Current through Register Vol. 18, September 20, 2024
(1)
Contract manufacturing occurs when a manufacturer utilizes its licensed
premises and equipment to produce and/or package alcoholic beverages for
another manufacturer to sell, called the client.
(2) The contract manufacturer and the client
must be licensed by the department to manufacture the alcoholic beverages to be
produced and/or packaged.
(3) The
contract manufacturer and client must seek the department's approval prior to
engaging in a contract manufacturing arrangement. To apply, the contract
manufacturer and client shall submit a complete application to the
department.
(4) The department
shall notify the contract manufacturer and client in writing of its approval or
denial of the contract manufacturing arrangement within 15 business days of
receiving all requested information.
(5) The sale and distribution of alcoholic
beverages manufactured by the contract manufacturer may only be conducted as
follows:
(a) a contract manufacturer is
prohibited from selling, providing, or distributing the product, with or
without charge, in the contract manufacturer's sample room, on its licensed
premises, or elsewhere;
(b) the
contract manufacturer may only sell the product to the client; and
(c) once the client holds title to the
product, the client must adhere to all applicable distribution requirements in
the Montana Alcoholic Beverage Code, the same as though the client produced the
product.
(6) The contract
manufacturer and client shall maintain control over their separate business
records at all times. The department may make an examination of the records of
the contract manufacturer or client.
(7) In addition to all other requirements
imposed by this rule, where the client 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 client; and
(ii) the client 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 set forth in
16-3-213 and 16-3-214, MCA, all beer produced by the contract manufacturer for
the client shall be considered as part of the client's annual nationwide
production; and
(c) a client 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 client providing beer in its sample room that was brewed or fermented
at a contract manufacturer's premises. A client that brewed and fermented beer
at its premises and then had the beer packaged at a contract manufacturer's
premises may provide that beer, with or without charge, in the client's sample
room.
(8) In addition to
all other requirements imposed by this rule, where the client 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 client; and
(ii) the client shall pay the tax due on wine
sold directly to consumers and retailers; and
(b) the client may provide, with or without
charge, wine for consumption on its licensed premises only if the wine was
produced by the client. This restriction includes a prohibition against the
client providing wine that was produced by a contract manufacturer. A client
that produced the wine at its premises and then had the wine packaged at a
contract manufacturer's premises may provide that wine, with or without charge,
for consumption on its licensed premises.
(9) In addition to all other requirements
imposed by this rule, where the client 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 contract
manufacturer for the client shall be considered as part of the client's annual
nationwide production; and
(c) a
client 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
client providing liquor in its sample room that was produced at a contract
manufacturer's premises, subject to the production exception in ARM
42.13.802.
(10) Except as
provided in (11), a contract manufacturing 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 contract manufacturer and client to administrative
action, including revocation of their manufacturing licenses.
(11) The department may approve a contract
manufacturing arrangement that does not fit within the bounds of this rule only
if the proposed arrangement is not prohibited by federal and state alcoholic
beverage regulations. This may include a contract manufacturing arrangement
where the client is not located in Montana.
AUTH: 16-1-303, MCA; IMP: 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
