Rule 42.13.1002 - ALTERNATING PROPRIETOR ON A MANUFACTURER'S PREMISES(1) An alternating proprietor arrangement occurs when a tenant manufacturer utilizes the licensed premises and equipment of a host manufacturer to produce and/or package alcoholic beverages.(2) The tenant must be licensed by the department to manufacture the alcoholic beverages to be produced and/or packaged.(3) The tenant and host must seek the department's approval for each alternating proprietor arrangement necessitating approval by the Alcohol and Tobacco Tax and Trade Bureau.(4) To apply, the tenant and host shall submit a complete application to the department that includes: (a) documentation of Alcohol and Tobacco Tax and Trade Bureau approval;(b) a description of the areas and equipment to be used by the tenant;(c) a copy of the host's floor plan identifying the areas to be used by the tenant; and(d) a copy of the executed agreement between the tenant and host.(5) The department shall notify the tenant and host in writing of its approval or denial of the alternating proprietor arrangement within 15 business days of receiving all requested information.(6) The tenant and host shall notify the department in writing within ten business days of receiving notice from the Alcohol and Tobacco Tax and Trade Bureau that approval for an existing alternating proprietor arrangement has been revoked.(7) All regulations set forth in Title 27 of the Code of Federal Regulations, in effect on October 5, 2015, addressing alternating proprietor arrangements are adopted by reference, except where the provisions of those regulations may be contrary to or inconsistent with the provisions of Montana law or department rule. Copies may be obtained from the United States Treasury at www.ttb.gov. Failure to comply with those regulations shall constitute a violation of this rule and may subject the tenant and host to administrative action, including revocation of their manufacturing licenses.(8) The tenant shall maintain possession, title, and control over all raw materials and its product on the host's premises.(9) The tenant's product must be separate and identifiable from the products of all other tenants and the host at all stages of production and through removal of the product from the host's premises.(10) The tenant and host shall keep separate records of their respective production and removals. The department may make an examination of any records kept by the tenant and host.(11) The host is prohibited from selling, providing, or distributing the tenant's product, with or without charge, in the host's sample room, on its licensed premises, or elsewhere.(12) The tenant must adhere to all applicable distribution requirements set forth in the Montana Alcoholic Beverage Code.(13) In addition to all other requirements imposed by this rule, where the tenant is a brewery:(a) for purposes of the tax imposed by 16-1-406, MCA:(i) wholesalers shall pay the tax due on beer purchased from the tenant; and(ii) the tenant shall pay the tax due on beer sold directly to consumers and retailers;(b) for purposes of the tax imposed by 16-1-406, MCA, the small brewery 60,000-barrel production cap in 16-3-213 and 16-3-214, MCA, all beer produced by a tenant at a host's premises shall be considered as part of the tenant's annual nationwide production; and(c) a tenant with an annual nationwide production between 200 gallons and 60,000 barrels may provide, with or without charge, beer in its sample room only if the beer was brewed and fermented at its premises. This restriction includes a prohibition against a tenant providing beer in its sample room that was brewed or fermented at a host's premises. A tenant that brewed and fermented beer at its premises and packaged the beer at a host's premises may provide that beer, with or without charge, in the tenant's sample room.(14) In addition to all other requirements imposed by this rule, where the tenant is a winery: (a) for purposes of the tax imposed by 16-1-411, MCA:(i) wholesalers shall pay the tax due on wine purchased from the tenant; and(ii) the tenant shall pay the tax due on wine sold directly to consumers and retailers; and(b) a tenant may provide, with or without charge, wine for consumption on its licensed premises that was produced and/or packaged at its premises or a host's premises.(15) In addition to all other requirements imposed by this rule, where the tenant is a distillery: (a) for purposes of the taxes imposed by 16-1-401 and 16-1-404, MCA, agency liquor stores shall pay the tax due on liquor purchased from the department;(b) for purposes of the taxes imposed by 16-1-401 and 16-1-404, MCA, and the microdistillery 200,000 proof gallon production cap set forth in 16-4-310, MCA, all liquor produced by a tenant at a host's premises shall be considered liquor produced by the tenant; and(c) a tenant distillery with an annual production of 200,000 proof gallons or less may provide, with or without charge, liquor in its sample room only if the liquor was produced at its premises. This restriction includes a prohibition against a tenant distillery providing liquor in its sample room that was produced at a host's premises, subject to the production exception in ARM 42.13.802.(16) When the host manufacturer's licensed premises is a colocated premises, as allowed in 16-4-401, MCA, the tenant manufacturer may only utilize the manufacturing area. Retail sales by the tenant manufacturer on the host manufacturer's premises are prohibited.(17) An alternating proprietor arrangement may only be conducted in accordance with the provisions of this rule. Failure to abide by the provisions of this rule may subject the tenant and host to administrative action, including revocation of their manufacturing licenses.Mont. Admin. r. 42.13.1002
NEW, 2015 MAR p. 2157, Eff. 12/11/2015; AMD,2019 MAR p. 2058, Eff.11/9/2019; AMD, 2024 MAR p. 2303, Eff. 9/21/2024AUTH: 16-1-201, 16-1-303, MCA; IMP: 16-1-201, 16-1-401, 16-1-404, 16-1-406, 16-1-411, 16-3-213, 16-3-214, 16-4-310, 16-4-311, 16-4-312, 16-4-406, MCA