Types of Alcohol

• Craft distilleries may distill so-called neutral spirits (vodka or grain alcohol), rum, brandy, cordial, whiskey or liqueur. They may also produce spirits by infusion through redistillation. Craft distillers may start with already distilled neutral spirits as long as they alter the neutrality of the spirits in the process.

Permits and Licenses

• Under the Alcohol and Tobacco Tax and Trade Bureau's regulations, craft distilleries fall into the category of "beverage," as opposed to "industrial." Such distilleries are defined as those involved in the production, bottling, processing or storage of spirits suitable for consumption. Applicants must complete TTB F 5100.24, the basic permit established by the Federal Alcohol Administration Act. They also must notify the Food and Drug Administration of their intent to produce alcoholic beverages.

Taxes

• Operators of craft distilleries are required to pay the federal distilled spirits excise tax. Fourteen states -- Arizona, California, Connecticut, Hawaii, Kansas, Massachusetts, Maryland, Minnesota, Nevada, New Mexico, New York, Oregon, Vermont and Washington -- as well as the District of Columbia also have their own distilled spirits taxes.

State Laws

• States are granted powers under the 21st Amendment with authority to regulate the production and sale of alcoholic beverages. Eighteen of the states are so-called "control" states, which maintain various degrees of direct control over the manufacturing and distribution of alcohol -- the most strict of which limit the sale of alcohol to state-run stores. In the other 32 states, producers of distilled spirits are allowed to sell directly to their customers or to wholesalers.