📺 Stream EntrepreneurTV for Free 📺

Distilleries Made Hand Sanitizer To Help. Now They're Hit With $14,000 Fees A government fee for drug manufacturers has surprised and alarmed the spirits industry.

By Maggie Kimberl Edited by Jason Feifer

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

FEW Distillery

Update: On December 31, 2020, shortly after this story was published, the Federal Department of Health and Human Services announced it had directed the FDA not to enforce its fee on distilleries. It stated that businesses that stepped up to help fight COVID-19 should be applauded, not taxed.

In the early days of the pandemic, more than 800 distilleries stopped making their usual whiskey, gin, vodka, and other alcoholic beverages. They instead started making hand sanitizer, which at the time was in short supply. This often required retrofitting their equipment and halting production of their core products, but they said they were happy to help their communities.

Now they're getting an unpleasant reward for their trouble: The FDA is charging them a fee of $14,060 or more.

"This has been a nasty surprise for our community of small distillers," says Becky Harris, co-owner of Catoctin Creek Distilling in Virginia, and president of the American Craft Spirits Association.

The fee is the result of these distilleries being temporarily classified as a non-prescription drug manufacturer. In normal times, the FDA charges this fee to offset the cost of inspecting and regulating over-the-counter drug manufacturers, in order to ensure public health and safety. But it has blindsided many of the small, often family-owned distilleries that are already struggling to manage the economic impact of 2020.

When distilleries began producing hand sanitizer in the spring, their effort was highly organized. As the head of her industry's association, Harris held near-daily meetings for weeks to ensure that distilleries' sanitizers met strict guidelines for safety and efficacy.

This also meant working with the federal government, because many of the laws regulating the beverage alcohol industry had to be temporarily set aside. Prior to the pandemic, it would have been illegal for these facilities to manufacture sanitizers. "We worked with the FDA to get companies registered and to make the rules clear to them," Harris says. "At no point was the specter of an upcoming fee highlighted in their guidance, especially one of the scale announced."

Now the industry is asking the FDA to waive the fees.

"This unexpected fee serves to punish already struggling distilleries who jumped in at a time of need to do the right thing," says Chris Swonger, president and CEO of the Distilled Spirits Council of the United States, who released a statement on December 31st, 2020. "While this fee may be a rounding error to a large pharmaceutical company, this will be disastrous to small distilleries who stepped up to help produce this critical product."

Meanwhile, the recipients of that hand sanitizer are showing their appreciation. Back in March and April, as many distilleries shifted their production, medical facilities were running dangerously low of the life-saving gel.

"When our hospital ran out of hand sanitizer, we were thankful to the distilleries," says a nurse in Southern Indiana, who spoke to Entrepreneur but asked to remain anonymous because her hospital hadn't authorized her to speak to the press. "Starlight [Distillery] donated individual bottles to us as well and even set up a station where we could bring our own container from home and fill it up. We were so thankful."

But it wasn't just hospitals who benefitted from the efforts of distilleries. Businesses were also required to have hand sanitizer and other cleaning solutions on hand as a condition of reopening their businesses.

"When we were told we could finally reopen during phase one, we were given new cleaning and sanitizing guidelines and had to come up with PPE and supplies to ensure the safety of both staff and our patients," says Dr. Andrew Harvey, owner of Harvey Eye Optometry in Kentucky. "We actually spent an extra week closed because masks, thermometers, and cleaning supplies were sold out everywhere at that time. The one thing we were able to find easily, and in ample supply, was sanitizer made by the local distilleries. I feel very fortunate to live in an area with so many wonderful distilleries, like Jeptha Creed, who really stepped up to meet the pandemic's new demand."

Now that distilleries know about the fees, they must act fast. Distilleries had to register with the FDA to make the hand sanitizer, and if they don't rescind their registration with the FDA by the end of 2020, they are told they'll be on the hook for this fee again in 2021.

"I am sure that the FDA is inundated with pleas from small companies right now with tons of questions," says Harris. "We would love to help them by working with them to create a solution to this issue, and then working to get this information out into the community."

Maggie Kimberl

Spirits Reporter

Maggie Kimberl is the Content Editor of American Whiskey Magazine as well as a freelance spirits journalist focusing on whiskey culture in the United States, though she considers herself to be 'geographically blessed' to live in the epicenter of the bourbon world, Louisville, Kentucky. When she's not covering the bourbon beat you can find her browsing through vintage vinyl with her kids or tending to her homegrown tomatoes. Follow her on Twitter, Instagram, and Facebook, and check out her blog.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

These Coworkers-Turned-Friends Started a Side Hustle on Amazon — Now It's a 'Full Hustle' Earning Over $20 Million a Year: 'Jump in With Both Feet'

Achal Patel and Russell Gong met at a large consulting firm and "bonded over a shared vision to create a mission-led company."

Business News

These Are the 10 Most Profitable Cities for Airbnb Hosts, According to a New Report

Here's where Airbnb property owners and hosts are making the most money.


Want to Be More Productive? Here's How Google Executives Structure Their Schedules

These five tactics from inside Google will help you focus and protect your time.

Side Hustle

How to Turn Your Hobby Into a Successful Business

A hobby, interest or charity project can turn into a money-making business if you know the right steps to take.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Starting a Business

This Couple Turned Their Startup Into a $150 Million Food Delivery Company. Here's What They Did Early On to Make It Happen.

Selling only online to your customers has many perks. But the founders of Little Spoon want you to know four things if you want to see accelerated growth.