Craft distilleries are finally being granted the same rights as their buddies, craft breweries.
A new bill was passed by the Illinois House and Senate and signed by Governor Pritzker in August 2019 which lifted certain restrictions previously placed on craft distilleries. The new bill was effective immediately.
Small Business Craft Distilleries Are Becoming More Popular
While not as prevalent as craft breweries, craft distilleries have seen a rise in popularity over the past few years. America is now home to over eighteen hundred (1,800) distillers which is a large increase from the one hundred (100) that existed in 2005.
The new law, named House Bill 2675, creates two (2) types of distillery licenses; these licenses are issued based upon how much a distillery produces. This new rule applies to all distilleries; however, those distilleries which produce less than five thousand (5,000) gallons can apply for an exemption under the new law to sell their spirits on their own.
Operating a Craft Distillery on the Same Field as Craft Breweries and Craft Wineries
The law is expected to level the playing field, giving small distilleries the same opportunities as breweries and wineries. The ability to distribute their own products has been vital to the growth of the craft beer industry and craft distilleries hope that House Bill 2675 will bring them the same opportunities.
Representative Tom Demmer (R-Dixon) is quoted in a prepared release that “the new licensing and exemption processes included in this new law will help these business owners establish and grow their small businesses without being subject to overly-burdensome state regulations.”
New Craft Distiller Licenses
The bill creates two (2) new licenses for craft distillers, a Class 1 and Class 2 license, as well as a distilling pub license. It also provides a process by which those who produce a certain amount or less of spirits per year can apply for an exemption for self-distribution.
Distillers who obtain a Class 1 license will be able to manufacture up to 50,000 gallons of distilled spirits per year. Distillers may obtain more than one (1) distiller license provided they do not produce more than a combined total of 50,000 gallons per year.
Distillers who obtain a Class 2 license will be able to manufacture up to 100,000 gallons of distilled spirits per year.
However, these distillers are only allowed to sell their spirits to distributors, not directly to the public or licenses retailers. They will still be required to sell their spirits to third-party distributors who will then sell it to retail establishments and the public.
Those who obtain a “self-distribution exemption” will be able to sell up to 5,000 gallons of their spirits directly to licensed retailers and distributors. Those distillers who do not obtain the exemption will be required to sell their spirits to third-party distributors who will then sell it to retail establishments and the public.
New Craft Distiller Warehousing Permit
To allow for the storage of all the new alcohol created under the distillery licenses, the legislators created a new craft distillery warehousing permit. This new permit allows class 1 and class 2 license holders, via a separate application process, to receive a warehousing permit to store or warehouse up to 500,000 gallons of the spirits manufactured by such license holder. This resolves the issue facing distillers of where to store their products as they age over the months, years or decades.
New Distillery Pub License
Certain Class 2 license holders will be able to obtain a distillery pub permit which will allow them to manufacture and serve up to 5,000 gallons of their spirits on or off-premises in addition to selling any other type of alcohol to the public. As an added benefit, under the new law, these distillers will be allowed to transfer a portion of their manufactured spirits to nearby licensed pubs provided they are owned by the same distiller. In addition, the pub license also allows the distillery to sell any type of alcohol at their location, which craft breweries were restricted from doing until last year. This is a big deal to distillers as it provides added flexibility and allows pubs to expand the type of spirits offered.
According to the new bill, this move to lift regulatory hurdles would, “allow smaller manufacturers of spirits access to the marketplace in order to develop a customer base”. It is expected that, as a result, craft distilleries will be able to broaden their customer base and more widely distribute their products themselves.
| Class 1 Distiller License | Class 2 Distiller License | |
| Production Limit | 50,000 gallons | 100,000 gallons |
| Ability to obtain a warehouse permit | Yes | Yes |
| Ability to obtain a tasting permit | Yes | Yes |
| Maximum for direct sales to consumer from tasting room (for on or off premise consumption) | 5,000 gallons | 5,000 gallons |
| Ability to apply for exemption to self-distribute | Yes | No |
| Maximum for self-distribution (under exemption) | 5,000 gallons | X |
Illinois as the Nations’ Craft Brewing and Distilling Capital
Illinois Craft Distillers Association President Noelle DiPrizio told the Chicago Tribune that the passage of this bill should make Illinois one of the more favorable states to start a business and should bring Illinois a step closer to fulfilling its potential to become the country’s craft capital.
While Illinois currently claims to be home to 34 federally licensed craft distilleries, up from 2 in 2010, the passage of this new law could cause the number of craft distilleries to double or triple in the coming years.
Should you have any questions about this new law, House Bill 2675 or any other laws that may affect your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.
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