Senate Bill 1078, signed into law on March 25th, 2019, amended Idaho Code Section 23-1001, by defining “contractee brewer” and “contractor brewer” as well as adding a new Section 23-1057 to authorize contract brewing in certain instances.
Newly amended Idaho Code Section 23-1001 defines “contractee brewer” as a brewer producing fewer than thirty thousand (30,000) barrels of beer in aggregate annually, including any beer manufactured outside the state of Idaho, that enters into a contractual relationship with another brewer to produce beer on the contractee’s behalf. “Contractor brewer” is defined as a brewer producing fewer than thirty thousand (30,000) barrels of beer in aggregate annually, including any beer manufactured outside the state of Idaho, that enters into a contractual relationship with a contractee brewer to produce beer for the contractee brewer on the contractor brewer’s licensed premises.
The addition of Section 23-1057 allows for a contractee brewer to enter into a contractual relationship with a contractor brewer to contractually produce beer for the contractee brewer to the extent allowed by federal law. Both the contractee brewer and the contractor brewer must be separately licensed and separately owned. Beer brewed for a contractee brewer must count toward the contractee brewer’s annual production, but it will not count toward the contractor brewer’s annual production.
The rise in popularity of contract production has afforded both aspiring and existing brewers more opportunities for production when, for a multitude of reasons, the contractee does not have the desired capacity or means to brew beer on their own. But while the TTB has defined contract brewing arrangements as “a business relationship in which one person, such as a wholesale or retail dealer or a brewer, pays a brewing company, the “contract brewer,” to produce beer for him or her” and has stated that they “consider contract brewing arrangements to be ordinary commercial arrangements”, there are many states that have yet to address the permissibility of contract production and remain silent on the issue. As alcohol production is a highly-regulated industry varying drastically from state-to-state, the lack of uniformity among the states in drafting even the most basic contract production definitions or outlining permissible practices leaves many brewers uncertain about whether they are operating in a compliant manner according to their respective state laws.
Regardless of whether the production caps or other restrictions in Idaho’s Senate Bill are favorable among craft brewers, other states may benefit from using its passage as an example in crafting their own state statutes and lobbying for legislation that provides clearly defined guidance for brewers looking to engage in contract production relationships.