What Is an Alternating Proprietorship? TTB Rules and Approval Steps

An alternating proprietorship is a federally approved arrangement that lets two or more alcohol producers share a single production facility while operating as separate, independent businesses. The Alcohol and Tobacco Tax and Trade Bureau (TTB) regulates the setup, and each participant holds its own federal permit, pays its own excise taxes, and maintains its own production records. The structure is common among breweries, wineries, and distilleries, where a smaller “tenant” producer rents scheduled time and space in an established “host” facility instead of building from scratch. Getting it right matters because the TTB scrutinizes these arrangements closely and will deny or revoke approval if it decides the tenant is not truly independent.

How the Shared Facility Works

Two roles define the arrangement. The host proprietor owns or primarily operates the facility. The tenant proprietor uses portions of that facility on a scheduled basis. Each party qualifies separately with the TTB, receives its own permit or registration, files its own operational reports, pays its own excise taxes, and keeps its own production records. The tenant is not an employee, agent, or customer of the host. The TTB treats each entity as a standalone manufacturer responsible for the integrity of its own operations.

When the tenant takes over a designated area, the host temporarily relinquishes control of that space. The handoff is documented through a letterhead notice submitted to the appropriate TTB officer before the alternation takes place. The notice identifies the outgoing and incoming proprietors, the effective date and hour of the switch, and references the approved diagrams showing which portions of the premises are involved.¹ The tenant holds legal title to all ingredients purchased and all alcohol produced throughout the entire manufacturing cycle.²

That independence is what separates an alternating proprietorship from contract manufacturing, and it is the single most important thing the TTB evaluates.

How It Differs from Contract Brewing

In a contract brewing arrangement, one brewer makes product on behalf of another. The contract brewer holds title to ingredients during production, keeps the records, pays the excise tax, and transfers the finished product to the purchasing company afterward. The purchaser is a customer, not a producer.³

In an alternating proprietorship, both parties hold title to their own ingredients and finished product separately. Both keep their own records, both file their own operational reports, and both pay tax individually at whatever rate applies to them. Each must be independently qualified as a brewer, winemaker, or distiller under the relevant federal regulations.³

The TTB has stated plainly that it is concerned some alternating arrangements are really attempts to split a larger brewery’s production into smaller entities to claim reduced excise tax rates that would not otherwise apply. If the agency concludes the tenant is not genuinely independent, it may reclassify the arrangement as contract brewing, assess taxes at the host’s higher rate, and deny or revoke the alternating proprietorship approval.³

What the TTB Requires for Approval

TTB Industry Circular 2005-2 lays out the criteria federal reviewers use when evaluating whether an alternating proprietorship is genuine. The circular addresses breweries directly but reflects the agency’s broader approach across beverage types. Falling short on any of these will delay or kill an application.

The tenant must own the raw materials, including unfermented wort for beer, and hold title to the finished product at every stage of production.
The agreement between host and tenant cannot include provisions where one party reimburses the other for federal excise tax payments. Each pays its own taxes directly.
The TTB will not approve an arrangement that prohibits the tenant or its employees from accessing the brewery premises. The tenant has to be able to walk in and oversee production.
The tenant must participate in developing its product, whether by hiring its own brewmaster, using its own formula, retaining a consultant, or working with the host on recipes. A business plan focused entirely on marketing with no production involvement signals contract brewing.
Each tenant’s product must remain physically separate and identifiable from the host’s product and from any other tenant’s product at all stages. Mixing, blending, or allocating beer after production is treated as contract brewing.
The TTB will not approve an arrangement that prevents the tenant from moving production to another facility. Locking the tenant into a single host location suggests the tenant is not truly independent.
The tenant must bear the actual financial risk if ingredients or product are lost or damaged during production.

These criteria all appear in Industry Circular 2005-2, which the TTB’s own brewery alternating proprietorships page directs applicants to review.³

Regulations by Beverage Type

Each beverage category has its own section of the Code of Federal Regulations governing alternation. The core requirements overlap; the details differ.

Distilled Spirits

Alternation of distilled spirits plants is governed by 27 CFR 19.141. Each proprietor must separately file and receive approval of the required registration, applications, and bonds. The registration must include a description of which areas, rooms, or buildings will alternate, the method used to separate alternated premises from non-alternated areas, and diagrams of the alternated portions. Before each alternation, the outgoing proprietor must completely process all distilling materials and unfinished spirits in the bonded areas being handed over, or transfer those materials to the incoming proprietor.¹

Wine

Wine premises alternation follows 27 CFR 24.136. The application must describe which areas will alternate and include a separate diagram for each arrangement under which the premises will operate. Before alternation, all operations in the alternated area must be finished and all wine, spirits, and other accountable materials removed or transferred to the incoming proprietor. Materials may be retained in locked tanks that remain in the outgoing proprietor’s custody. Each alternation of production operations must last at least one full calendar day.⁴

Beer

Brewery alternation between brewery and bonded or taxpaid wine premises is addressed in 27 CFR 25.81. The brewer must file and receive approval of qualifying documents, including special diagrams in duplicate that clearly depict all areas, buildings, rooms, equipment, and pipelines subject to alternation in their relative operating sequence. After approval, alternation may occur through a letterhead notice to the TTB officer with the plant name, serial number, effective date and hour, and purpose of the change.⁵ For alternating proprietorships between two brewers at the same premises, the TTB evaluates applications under the criteria in Industry Circular 2005-2, and each brewer must separately qualify under 27 CFR Part 25 with its own Brewer’s Notice.

Taxes, Records, and Bonds

Each proprietor pays its own excise taxes based on its own production volumes and applicable rates. This is where the financial incentive for both legitimate and problematic arrangements lives.

For beer, the federal excise tax structure works in tiers. Brewers producing no more than 2,000,000 barrels per year pay $3.50 per barrel on the first 60,000 barrels removed for sale. All other brewers pay $16 per barrel on the first 6,000,000 barrels and $18 per barrel beyond that.⁶ The gap between $3.50 and $16 is exactly why the TTB worries about sham arrangements designed to split production and claim the lower rate.

Small producers often catch a break on bonding. Since January 1, 2017, producers who owed less than $50,000 in excise taxes in the prior year and expect to owe less than $50,000 in the current year are exempt from the federal surety bond requirement entirely.⁷ Producers above that threshold must obtain a bond, and each proprietor in an alternating arrangement evaluates its bond obligation independently based on its own tax liability.

Recordkeeping is unforgiving. Raw materials and finished products must remain physically segregated at all times, using separate storage areas, clearly labeled tanks, or locked cages to prevent commingling. Each proprietor maintains its own complete set of production records. For breweries, that means daily summaries covering beer packaged, beer removed for sale or consumption, beer returned, brewing materials on hand, and beer in process, with entries recorded by the close of the next business day.⁸ Wine alternating proprietors keep separate records showing the name and registry number of the incoming or outgoing proprietor, the effective date and hour of alternation, and the quantity and alcohol content of any materials transferred. Each files its own TTB F 5120.17, Report of Bonded Wine Premises Operations.⁴ All required records must be retained for at least three years and made available for federal inspection.

Applying for TTB Approval

The application package involves several layers of documentation, and incomplete submissions are a common reason for delay.

The Written Agreement

Host and tenant must draft a written agreement governing the relationship. It should address which party bears liability for losses, how shared space will be scheduled, and how utilities, maintenance, and equipment cleaning will be handled and paid for. The agreement also serves as evidence that the tenant is genuinely independent. Provisions that restrict the tenant’s access to the premises, lock the tenant into using only the host’s facility, or include pass-through tax payments will draw reviewer scrutiny.

Facility Diagrams

The application must include diagrams that delineate which areas, buildings, rooms, equipment, and pipelines will be subject to alternation. Distilled spirits plants file these as part of the registration and must show the method used to separate alternated from non-alternated areas.¹ Brewery-to-winery alternations require special diagrams in duplicate depicting premises as they will exist during both extension and curtailment.⁵ Wine premises require a separate diagram for each arrangement under which the premises will operate.⁴ Diagrams need to be precise enough that a field agent can walk the floor and identify which proprietor controls a specific area at any given time.

Federal Forms

The specific forms depend on the beverage type. Brewers file the Brewer’s Notice on Form 5130.10. Wine producers apply for a Basic Permit on TTB Form 5100.24.⁹ Distilled spirits plant operators file Form 5110.41, Registration of Distilled Spirits Plant.¹⁰ Each form requires a written description of the alternation process as a supplemental attachment. Every owner, officer, director, member, or partner must also complete TTB Form 5000.9, the Personnel Questionnaire, which collects investment details, criminal history for the past ten years, and any prior history of disapproved TTB applications or revoked permits.¹¹

Timeline

Applications go through the TTB’s Permits Online system, which allows applicants to upload diagrams, signed agreements, and federal forms electronically.¹² As of February 2026, the TTB’s median processing times for original applications were 57 days for breweries, 59 days for distilled spirits plants, and 62 days for bonded wineries. The agency’s broader goal is to issue 85% of permits within 75 calendar days.¹³ A federal officer may contact the applicant to clarify operational details or request corrections. A physical site inspection may also occur, where an officer verifies that equipment, segregation areas, and layout match the submitted diagrams.

What Happens If You Get It Wrong

The TTB has several enforcement tools when an alternating proprietorship falls out of compliance. Record-keeping failures without fraudulent intent can bring a fine of up to $1,000 and up to one year of imprisonment per offense. Where the government proves intent to defraud, the penalties jump to $10,000 and up to five years per offense.¹⁴ These are criminal penalties under federal law, not administrative fines.

The TTB can also take administrative action against a producer’s permit. For holders of a Basic Permit under the Federal Alcohol Administration Act, the agency generally must demonstrate that violations were “willful” to sustain a suspension or revocation, and a first violation under the FAA Act can only result in suspension, not revocation. In more serious cases, or for Internal Revenue Code permits where willfulness need not be proven, the TTB may revoke the permit outright.¹⁵

If the TTB determines that an alternating proprietorship is not genuinely independent, the fallout goes beyond permit issues. The agency may reclassify the tenant’s production as contract manufacturing by the host, then assess excise taxes against the host at whatever higher rate applies to the host’s combined production volume. For a small operation that thought it was paying $3.50 per barrel, discovering that its beer is now taxed at $16 or $18 per barrel can be financially devastating.

State Licensing

A federal TTB permit is not the only license you need. Every state requires its own alcohol manufacturing license or permit, and the tenant in an alternating proprietorship generally must obtain a separate state license in addition to the federal one. Some states explicitly recognize alternating proprietorships in their regulations; others require the tenant to qualify under general manufacturing license provisions. Some impose production minimums that each licensee must meet at the shared facility. Fees, processing times, and specific documentation requirements all differ by state, so contact your state’s alcohol regulatory agency early in the planning process to avoid delays after the federal permit comes through.

1
eCFR. 27 CFR 19.141 – Procedures for Alternation of Proprietors
2
Alcohol and Tobacco Tax and Trade Bureau. Brewery Alternating Proprietorships
3
Alcohol and Tobacco Tax and Trade Bureau. Industry Circular 2005-2
4
eCFR. 27 CFR 24.136 – Procedure for Alternating Proprietors
5
eCFR. 27 CFR 25.81 – Alternation of Brewery and Bonded or Taxpaid Wine Premises
6
Office of the Law Revision Counsel. 26 USC 5051 – Imposition and Rate of Tax
7
Alcohol and Tobacco Tax and Trade Bureau. Elimination of Bond Requirement for Small Breweries/Brewpubs
8
Alcohol and Tobacco Tax and Trade Bureau. Records, Operational Reports, and Tax Returns
9
Alcohol and Tobacco Tax and Trade Bureau. TTB F 5100.24 – Application for Basic Permit Under the Federal Alcohol Administration Act
10
Alcohol and Tobacco Tax and Trade Bureau. TTB F 5110.41 – Registration of Distilled Spirits Plant
11
Alcohol and Tobacco Tax and Trade Bureau. Personnel Questionnaire – TTB F 5000.9
12
Alcohol and Tobacco Tax and Trade Bureau. Applying for a Permit and/or Registration
13
Alcohol and Tobacco Tax and Trade Bureau. Processing Times for Original Permit Applications
14
Office of the Law Revision Counsel. 26 USC 5603 – Penalty of Fraudulent Noncompliance
15
Alcohol and Tobacco Tax and Trade Bureau. Adverse Actions Handbook