Indiana Could be Latest State to Recognize Craft Distilling

Indiana is poised to become the latest state to reform its craft distilling laws. Inspired by the popularity of craft wineries and microbreweries, more small-scale distilleries are starting to open in the Hoosier State. Heartland Distillers, founded by Stuart Hobson in 2008, was one of the first distilleries to open in Indiana since Prohibition. Hobson distills a small-batch bourbon and is a co-creator of SorgRhum, America’s first sweet sorghum-based spirit. Then there’s Starlight Distillery, which offers craft brandies and grappa. The American Distilling Institute estimates there are almost 250 microdistilleries nationwide. There could be even more if Indiana passes a new reform bill.

Indiana State Captiol

HB 1293 would create a separate artisan distiller’s permit, allowing commercial manufacture of no more than 10,000 gallons of liquor in a calendar year. Hoosier microdistilleries would also be able to offer samples and sell on-site directly to customers. That last reform would be crucial to liberating the liquor market.

Like too many other states, Indiana has a three-tier distribution system for alcohol sales: Distillers are forced to sell their spirits to wholesalers and distributors who in turn sell to retail stores, restaurants, and bars. Or as Stuart Hobson put it:

“I have one customer in the state of Indiana: my distributor. And that limits me. I [run] an Indiana company, and there should be no reason why I can’t compete with all the other Indiana alcohol producers.”

But if HB 1293 passes, Heartland Distillers and others could partially bypass these middlemen, while visitors would gain the convenience from buying spirits directly at a distillery, instead of having to wait to buy them later at a liquor store. One microdistillery in Pittsburgh generates over half of its revenue from on-site sales.

On top of that, a separate permit would drastically lower fees. Under state law, a distiller’s permit currently costs $2,000 a year, regardless of the size of the operation. But HB 1293 would instead charge only $250 annually for the artisan distiller permit. (Unlike homebrewing, under federal law, it is still illegal to distill liquor without a license.)

Back in February, recognizing these entrepreneurs’ right to distill overwhelmingly passed the statehouse, 91 to 8. Legislators are backing the bill for many reasons, and not just a love for innovative spirits. As co-sponsor State Sen. Jim Banks, explains, “It has a lot less to do with alcohol and a lot to do with homegrown Indiana businesses. I see it as an economic development issue and a tourism issue for our state.”

-- Nick Sibilla

Nick Sibilla is a writer at the Institute for Justice

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