Brewers make mistakes.
Just ask the Ohio Division of Liquor Control.
The state agency, along with the federal Alcohol and Tobacco Tax and Trade Bureau (TTB), regulates breweries. Those regulators see major errors committed by brewers before they even make their first beer.
We’re talking about paperwork errors here — not issues with financing and equipment. Simple stuff like writing down the wrong name or address on an application — the kind of mistake that can lead to delays, headaches and heartburn.
With breweries opening in record numbers in Ohio over the last two years, I chatted with Bruce Stevenson, superintendent of the Ohio Department of Commerce, and Gary Jones, chief of investigations and compliance with the Ohio Division of Liquor Control, about the common regulatory pitfalls that trip up new brewers.
They offered up plenty of advice:
STATE AND FEDERAL: Brewers must remember that both Ohio and the federal government regulate alcohol. You can’t just deal with one and not the other. Both the Ohio Division of Liquor Control and TTB maintain websites that help answer basic questions about launching a brewery.
“Both have a lot of resources available, not only on the web but through the telephone if you want to call and talk to someone about getting into the business,” Jones said.
NO TIED HOUSES: Ohio has a three-tier system of licensing when it comes to alcohol. There are manufacturers, wholesale distributors and retailers. Ohio law prohibits ownership in multiple tiers. You can’t own a retail license and a brewing license, for example.
“This is probably one of the key areas that we run into,” Stevenson said. “We find that people have ownership in a restaurant and they decide, ‘Oh well, I’d like to become a brewery, too, so I can brew product and sell that in my restaurant.’ But, of course, the tied house laws in Ohio prohibit the ownership of a retail establishment by the same individuals who would own a manufacturer’s permit.”
A brewpub, obviously, is different and involves a separate license.
APPLICATIONS: Brewers must apply to both the state and TTB for approval. The state won’t issue a brewing license until the federal permit is issued. But that doesn’t mean brewers should wait to file their state application.
“They can be processed simultaneously,” Jones said.
Stevenson added: “They can never start the process too early for us.”
KNOW YOUR ENTITY: Brewers can apply as a sole proprietor, partnership, corporation or LLC. “It’s amazing how many times we’ll find one of the applications is one entity type and the other [application] is a different one,” Jones said. That type of mistake can cause a lot of pain and result in the whole application process starting over.
KNOW YOUR ADDRESS: The state won’t accept an application without an address. It can’t just be filled in at a later date. And it has to be the business address, as opposed to your residential address. The address is important because if, for example, the brewery is located in close proximity to a school, church or public park, objections can be raised.
PROOFREAD: Jones urged brewers to proofread their applications carefully before submitting them. You are dealing with government bureaucracy, after all. “It’s so difficult to fix an error, as opposed to being more thorough on the front end,” he said.
BACKGROUND CHECK: The Ohio Bureau of Criminal Investigation conducts a background check on the owners and officers. Fingerprints are taken. The Division of Liquor Control also checks with local law enforcement.
“We no longer have a strict prohibition, for instance, for a person who has been convicted of a felony charge,” Jones said. “At one time, that was the case in Ohio. But the law does allow ... discretion to review that applicant’s criminal history to determine, quite frankly, if they are fit to be a permit holder in our state.”
The superintendent gets to rule on the touchy cases, which could involve drug and alcohol-related offenses.
“Each situation is taken on its own merits,” Stevenson said. “The one thing that would definitely knock you out of the ballpark is if you were still incarcerated.”
Once every three or four years, someone on probation for a serious offense or still in prison does try.
BREWING EARLY: Brewers aren’t allowed to start brewing until they receive their state license. But that doesn’t stop many from firing up their brewing system early. I know of one Ohio brewery that received its license on a Friday and was serving at a beer festival on Saturday. Stevenson and Jones said they know that goes on, but it’s not permitted.
REGISTER YOUR PRODUCTS: While the TTB oversees beer names, each beer must still be registered with the Ohio Division of Liquor Control before it’s sold. A one-time registration fee — for each beer — is $50.
THE FUTURE: The Ohio Division of Liquor Control receives dozens of calls each week about launching a brewery, winery or distillery.
There are nearly 100 brewing licenses issued in Ohio, with more than a dozen applications pending.
The Ohio craft industry is expected to grow even more, especially since state lawmakers earlier this year lowered the annual price of a license for smaller brewers from $3,906 to $1,000.
“The jury is out on that but my personal opinion is it probably will [grow],” Stevenson said. “I don’t know how many people were prevented from having a brewery because of the cost but clearly that was ... the negative part of becoming a brewery. ... I would think we would probably continue seeing an even stronger issuance of licenses and applications filed with us. We’ll wait to see.”