Billy Trout, manager of taxpayer education for the Tennessee Department of Revenue, opened a departmental webinar in April 2025 outlining how Tennessee taxes apply to wineries, distilleries and breweries and how those businesses may qualify for exceptions to the state’s three‑tier distribution system. “Good morning, everybody. This is Billy Trout, manager of taxpayer education for the Tennessee Department of Revenue,” Trout said at the start of the presentation.

The webinar focused on statutory and administrative rules that affect manufacturers’ tax obligations and distribution options, and on practical compliance steps for licensees. “The biggest thing that you guys should do is keep excellent records,” said Amanda Luke, a guest from the department’s audit division, urging producers to maintain inventories and to understand how their point‑of‑sale and inventory software reports activity.

Why it matters: Tennessee law generally requires a three‑tier chain—manufacturer, wholesaler, retailer—but state statutes and administrative permits create specific exceptions for on‑site sales, self‑distribution, satellite locations and direct shipping by manufacturers. Those exceptions change who must collect and remit Tennessee taxes such as the wine gallonage tax, sales and use taxes, liquor‑by‑the‑drink (LBD) tax and the beer barrelage tax.

Key points from the webinar

- Three‑tier overview and exceptions: The department reiterated the basic three‑tier model—retailers buy from wholesalers, wholesalers buy from manufacturers—and said wineries, distilleries and some breweries may operate outside that model under limited conditions regulated by the Tennessee Alcoholic Beverage Commission (ABC) and related state law. Katie Julian, the webinar host, pointed attendees to the department’s alcohol tax manuals and the ABC website for licensing details.

- Wineries: A licensed Tennessee winery may manufacture and bottle wine and engage in limited direct sales and tastings. The department said a licensed winery may self‑distribute within 100 miles of the production site if its total annual production is 50,000 gallons or less and it has no wholesale contract covering a county within that 100‑mile radius. When a winery self‑distributes, the winery—not a wholesaler—becomes responsible for wine gallonage tax that would otherwise be remitted by the wholesaler.

- Farm wine permits and satellite facilities: A Tennessee farm wine permit holder may self‑distribute when production is 50 gallons or less. Wineries and farm wine permit holders can apply for ABC satellite permits to operate off‑site tasting rooms; producers that make more than 50,000 gallons annually must supply satellites through a wholesaler, while those producing 50,000 gallons or less are not required to use a wholesaler for satellite inventory. Sales at satellite locations for on‑premises consumption follow the same tax treatment as on‑site sales.

- Direct shipping: Manufacturers that obtain a direct shipper license may ship to Tennessee customers without using a wholesaler but are subject to limits. The department summarized quantity caps: up to 9 liters per individual per calendar month and up to 27 liters per individual per calendar year, with an increased annual cap of 54 liters for winery direct shippers that produce less than 270,000 liters per year. The department noted that direct shippers are responsible for remitting Tennessee sales tax and the wine gallonage tax because no wholesaler is involved.

- Distilleries: A manufacturer’s license lets a distillery sell and serve products made on premises and offer samples. Distilleries are not required to pay the liquor‑by‑the‑drink tax on alcohol served for on‑site consumption, whether sold or offered as free samples; however, sales and use tax generally applies to products served as samples if the distillery purchased the product from a wholesaler and the wholesaler did not collect sales tax. The department advised that distilleries should use the distiller alcoholic beverage tax return (form TINTAP ALC 101) to report gallonage on product retained for incidental use, subject to a 100‑case per month limit and a $4.40 per‑gallon rate for that reporting category.

- Breweries: The department said breweries face fewer distribution exceptions than wineries and distilleries but must collect sales tax and the beer barrelage tax on taproom sales. Beer dispensed as part of a paid brewery tour and tastings that are charged to customers are taxable for barrelage and sales tax purposes. The department also reviewed how buy‑one, get‑one or coupon discounts affect the barrelage tax base.

- Manufacturing exemption and business tax: The department reiterated that the industrial/manufacturing sales tax exemption applies to manufacturers who sell product for resale. If a location’s dominant sales are to the general public for on‑premises consumption (the department referenced a 50% test), the manufacturer may lose the business‑tax exemption even if it otherwise qualifies as a manufacturing operation.

Guidance and compliance reminders

- Recordkeeping: Amanda Luke emphasized maintaining detailed inventory records and understanding point‑of‑sale software because auditors review records and inventory during compliance visits. “Be conscious of your software and what it's doing and maintain that inventory as well,” she said.

- Documentation and invoicing: The department described rules that allow distillers to supply retail licensees for consumer tastings via wholesalers with $0 invoices and outlined the written notice and timing the distiller must provide to wholesalers and retailers when arranging tastings and transfers.

- Legislative changes and notices: The presenters flagged recent legislative activity and departmental notices. They noted House Bill 160 had passed the General Assembly but had not been signed by the governor at the time of the webinar; if enacted as described in the presentation, HB 160 would make retail sales of wine for on‑premises consumption at a winery, farm wine producer or satellite facility exempt from the LBD tax effective July 1, 2025. The department also referenced Important Notices (for example, Important Notice 2104 for winery direct shippers and Important Notice 20115 for distillery tasting rules) and directed attendees to the alcohol tax manual and the department’s webinar video library for more detail.

What officials urged: Practical steps

Presenters urged licensees to consult the department’s alcohol tax manual, to contact revenue.support@tn.gov or liquor.tax@tn.gov with complex questions, and to use the Department of Revenue’s miscellaneous tax unit phone line for alcohol tax questions. Amanda Luke and other presenters recommended contacting the department directly on nuanced questions, and keeping transaction and inventory documentation readily available for audits.

Ending: The department said it will post the recorded webinar and the PDF presentation to the revenue webinar video library and reiterated contact points for follow‑up questions and technical assistance.