Homebrewers Association | AHA Forum

General Category => General Homebrew Discussion => Topic started by: phunhog on August 28, 2011, 07:02:43 PM

Title: Homebrewing CSA?
Post by: phunhog on August 28, 2011, 07:02:43 PM
I was wondering what you guys thought about this?  http://www.chow.com/food-news/86982/it-was-only-a-matter-of-time-san-franciscos-first-beer-csa/

Essentially it is a CSA (Community Supported Agriculture) that instead of passing fruits and veggies passes out homebrewed beers.  What are the legalities of this? It sounds like they take donations but technically it is free. It sounds like a wonderful way to expose people to homebrewing and craft beer in general. If I was involved with something like this it would allow me to become a better brewer since I would be able to brew more often.....I can only drink so much ;)
Title: Re: Homebrewing CSA?
Post by: denny on August 28, 2011, 07:56:30 PM
IANAL, but the legality seems dubious to me.
Title: Re: Homebrewing CSA?
Post by: tschmidlin on August 28, 2011, 09:55:50 PM
I'm not a lawyer either, but I'm with Denny - I think if anyone takes a look at the way they are doing things it will be deemed illegal.  "Reimbursing for ingredients" is paying for beer in my view.  The law isn't against paying people to brew, it is against selling homebrew.  If they have sacks of grains and hops delivered to the brewers house that might be more acceptable, although it is still a material gain.
Title: Re: Homebrewing CSA?
Post by: tygo on August 29, 2011, 12:10:21 AM
Also not a lawyer.  But I think any exchange of goods is considered a monetary (taxable) exchange and that would be considered "selling" homebrew.  We've talked about "eggs/bread/vegetables for beer" before and as far as I can tell that's barter and would be considered selling your beer the same as if you accepted cash instead of eggs.

I would think that even exchanging homebrew as many do would technically be considered barter and would qualify.  Not that the authorities are going to be paying much attention to things like that.  Something organized, however, might eventually cause them to take notice.

Might be a good subject for a Pint of Law article  :)
Title: Re: Homebrewing CSA?
Post by: Pawtucket Patriot on August 29, 2011, 05:26:11 PM
Might be a good subject for a Pint of Law article  :)

My ears were burning, so I figured I'd chime in.  ;)

In either June or July, I linked an article from another beer law blog discussing this very issue.

Check it out: http://brewerylaw.com/2011/05/is-the-sale-of-home-brew-shares-illegal-most-likely/

Doug (author of the Brewery Law blog) concludes that it is most likely illegal and I agree.
Title: Re: Homebrewing CSA?
Post by: tschmidlin on August 29, 2011, 05:28:37 PM
Might be a good subject for a Pint of Law article  :)

My ears were burning, so I figured I'd chime in.  ;)

In either June or July, I linked an article from another beer law blog discussing this very issue.

Check it out: http://brewerylaw.com/2011/05/is-the-sale-of-home-brew-shares-illegal-most-likely/
Doug's article was on the thing in NY though ("The homebrew shares costs $44"), the SF one seems to be set up differently.  It's still probably illegal though. :)
Title: Re: Homebrewing CSA?
Post by: Pawtucket Patriot on August 29, 2011, 05:35:07 PM
Might be a good subject for a Pint of Law article  :)

My ears were burning, so I figured I'd chime in.  ;)

In either June or July, I linked an article from another beer law blog discussing this very issue.

Check it out: http://brewerylaw.com/2011/05/is-the-sale-of-home-brew-shares-illegal-most-likely/
Doug's article was on the thing in NY though ("The homebrew shares costs $44"), the SF one seems to be set up differently.  It's still probably illegal though. :)

You don't miss a thing, do you Tom?!   :P

The second to the last sentence in Doug's article sets the stage for the general illegality of the CSA homebrew model. TTB and state regulation requires very specific and often burdensome licensing requirements. Without satisfying these requirements, brewers are selling illegally.
Title: Re: Homebrewing CSA?
Post by: tschmidlin on August 29, 2011, 05:41:16 PM
Might be a good subject for a Pint of Law article  :)

My ears were burning, so I figured I'd chime in.  ;)

In either June or July, I linked an article from another beer law blog discussing this very issue.

Check it out: http://brewerylaw.com/2011/05/is-the-sale-of-home-brew-shares-illegal-most-likely/
Doug's article was on the thing in NY though ("The homebrew shares costs $44"), the SF one seems to be set up differently.  It's still probably illegal though. :)

You don't miss a thing, do you Tom?!   :P

The second to the last sentence in Doug's article sets the stage for the general illegality of the CSA homebrew model. TTB and state regulation requires very specific and often burdensome licensing requirements. Without satisfying these requirements, brewers are selling illegally.

;D  I was familiar with Doug's article since he emailed me about it to get my opinion. ;)
Title: Re: Homebrewing CSA?
Post by: beersk on August 29, 2011, 09:08:58 PM
IANAL

Man, you and your internet acronyms.  What is this? I am not a liar?
Title: Re: Homebrewing CSA?
Post by: denny on August 29, 2011, 09:24:47 PM
IANAL

Man, you and your internet acronyms.  What is this? I am not a liar?

Well, that, too, but...

I
Am
Not
A
Lawyer
Title: Re: Homebrewing CSA?
Post by: tschmidlin on August 29, 2011, 09:37:47 PM
And here I thought it was a typo.  IMANAL

jk
Title: Re: Homebrewing CSA?
Post by: bluesman on August 29, 2011, 09:40:47 PM
So how did they get past this "obvious illegality"?

This is now public information...I can only imagine someone will press the issue to have them shut down.

Don't get me wrong...I like the idea, but it seems obvious to me that they are skirting some legalities.  :-\

Matt?
Title: Re: Homebrewing CSA?
Post by: beersk on August 29, 2011, 09:44:08 PM
IANAL

Man, you and your internet acronyms.  What is this? I am not a liar?

Well, that, too, but...

I
Am
Not
A
Lawyer
That's pretty much saying the same thing, haha.
Title: Re: Homebrewing CSA?
Post by: Pawtucket Patriot on August 29, 2011, 10:14:56 PM
IANAL

Man, you and your internet acronyms.  What is this? I am not a liar?

Well, that, too, but...

I
Am
Not
A
Lawyer
That's pretty much saying the same thing, haha.

Hey, we're not liars.  We "massage" the facts.  :P ;D
Title: Re: Homebrewing CSA?
Post by: phunhog on August 29, 2011, 11:50:11 PM
So how did they get past this "obvious illegality"?

This is now public information...I can only imagine someone will press the issue to have them shut down.

Don't get me wrong...I like the idea, but it seems obvious to me that they are skirting some legalities.  :-\

Matt?

That is what I would like to know. They have been operating for 3-4 months now according to their website. I know their CSA has been mentioned on various blogs and local newspapers. They aren't trying to hide anything.  I just wonder how much the authorities care?  In the 33 years of legal homebrewing there must be some sort of legal precedent.  I can't believe that this is the first time something like this has happened.
Title: Re: Homebrewing CSA?
Post by: skyler on August 30, 2011, 04:26:07 PM
I am a lawyer. Reimbursement for ingredients or other expenses is not selling homebrew. The fact that this is a corporate-type entity is significant, because corporations are not prohibited from homebrewing, that I know of. As a very general rule full of exceptions, anything an individual can do, a corporation (particularly a nonprofit) can also do. So ingredient-reimbursement within the same CSA would be legally akin to my buddy paying for the ingredients for one batch and me for the next and us sharing both batches.

That being said, it does sound like this CSA may be selling homebrew because of the "optional donations." Regardless, I would be shocked if the SFDA wanted to prosecute this CSA, and I seriously doubt the ATF is going to pick this one up, so it is "legal" in the sense that no one is going to be enforcing the law. California also has about the most lax alcohol sales and distribution laws around, fwiw.
Title: Re: Homebrewing CSA?
Post by: tschmidlin on August 30, 2011, 04:33:59 PM
Skyler, I vaguely recall reading that the IRS technically expects people to report bartering activity - has that changed?  How is this different?  If the brewer is being reimbursed in either money or goods, wouldn't that be a taxable transaction?  And if it is a taxable transaction, isn't that the same as selling?

Thanks for explaining to us non-lawyers. :)
Title: Re: Homebrewing CSA?
Post by: narvin on August 30, 2011, 05:09:30 PM
Regardless, I would be shocked if the SFDA wanted to prosecute this CSA, and I seriously doubt the ATF is going to pick this one up, so it is "legal" in the sense that no one is going to be enforcing the law. California also has about the most lax alcohol sales and distribution laws around, fwiw.

I wouldn't be shocked, unless San Francisco is truly without power hungry bureaucrats.  Arbitrary enforcement of laws seems to happen often, and alcohol is always a magnet for attention.

Not a lawyer, but I don't see how "donations" don't make them vulnerable to being shut down.  You could eliminate donations but who would brew a batch of beer for other people for cost?
Title: Re: Homebrewing CSA?
Post by: morticaixavier on August 30, 2011, 05:18:17 PM
I have an inquiry in with them. I am not in SF nor even in the bay area anymore but close. These are all good questions and I will ask when and if I hear back from them. Seems like at very least it's a fun way to get to brew more often.
Title: Re: Homebrewing CSA?
Post by: Pawtucket Patriot on August 30, 2011, 05:44:20 PM
It seems like semantics to me to make a distinction between paying for ingredients and paying for the beer itself. But maybe there's an argument there. I think the conduct of the CSA itself, however, plainly amounts to either illegal distribution, illegal retailing, or both (especially in the NY case where members pay for homebrew "shares," as opposed to making voluntary donations).  These are privileges that homebrewers have never had under the homebrewing exemption statute.  Also, the benefit of the homebrewer exemption only applies to natural persons because it uses the term "adult," which is expressly defined as a person who is of legal drinking age. A corporation doesn't get to brew up to 200 tax-free gallons per year when it turns 21.  ;)
Title: Re: Homebrewing CSA?
Post by: phunhog on August 31, 2011, 04:12:53 AM
I too contacted the CSA and am awaiting a reply. I live in CA but nowhere near SF. Like I said earlier it seems like such a great way to get homebrew to the people and enable us to brew more.  Like most homebrewers I have a ton of recipes/styles that I want to try, not to mention refining favorite recipes. I really do enjoy brewing beer more than drinking beer. I thought I read on one of the brewing law blogs that homebrewing has never been litigated. Does that mean that no one has ever been fined/arrested for violation of homebrewing laws?
Title: Re: Homebrewing CSA?
Post by: skyler on August 31, 2011, 05:21:47 AM
As to the tax issue: yes, you have to report bartering, but that is up to you to do and not the corporate entity helping you engage in bartering. If the entity is a true non-profit, it is exempt from taxation. And the "income" you gain from an exchange like this is likely no greater than the cost, which would mean you wouldn't actually have to pay any additional taxes.

As to the likelihood of the CSA being prosecuted: San Francisco doesn't have resources to prosecute this kind of thing, as far as I know - and it would be a hugely unpopular move for the police or the DA to go after a CSA of any kind, or homebrewers, for that matter. The SFPD condones obvious illegal and even underaged drinking in Dolores Park for this reason. "Illegal" on the books just doesn't always mean illegal in San Francisco.
Title: Re: Homebrewing CSA?
Post by: tygo on August 31, 2011, 10:52:56 AM
As to the tax issue: yes, you have to report bartering, but that is up to you to do and not the corporate entity helping you engage in bartering. If the entity is a true non-profit, it is exempt from taxation. And the "income" you gain from an exchange like this is likely no greater than the cost, which would mean you wouldn't actually have to pay any additional taxes.

I haven't done a complete read-through of the IRS regulations on the subject however I believe that unless the barter exchange meets certain exemption criteria they do need to file a 1099-B information return with the IRS, whether they are a for-profit or not-for-profit entity.

Also, bartering income would technically reported based on the fair value of services received, not the net profit on the transaction.  You would be paying taxes on the fair value, not the net.

If anyone wants to take the time to read through everything the IRS has on it here's a good resource:

http://www.irs.gov/businesses/small/article/0,,id=187920,00.html

Title: Re: Homebrewing CSA?
Post by: Pawtucket Patriot on August 31, 2011, 11:46:00 AM
I thought I read on one of the brewing law blogs that homebrewing has never been litigated. Does that mean that no one has ever been fined/arrested for violation of homebrewing laws?

This was something I wrote in the article (http://pintoflaw.com/?p=114) on the homebrewing exemption statute for Pint of Law (http://pintoflaw.com).  It doesn't mean that no one has ever been fined/arrested for engaging in conduct outside the scope of the exemption benefit.  What it means is that if anyone has ever been fined/arrested, they have not challenged those penalties in court.  I have no information regarding whether and how frequently the TTB or state agencies have actually targeted homebrewers.  
Title: Re: Homebrewing CSA?
Post by: hopfenundmalz on August 31, 2011, 12:58:35 PM
I thought I read on one of the brewing law blogs that homebrewing has never been litigated. Does that mean that no one has ever been fined/arrested for violation of homebrewing laws?

This was something I wrote in the article (http://pintoflaw.com/?p=114) on the homebrewing exemption statute for Pint of Law (http://pintoflaw.com).  It doesn't mean that no one has ever been fined/arrested for engaging in conduct outside the scope of the exemption benefit.  What it means is that if anyone has ever been fined/arrested, they have not challenged those penalties in court.  I have no information regarding whether and how frequently the TTB or state agencies have actually targeted homebrewers.  

There is a certain Pro-Brewer who has told the story of years back making 1.5 barrels at a time, and having a group that would "buy" the beer (not sure what he said the payment scheme was).  He was having fun until the Cease and Desist letter came from the BATF, also asking for back taxes to be paid.  He decided to go Pro then, and be legit.

If you get big enough, you will draw attention.
Title: Re: Homebrewing CSA?
Post by: denny on August 31, 2011, 04:08:10 PM
I thought I read on one of the brewing law blogs that homebrewing has never been litigated. Does that mean that no one has ever been fined/arrested for violation of homebrewing laws?

There was a guy in AL last year who was busted and prosecuted for homebrewing.
Title: Re: Homebrewing CSA?
Post by: hopfenundmalz on August 31, 2011, 05:38:57 PM
I thought I read on one of the brewing law blogs that homebrewing has never been litigated. Does that mean that no one has ever been fined/arrested for violation of homebrewing laws?

There was a guy in AL last year who was busted and prosecuted for homebrewing.

I remember that one.  He also did distillation, right?

Edit - There was also the guy from Huntsville that was in the LA Times article.  He was visited by the authorities and had to sign some sort of documnet saying he would stop, if I remember right.

Title: Re: Homebrewing CSA?
Post by: skyler on September 01, 2011, 07:10:31 AM
I haven't done a complete read-through of the IRS regulations on the subject however I believe that unless the barter exchange meets certain exemption criteria they do need to file a 1099-B information return with the IRS, whether they are a for-profit or not-for-profit entity.

Yes, you have to file something, but you are still basically exempt from taxation in the end.

Also, bartering income would technically reported based on the fair value of services received, not the net profit on the transaction.  You would be paying taxes on the fair value, not the net.

Your income reported is the amount of services received, but you can deduct your tax basis (essentially the same as cost) in the transaction. So you are reporting everything as your income, but you are only paying tax on (essentially) the net income. It is not fundamentally different than exchanging money for items of value. AIt's like when an individual person sells his used car, he has to report the money he makes on the deal as income, but he can also deduct the cost of that car (less depreciation, which he may have been deducting all along).

But this is all beside the point. The fact that there are potential tax consequences of trading homebrew for ingredients and feedback does not necessarily make it "liquor sales." You give them a recipe, they give you ingredients. Then you give them beer and they give you back other peoples' beer. I don't think the transactions described by this "donations not required" CSA would be considered a sale in California. My biggest concern would be that the system would eventually be unable to sustain itself because of too many free riders.
Title: Re: Homebrewing CSA?
Post by: Pawtucket Patriot on September 01, 2011, 05:35:52 PM
Might be a good subject for a Pint of Law article  :)

Here is an article I posted earlier today about legal issues I believe would affect the homebrewing CSA model.

http://pintoflaw.com/?p=283

Title: Re: Homebrewing CSA?
Post by: tygo on September 02, 2011, 12:57:45 AM
Might be a good subject for a Pint of Law article  :)

Here is an article I posted earlier today about legal issues I believe would affect the homebrewing CSA model.

http://pintoflaw.com/?p=283

Nice article.  I think that pretty much sums it up.  I'd like to see the laws regarding this relaxed but I'm not holding my breath.  Maybe once the AHA finishes up the state by state war to completely legalize homebrewing this might be a good issue to devote some supportive resources to.
Title: Re: Homebrewing CSA?
Post by: phunhog on September 02, 2011, 02:42:00 AM
Might be a good subject for a Pint of Law article  :)

Here is an article I posted earlier today about legal issues I believe would affect the homebrewing CSA model.

http://pintoflaw.com/?p=283

Nice article.  I think that pretty much sums it up.  I'd like to see the laws regarding this relaxed but I'm not holding my breath.  Maybe once the AHA finishes up the state by state war to completely legalize homebrewing this might be a good issue to devote some supportive resources to.

It was an excellent article! However I hope the Homebrew CSA's continue to gain steam despite them probably being illegal.  Sometime the only way for laws to change is to show that everyone is all ready doing it and that no one is really interested in enforcing current law.  I can equate it to the federal highway speed limit increase from 55 to 65 a few years ago. They did it because nobody was driving 55 and everybody was driving 65. The cops weren't busting people for driving 60, or even 65 mph. Likewise with homebrewing in Alabama....does anybody really believe that there aren't homebrewers in AL because it is illegal?
Title: Re: Homebrewing CSA?
Post by: oscarvan on September 02, 2011, 10:35:23 PM
If you get big enough, you will draw attention.

It appears the money they would get out of you has to be more, or at least close, to the expense of going after you.
Title: Re: Homebrewing CSA?
Post by: kgs on September 05, 2011, 05:42:38 PM
I do live in SF, and this is an interesting turn of events, because SF is a case of a city that does not have a homebrew club and yet has many homebrewers. (There was a club, once upon a time, but it seems to have disappeared.) This CSA feels like an interesting way to meet other brewers; it feels, in fact, like a homebrew club in many ways, except less emphasis on the meeting and more on the sharing. I really liked the homebrew club I briefly belonged to in Florida before we suddenly moved back to CA, and I miss the camaraderie, advice, beer-tasting, etc. The Bay Area has some very good homebrew clubs, but SF proper doesn't, and if you live in the area you know that traffic and bridges make a seemingly short distance pretty challenging to get to.

I won't comment on the legality (I even have an IANAL button somewhere), except to note that the first homebrew I ever had was shared with me on the dunes of SF's Ocean Beach several years before homebrewing became legal... I didn't know at the time that it was illegal, but I do have to note that it was hardly the only illegal activity known to happen in SF at the time; if anything, in those days beer was considered kind of "square."
Title: Re: Homebrewing CSA?
Post by: johnf on September 05, 2011, 06:55:00 PM
If you get big enough, you will draw attention.

It appears the money they would get out of you has to be more, or at least close, to the expense of going after you.

That's not really how law enforcement works.
Title: Re: Homebrewing CSA?
Post by: kgs on September 05, 2011, 10:32:12 PM
Question, with the usual IANAL, YANAL disclaimers: if the "CSA" reorganized where there was no cash involved except for membership dues, and it focused on sharing beer among homebrewers, would that meet the standards of a homebrew club?

I don't know that they want to do that or have considered doing that (I did write them to say I homebrew and am interested in participating), but to me the big appeal is connecting with other homebrewers, not sharing my homebrew with people who don't homebrew at all. I'm just curious why they went to the step of creating a "CSA" rather than a club primarily by and for homebrewers. 

Title: Re: Homebrewing CSA?
Post by: phunhog on September 06, 2011, 04:50:14 AM
It's funny because that it is NOT a homebrew club is exactly what is so appealing to me.  I belong to a homebrew club and it's great but c'mon I will be the first to admit that we geek out! Get us together and we start talking about keezers, yeast pitching rates, hop varietals, etc. The funny thing is that my club is waaaaay laid back compared to some clubs that I have heard about. I actually enjoy sharing my beer more with non-homebrewers. They are always surprised...."Wow!! you brewed this yourself?" kind of thing.  I also believe that if you only share your beer with other homebrewers you are just "preaching to the choir".  That is why I LOVE the CSA model. It gets homebrewed beer into the hands of the public who might have never had a handcrafted homebrewed beer before.