TTB Releases New Guidance on Social Media Advertising for Alcohol Beverages (11/01/2024)

On November 1, 2024, the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued Industry Circular 2024-1, an important update for alcohol industry members navigating social media advertising. This latest guidance clarifies the application of TTB’s advertising regulations under the Federal Alcohol Administration (FAA) Act to all forms of digital media, including social media platforms such as Facebook, Instagram, LinkedIn, TikTok, blogs, and other interactive sites. Below, we’ll break down what this means for industry members.

Application of TTB Regulations to Social Media

According to TTB, social media advertisements are considered any written, graphic, or verbal content intended to promote alcohol beverage sales across state or international lines. TTB’s longstanding advertising rules now explicitly extend to digital platforms, underscoring the need for compliant content across all forms of social media.

Key Compliance Areas for Social Media Advertising

Here’s a closer look at the essential compliance points under the new circular:

Mandatory Information

For social media posts promoting alcohol beverages, TTB requires specific mandatory information:

• Essential Statements: Social media posts must include the advertiser's name and address, as well as other product details, including alcohol content and composition, depending on the beverage category (wine, spirits, or malt beverages).

• Information Placement: TTB treats an entire social media profile (including the main profile page and linked tabs) as a single advertisement. Therefore, required information should be displayed on the profile or home page, or in sections like “About” or “Products” that are likely to be seen by consumers.

• Use of Links: In cases where character limits restrict full disclosure, links (e.g., LinkTree or other link-sharing services) may be used to direct consumers to mandatory information. These links must be clearly labeled and require no further steps to access the information.

Avoiding Prohibited Practices

TTB’s advertising regulations also detail specific practices that are prohibited to prevent consumer deception:

• Misleading Statements: Avoid statements about product attributes, age, manufacturing, guarantees, or scientific claims that could mislead consumers.

• Content Quality: TTB restricts content that is false, disparaging, obscene, or inconsistent with label information.

• Reposted or Shared Content: Industry members are also responsible for ensuring that any third-party content they like, repost, or share complies with TTB standards.

Platform-Specific Guidelines

Media Sharing Platforms (Instagram, YouTube): Profile and media posts (including downloadable content) must visibly display the required information.

Microblogging (X/Twitter): For platforms with tight character limits, profile pages or pinned posts should feature mandatory information or a direct link to it.

Crowdfunding Sites and Apps: Platforms like Kickstarter or mobile apps promoting alcohol must also comply with TTB’s requirements for mandatory information.

QR Codes, Linked Content, and Augmented Reality: Any content linked through QR codes or accessed via AR must meet TTB’s disclosure requirements, ensuring transparency across all digital content.

Social Media Influencers (SMIs) and Advertising Compliance

Influencers who are paid to promote alcohol products are now expressly covered by TTB’s advertising regulations. Industry members are responsible for ensuring that influencer content includes mandatory statements and avoids prohibited claims, just as if they posted the advertisement themselves.

Compliance Considerations for Emerging Platforms

The TTB’s guidance acknowledges that new social media platforms continue to emerge. While not every scenario may be specifically outlined, the TTB emphasizes applying these guidelines consistently to ensure compliance and avoid regulatory issues.

Stay Compliant, Stay Informed

In light of these updates, industry members should regularly review their social media advertising practices. If you have questions or need support ensuring compliance with TTB advertising standards, please reach out. Staying on top of these rules is crucial for avoiding regulatory pitfalls in today’s digital advertising landscape.

For a detailed breakdown, refer to the complete text of Industry Circular 2024-1.

Staying proactive with regulatory updates like these can protect your brand and foster trust with your audience. Let’s work together to make compliance a seamless part of your social media strategy.

Corporation or LLC? What’s best for your beverage business

Congratulations on making it this far in launching your beverage venture! One of the first essential steps is deciding what type of business entity best suits your goals. If you’re considering participating in the alcohol industry, selecting an entity type that maximizes legal protection is crucial. This post provides an overview of the two most common entities we form for our clients—Limited Liability Companies (LLCs) and Corporations—and explains how each can be a strong foundation for your alcohol business.

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Key Differences:

• Liability Protection: Both LLCs and corporations protect owners from personal liability for business debts and lawsuits.

• Ownership: Corporations are owned by shareholders, while LLCs are owned by members.

• Management Structure: Corporations require a board of directors and formal management, whereas LLCs allow for flexible member or manager control.

• Taxation: Corporations face double taxation unless they elect S-corp status; LLCs generally use pass-through taxation, avoiding double taxation.

• Best Fit: Corporations suit growth-focused, investor-driven businesses; LLCs are ideal for flexibility and simpler operations.

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Ownership Structure:

Corporations are a well established entity type, known for its strong asset and liability protections. If set up properly, a corporation separates the business’s assets and liabilities from its shareholders, shielding owners from personal liability.

Corporations are owned by shareholders who invest capital in exchange for shares. Corporations have no ownership cap, making them more appealing to professional investors and companies aiming for growth. This structure is ideal for those looking to raise capital, expand rapidly, or potentially go public in the future.

LLCs, on the other hand, are owned by members, with each holding a “membership interest” in the company. LLCs can have a single member or multiple members, without limitations on the number or type of members, which may include individuals, corporations, or other LLCs. This flexible ownership structure suits family-owned or closely-held alcohol businesses, offering straightforward management and personal liability protection.

Taxation

A significant distinction between these two entities lies in taxation. By default, corporations may be subject to double taxation, which subjects the business to corporate tax rates on income, and shareholders taxed individually on dividends.

LLCs enjoy greater tax flexibility. By default, single-member LLCs are taxed as sole proprietorships, while multi-member LLCs are taxed as partnerships, both of which allow for pass-through taxation, meaning profits pass directly to members’ personal tax returns.

“Can I form an S-Corp to avoid double taxation?”

Well, sort of. “S-Corporations” actually just refer to a business that has made an election to pass business income, losses, deductions, and credits through to their owners. Both corporations and LLCs can make this election with the IRS, so long as it is made during the preceding calendar year or no more than 2 months and 15 days after the beginning of the tax year the election is to take effect (most often March 15).

Choosing Based on Growth and Exit Strategy

Speaking in very general terms, if you envision your business as a family-owned or small-scale operation, an LLC might be a suitable choice, offering a streamlined structure, asset protection, and straightforward tax requirements. However, if you plan to build an RTD brand or liquor company with rapid expansion in mind, a corporation could provide an advantageous framework for growth and ownership transfer.

So, which one should you pick?

Selecting an entity structure depends on your specific goals. An LLC may be suitable if you aim to avoid double taxation, prefer flexible management, and envision a small or family-run alcohol business. A corporation might be ideal if you’re seeking investor funding, aiming for exponential growth, or plan to eventually go public.

It's crucial to consider state-specific liquor laws, as requirements vary and can impact business formation and operations. Consulting a specialist in alcohol regulatory compliance, as well as a tax professional, can help you navigate these complexities and establish your business with a strong, compliant foundation.