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Custom Crush and Alternating Proprietorships: Wine Without a Winery

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

Custom crush and alternating proprietorship are the two common ways to make wine under your own label without owning a winery building, and federal law treats them very differently. In custom crush, you pay a bonded winery to make wine to your order, and that winery is the legal producer. In an alternating proprietorship, you become a bonded winery yourself, renting time, space and equipment in someone else’s facility, and you carry your own permits, records and taxes.

The choice matters beyond the cellar. It decides which federal and state licenses you need, who answers to the Alcohol and Tobacco Tax and Trade Bureau (TTB), and what kind of land you need to buy, if any. This guide explains both models, the TTB rules behind them, the obligations on host and tenant, and how the decision changes a vineyard property search in Napa and Sonoma. For the wider set of options, from a first label to a permitted winery of your own, see our guide to how to start a winery in Napa or Sonoma.

Custom crush and alternating proprietorship side by side

TTB’s Industry Circular 2008-4, “Alternating Proprietors at Bonded Wine Premises” (August 18, 2008), is the agency’s main statement on the difference. It replaced Industry Circular 2003-7, which some older TTB pages still cite.

Question	Custom crush	Alternating proprietorship
Who is the legal producer?	The host winery. TTB holds the producer accountable; the customer is not the producer or bottler.	Each proprietor, during its own alternation. The tenant is a bonded winery in its own right.
Federal qualification for the brand owner	No bonded winery of its own. A customer that will sell the wine to other dealers must qualify as a wholesaler under 27 CFR part 1 and keep receipt and disposition records under part 31.	Its own bonded winery registration under 27 CFR part 24 and a basic permit as a wine producer under part 1.
Label approvals (COLAs)	Customers do not obtain COLAs; the producer does.	Each proprietor that bottles obtains its own COLAs.
Records, reports and excise tax	Handled by the host winery.	Each proprietor keeps separate records, files its own Report of Bonded Wine Premises Operations (TTB F 5120.17) and pays tax on wine it removes.
Small producer tax credit (as the 2008 circular describes it)	Custom crush output counts toward the host’s production.	Each proprietor’s credit is based on its own production, subject to controlled-group rules.
Hands-on involvement	Optional; the host makes the wine to order.	Required. The tenant must direct and stay responsible for its own production.

The tax-credit row reflects the 2008 circular. Federal wine tax credits were rewritten starting in 2018 under the Craft Beverage Modernization Act, so confirm how today’s credits apply to each arrangement with TTB or your compliance adviser.

In plain terms, custom crush buys a service, while an alternating proprietorship rents a place to run your own regulated business.

How TTB decides whether an alternating proprietorship is real

Federal rules allow wine premises, or parts of them, to be operated alternately by proprietors who have each filed and received approval of the required applications and bonds (27 CFR 24.136). Premises can’t be shared until TTB approves. The circular explains what reviewers look for.

A real producer. TTB may deny qualification if the tenant’s business plan is mainly marketing, or if another company handles all of its production, records, reports and tax filings.
Commitment. Reviewers consider the applicant’s history, plans for future winery assets and investment in vineyards or other permanent assets.
Identifiable wine. TTB must be able to tell each party’s barrels, tanks and cased goods apart. Signs may be enough in some buildings; fencing may be required in others.
Control of staff. A tenant using the host’s workers must direct them and stay responsible for production, bottling, storage and business management, with written work orders.
Access. Each party needs reasonable access to its own premises and wine, and so does TTB.
Duration. An alternation for production must last at least one calendar day, with some shorter uses, such as a bottling line, allowed if they are part of the approved plan.

Warning signs TTB lists

The circular names arrangements it treats as indicators that a proprietorship isn’t bona fide: a business plan centered on marketing with little production involvement, a contract where one party only receives juice, ferments it and hands the wine back for all other processing, and alternation fees based on the quantity of wine rather than rent for space and equipment. It also flags a host moving “excess” custom crush business into alternation, and customers encouraged to become alternating proprietors to split production for tax purposes.

If TTB finds a party isn’t a genuine producer, the circular says it may still qualify for a wholesale permit. TTB can also deny registry, require operating or premises changes, collect underpaid taxes or require relabeling.

What the tenant files and keeps

A tenant files the same federal package as any producing winery, with TTB’s National Revenue Center: the wine premises application (TTB F 5120.25), the basic permit application (TTB F 5100.24), a wine bond (TTB F 5120.36) unless exempt, special tax registration (TTB F 5630.5) and its organizational documents. Our start-a-winery guide walks through that package. What’s specific to an alternation:

A premises diagram. TTB’s application page says one is required for alternating proprietor hosts and tenants.
The alternating proprietor agreement and any lease, written as rent for space, time and equipment, since TTB treats per-gallon fees as a warning sign.
The host’s amended application. The alternation plan describes the areas each proprietor uses, and the premises can’t be shared until TTB approves it.
A bond decision. Under 27 CFR 24.146(d), a proprietor paying tax on a deferred basis needs no bond for any part of the year in which it’s eligible for annual or quarterly returns. Under 27 CFR 24.271, quarterly returns require no more than $50,000 in wine excise tax in the prior calendar year and an expectation of no more than that this year; annual returns, $1,000. Once tax due in the year passes the limit, that eligibility, and the exemption with it, ends for the rest of the year.

TTB doesn’t publish a processing time. It says a paper application can take up to seven business days just to be logged before a specialist reviews it and may send it for an on-site inspection; Permits Online is the electronic route.

Records follow the wine

Each alternating proprietor keeps its own records under 27 CFR 24.35 and subpart O of part 24 and must be able to discuss them with TTB. The circular is blunt that handing control of official records to a contract employee is inadequate. Records stay at the tenant’s own premises or, with permission under 27 CFR 24.22, at a separate permanent business office, but never at another proprietor’s premises.

What the host takes on

The host is usually the winery that owns or controls the building. TTB’s application page says the host and each tenant must be fully qualified bonded wineries, each handling its own production, records, reports, labeling and taxes.

An approved alternation plan. The plan describes the areas each proprietor uses while active. Any change needs TTB approval of an amended application.
Clean handovers. Under 27 CFR 24.136, operations in an area to be alternated must be completely finished before the next proprietor takes over, and an outgoing proprietor’s bond still matters for wine or other taxable material left in its tanks.
Segregation and access. The host has to lay out the building so each party’s wine is identifiable and reachable.
Pricing on rent, not gallons. Because quantity-based fees are a warning sign, host agreements are usually written as rent for space, time and equipment.

The host also has a county permit to protect. A winery’s use permit sets its own production and visitor limits, so before hosting, or before buying a facility that hosts, ask the planning department how tenant production is treated under that permit. Our guides to the Napa Winery Definition Ordinance and Sonoma County winery use permits explain what those permits control.

California ABC: the state license follows the federal one

At the state level, the license that matters is the Type 02 winegrower license from California’s Department of Alcoholic Beverage Control (ABC). ABC limits it to businesses that have winemaking facilities and equipment and actually make wine, but it recognizes that federal rules let one winegrower use another’s facilities, “commonly referred to as an ‘alternating proprietorship.'”

Each legal entity operating its own bonded winery gets its own winegrower license. So an alternating proprietor typically holds its own Type 02, tied to its own TTB qualification. A custom crush customer has no bonded winery, so it needs a different route to sell its wine; confirm the state license type with ABC and an alcohol-beverage attorney before you print labels.

If you later buy a licensed winery instead, licenses don’t transfer automatically with the property; our page on winery license transfers covers that process.

Costs to compare

Facility fees vary too much by host, volume and services to quote meaningfully, so compare offers line by line. The structure of the bill differs between the two models.

Custom crush is usually priced as a package: fruit processing, fermentation, barrel or tank storage, bottling and compliance work. You pay for labor and expertise as well as space.
Alternating proprietorship is rent: space, equipment time and storage, with your own labor or work orders on top. You also carry your own bond (unless exempt), compliance time, excise tax filings, insurance and label approvals.
Fruit is a separate line in both models, whether it comes from your own vineyard or a contract. Our guide to grape purchase agreements covers the contract terms.
Getting out also has a cost: moving barrels and cased goods when the agreement ends, and, for a tenant, closing or moving its federal and state qualifications.

How the choice changes the property you need

This is where the decision touches real estate. If you plan to make wine through custom crush or as an alternating proprietor, you don’t need land that can be permitted for a winery. That widens the search to vineyard parcels and rural homes that would never qualify for a winery use permit. In Napa County, for example, the Winery Definition Ordinance requires a parcel of at least 10 acres for a new winery, as the 2014-15 Napa County Grand Jury summarized it; a label made under custom crush or alternation needs no such parcel.

Vineyard only. A planted parcel that supplies your own label can work with either model. Focus the due diligence on vines, water and contracts; see buying a vineyard in Napa or Sonoma.
Small acreage. A few acres can feed a small label made off site; our post on how much land a hobby vineyard needs works through the numbers.
A winery of your own later. If the long-term plan is an on-site winery, buy land that can support one: zoning, parcel size, water, wastewater and road access. See winery production facilities for what a building needs.
Owning a host facility. A permitted winery with spare capacity can earn rent from alternating proprietors, but only within its use permit and TTB-approved plan.

Label claims also tie back to land. “Estate bottled” has its own federal requirements, explained in our guide to estate bottled rules.

Questions people ask

Is an alternating proprietorship the same as custom crush?

No. In custom crush the host winery is the legal producer and you are its customer. In an alternating proprietorship you are a separately qualified bonded winery using someone else’s premises, with your own permits, records, reports, labels and taxes.

Do I need a TTB permit for custom crush?

You don’t qualify a bonded winery, because the host is the producer. But if you will sell the wine to distributors or retailers, TTB’s circular says you must qualify as a wholesaler under 27 CFR part 1 and keep wholesaler records under part 31. Confirm the federal and state permits for your sales plan before the first harvest.

Can I start a brand as an alternating proprietor and then build my own winery?

Yes, and TTB considers plans for future winery assets and investment in vineyards when it reviews an application. When you move, you’ll amend or file new applications for the new premises, and the county permit for the new building is a separate approval.

Does an alternating proprietor need a bond?

Generally yes, on TTB F 5120.36, unless it qualifies for the exemption in 27 CFR 24.146(d) for proprietors paying tax on a deferred basis with annual or quarterly return periods. Quarterly returns require wine excise tax of no more than $50,000 in the prior calendar year and expected in the current one (27 CFR 24.271). If the year’s tax passes that limit, the exemption ends for the rest of the year, so check your projected liability with your compliance adviser.

Can the host’s staff make my wine?

They can do the work, but you must direct it and remain responsible for production, bottling, storage and business management, with written work orders. A plan in which another company handles all your production and records is one TTB may reject.

Can I hold tastings at my vineyard if my wine is made elsewhere?

Not automatically. Tasting and retail activity on a property is governed by county land-use rules and the state license, not by where the wine was made. Check the county rules for the parcel before you plan visitors.

How long does TTB approval take?

TTB doesn’t publish a fixed time on its application page. It says entry into its tracking system alone can take up to seven business days for a paper filing, followed by review and possibly an inspection, so apply well before harvest.

If your plan is a label first and land second, we can help you look for vineyard property that fits the way your wine will be made. Start with our vineyard and winery services or talk with us about your plans.

This is general information, not legal or tax advice; talk to an alcohol-beverage attorney or winery compliance adviser about your situation.

Sources & notes

Last reviewed October 2026 by Matthew Martinez.