Distilled Spirits Permits and Licenses When Buying a Distillery
Few businesses are as closely regulated as a distillery. Producing, storing, bottling and selling spirits involves federal, state and often local approvals, and those approvals are typically tied to a specific owner and premises. When a distillery changes hands, distillery permits and licenses are one of the first issues buyers, sellers and lenders need to plan around, because the business generally cannot operate under new ownership without the right approvals in place.
This article is general information for buyers and sellers of existing, operating craft distilleries. Permit and licensing rules vary by state and locality and change over time, and permits should not be assumed to transfer. Nothing here is legal or regulatory advice. Buyers and sellers should work with qualified attorneys experienced in alcohol regulation.
Layers of Approval
- Federal: a federal permit and registration covering production, storage and processing of distilled spirits, along with related tax and reporting obligations
- State: a state manufacturer or distiller license, which may define where and how products can be sold
- Local: city or county licenses, zoning approvals and permits that may govern a tasting room, cocktail service, events or retail bottle sales
- Related approvals: label and formula approvals, health permits for food service and fire or building occupancy approvals
Why Permits Generally Do Not Transfer
Permits are typically issued based on the owners, the premises and the planned activities. A sale of assets usually means the buyer must apply for its own approvals. A sale of ownership interests may still require notices, amendments or approvals, depending on the change and the rules involved. In either case, buyers should not assume they can operate on the seller’s permits.
Effect on Deal Timing and Structure
Because approvals take time and cannot be predicted, parties sometimes structure the transaction so that closing depends on the buyer obtaining required permits, or arrange interim agreements where the law permits. Whether any interim arrangement is allowed is a question for counsel. These issues should be discussed early, since they may affect the closing date and the lender’s requirements.
Tasting Room and Direct Sales Privileges
Many states allow distilleries to sell on site, serve cocktails or ship directly only under specific conditions, which may depend on the license class or on how much the distillery produces. Those privileges may differ for a new owner. Buyers should confirm with counsel which privileges will be available after closing.
Distribution Considerations
State rules also shape how spirits reach stores and restaurants, including whether a distillery may self-distribute and how distributor relationships work. See our article on distillery distributor agreements.
Compliance History Matters
Buyers should review required reports, tax filings and records, along with any notices or violations. Unresolved issues may follow the business or complicate the buyer’s applications. Our craft distillery due diligence checklist covers what to request.
Facility Approvals
Distilleries handle flammable materials, and fire, building and occupancy approvals may be part of the permitting picture. See our article on still and production condition for related diligence questions.
What Lenders Look For
Lenders will want to understand how and when the buyer will obtain the permits needed to operate. Some may require approvals before funding. Our article on SBA loans for craft distilleries explains how financing fits into the timeline. Every loan is subject to lender approval.
For Sellers
Sellers can help by organizing permits, reports and compliance records early and cooperating with the buyer’s applications. See our guide on how to sell a craft distillery.
US Professional Funding helps buyers finance the acquisition of existing, operating craft distilleries and can help coordinate financing with the permitting plan. Learn more about our craft distillery acquisition financing.
