Alternating Proprietor (AP) vs. Custom Crush in California: TTB & ABC Compliance Guide

Last reviewed: October 20, 2026

For wine brands launching or scaling in Napa Valley and Sonoma County without purchasing a standalone brick-and-mortar winery facility, two operating models dominate the industry: an Alternating Proprietorship (AP) and a Custom Crush arrangement. While both models use a host winery’s physical crush pad, fermentation tanks, barrel rooms, and bottling equipment, the Alcohol and Tobacco Tax and Trade Bureau (TTB) and the California Department of Alcoholic Beverage Control (ABC) treat them as fundamentally different legal structures.

Choosing the wrong structure—or blurring the operational lines between an AP agreement and a custom-crush contract—can trigger TTB permit delays, Craft Beverage Modernization Act (CBMA) tax credit disallowances, or California ABC licensing issues. Below is a practical regulatory comparison prepared by Gateway Compliance Napa.

What Is an Alternating Proprietorship (AP)?

Under 27 CFR § 24.136 and TTB Industry Circular 2008-4, an Alternating Proprietorship occurs when two or more independently qualified bonded wineries take turns using the same physical winemaking space and equipment (or designated portions of a facility). In an AP structure, the tenant winery (the alternating proprietor) is a fully licensed wine producer in its own right.

• Federal TTB Qualification: The Alternating Proprietor applies for and holds its own TTB Bonded Winery (BW) permit and Federal Basic Permit at the host facility’s address, supported by an Alternating Proprietor Agreement, alternating premises diagrams, and wine bond (when required).
• California ABC License: Because the AP holds a federal Bonded Winery permit and produces its own wine, it qualifies for a California ABC Type 02 Winegrower license at the host premises.
• Operational Control: TTB Industry Circular 2008-4 requires the AP to operate as an independent winery—directing winemaking decisions, maintaining independent access to its alternated space, and keeping separate production and inventory records.
• TTB Reporting & Excise Taxes: The AP files its own TTB Form 5120.17 (Report of Wine Premises Operations), files its own federal Form 5000.24 and California CDTFA excise tax returns, and claims its own CBMA producer tax credits ($1.00 / $0.90 / $0.535 per gallon) on wine it produces.
• COLAs & Bottling Claims: The AP applies for Certificates of Label Approval (COLAs) under its own TTB permit and may use “Produced and Bottled by” (or “Cellared and Bottled by”) under its own trade name when regulatory production percentages are met.
• Tasting Room & DTC Shipping Privileges: Holding a California Type 02 Winegrower license allows the AP to apply for one off-site Type 02 Duplicate tasting room in California and qualify as a licensed wine producer across out-of-state Direct-to-Consumer (DTC) shipping jurisdictions.

What Is a Custom Crush Arrangement?

In a Custom Crush arrangement, a wine brand (the custom-crush client) contracts with a host bonded winery to crush, ferment, cellar, and bottle wine to the client’s specifications. Legally and regulatorily, the host winery is the producer until the finished wine is bottled, taxpaid (or transferred in bond), and invoiced to the client.

• Federal TTB Qualification: The custom-crush client does not hold a TTB Bonded Winery permit at the production facility. Instead, the client obtains a Federal Wholesaler’s Basic Permit at its office or commercial premises.
• California ABC License: In California, custom-crush clients hold a Type 17 (Beer and Wine Wholesaler) and Type 20 (Off-Sale Beer and Wine) combination license (typically paired with a Type 14 Public Warehouse license where finished cased goods are stored).
• TTB Reporting & Excise Taxes: The host winery reports all fermentation, bulk storage, and bottling on the host’s TTB Form 5120.17. The custom-crush client does not file Form 5120.17.
• COLAs & Bottling Claims: The host winery applies for and holds the TTB COLA under the host’s Bonded Winery permit, adding the client’s brand/DBA as a bottling trade name so the back label can read “Bottled by [Client Brand Name]” or “Vinted and Bottled by [Client Brand Name].”
• Tasting Room & DTC Shipping Limitations: A California Type 17/20 holder is restricted to internet/phone/mail retail sales without a physical walk-in tasting room, and a handful of out-of-state DTC jurisdictions restrict Direct Wine Shipper permits to entities holding a federal Bonded Winery / producer license.

Key Compliance Risks TTB & ABC Scrutinize

Under TTB Industry Circular 2008-4, federal investigators evaluate whether a purported Alternating Proprietorship is actually an unapproved custom-crush arrangement. Common red flags include contracts where the host winery retains total control without tenant winemaking direction, failure to log physical alternation of tanks and equipment, or improper sharing of CBMA tax credits. Before signing an AP or custom-crush contract in Napa or Sonoma, review both the agreement terms and the host winery’s county use-permit allowance for AP licenses.

Need Help Structuring an AP or Custom Crush License?

Gateway Compliance Napa guides wineries and wine brands through Alternating Proprietor and custom-crush licensing, TTB Permits Online filings, California ABC Type 02 and Type 17/20 applications, and transitions from Type 17/20 to Type 02. Contact Taylor Marchand at Gateway Compliance Napa to map the right structure for your brand.

This guide provides general educational information and is not legal or tax advice. Confirm current TTB, California ABC, and local zoning requirements for your specific business and premises.