State ABC Cracks Down on House-Infused Spirits. Can Tennessee's Cocktail Culture Survive?

It wasn't that long ago that house-infused spirits were a rarity in Tennessee, but these days, everyone from high-end speakeasies like Peter Kern Library to casual chains like Tupelo Honey have them on the menu. However, if the Tennessee Alcoholic Beverage Commission gets its way, infused liquors will be banned across the state—that is, unless they've been produced by a distillery.

According to the Public House's Laura Sohn, the crackdown started several weeks ago after a TABC agent read an article in this publication describing one of the bar's specialty drinks, a barrel-aged Negroni. The agent informed Sohn that only distilleries with a manufacturing license are able to age spirits in a barrel. At the same time Sohn was told that, according to the same provision, her house-infused liquors were also illegal.

"I've never heard of anything like this," Sohn says. "I don't know why they've just started enforcing this now."

The law TABC is citing in its crackdown, according to a memo sent out to all licensed establishments in early May by director Keith Bell, is a provision added in 2006 that allows distillers to blend alcoholic and non-alcoholic beverages together and then sell them. The subsection reads, in part: "A manufacturer's license may be issued to a person, firm or corporation for the limited purpose of blending nonalcoholic products with alcoholic beverages on premises, either on its own behalf or on behalf of other entities pursuant to contract."

The law was sponsored by then-state Sen. Steve Cohen and Rep. Ulysses Jones. Jones died in 2010, and Cohen's office didn't return requests for details by press time, but according to several lawyers we spoke with, the intent of the law was to allow Jack Daniel's to manufacture pre-mixed, single-serving Lynchburg Lemonades and other similar drinks on site.

"We don't think the ABC is interpreting the law correctly," says Will Cheek, a Nashville lawyer representing a number of hospitality industry clients on the issue. "By this measure, pre-mixing a pitcher of sangria is illegal."

But Bell says the law is indeed on his side, and he intends to enforce it. Bell says that something like a bartender muddling mint with whiskey for one mint julep is technically infusing the liquor, and he's got no problem with that—it's for immediate consumption. But a bottle of whiskey that's been infused with mint for a longer period of time? That's a health and safety issue, he says.

"They're producing a product that doesn't have a born-on date or an expiration date on it," Bell says. "There's several issues with that."

Bell also points out that, technically, it's illegal for any bar, in any state, to infuse spirits not for immediate consumption. And he's right—under the Federal Alcohol Administration Act, rectifying or blending (infusing) distilled spirits may only be lawfully done by a person with an Alcohol and Tobacco Tax and Trade Bureau (TTB) permit, on the premises of a distillery.

However, you might have noticed there hasn't exactly been a federal crackdown on infusions. In a May 2012 newsletter, the TTB said it was basically okay with the practice:

"At TTB, we are aware of the increasing trend of bars and restaurants infusing distilled spirits with fruits, herbs, and other nonalcoholic ingredients in order to make ‘infusions,' which are served on premises in cocktails. ... We understand that infusions are generally not for immediate consumption at the time the ingredients are mixed and would, accordingly, be subject to the [Internal Revenue Code] requirements. However, since taxpaid spirits are used in the process, TTB believes there is little risk to the Federal excise tax revenue. Additionally, because infusions are served on premises as or in cocktails, we do not foresee FAA Act packaging and labeling concerns. Under these circumstances, TTB exercises its enforcement discretion not to take enforcement action solely on the basis of violations with regard to a retail liquor dealer that mixes taxpaid spirits to produce infusions for on-premise consumption."

Matt Scanlan, a Nashville lawyer who represents the Tennessee Hospitality Association along with a number of other clients, says that TABC shouldn't be going further than the federal government.

"They're not charged with enforcing federal law," Scanlan says. "They're effectively shutting down an entire segment of the hospitality industry based on a spurious interpretation of the law."

Indeed, while TABC has not yet started issuing citations, bars and restaurants have already begun struggling with how to replace the infusions on their menus. Sohn has pulled her infused spirits for the time being and is relying on savory syrups to create similar drinks. Tupelo Honey hasn't yet pulled their infusions, but according to spokesperson Elizabeth Sims, the staff is readying a bacon-infused Bloody Mary mix to replace the bacon-infused moonshine in the signature drinks. Michael Riley, the general manager of the Oliver Hotel and the Peter Kern Library, says the bar has taken its infused liquors off the shelf but is still using them, at least for now.

"It's not a safety issue," Riley says. "We're making a mix. It's no different than a margarita mix. I don't understand why putting a vanilla bean in bourbon isn't okay, but a frozen margarita machine is."

Bell says, again, that it's the intent—a bottle of tequila mixed into frozen margarita mix in a machine at a Mexican restaurant is "for immediate consumption," he says. When asked what if the restaurant didn't sell all the frozen margaritas until two days later, Bell says he wouldn't want to get a drink from a restaurant that didn't clean its machines every night.

Greg Adkins, the president of the Tennessee Hospitality Association, says the organization isn't giving in.

"We are very much concerned about the interpretation—it seems like a real stretch," Adkins says. "And we will challenge it. We'll challenge it with the department, and if they take a different stance, we'll take it to the Legislature and change the law."

Bell says he'd be fine with a law change—he says he's encouraging people to look at newly passed legislation in Iowa that better regulates "Mixed Drinks or Cocktails Not For Immediate Consumption." But according to the Iowa Alcoholic Beverage Division, that law requires pre-mixed batches of drinks to be disposed of within 72 hours if not consumed. Bars are also required to keep records—for three years—detailing when each and every batch is made and disposed of, along with the recipe, the ingredients, and the names of the person who made the batch and the person who disposed of it. We asked Sohn if this seemed like a practical solution. She laughed loudly.

"Yeah, no," Sohn says. "It would be very wasteful. ... If they changed it to that, we probably still wouldn't bother with infusions."

Scanlan says he hopes TABC will reconsider its actions, but Bell doesn't seem inclined to do so.

"I'm going to have to apply the law as it is right now," Bell says. "I'm pretty certain we'll start issuing citations sometime in the next few weeks."

If this happens, expect all your favorite infused drinks to quickly disappear off the menu—at least for the time being. Adkins says he's not quite sure what next step the industry will take, but there will be one.

"We think our chances of winning on this are extremely high," Adkins says. "We will take this to the very end."