So Scrappy's bitters aren't, um, "fully legal"? Says the guy with bottles both at home and at work....
I don't think
so. I hope I'm wrong, or at least that they're working on becoming legal - but to the best of my knowledge, they haven't received an executed form 5154.1
The thing is that many producers have received information that they want
to hear from people who haven't read the appropriate sections of the civil code that refer to the TTB and alcohol use. Here's the most basic summary:
1) If you create alcohol or increase the proof of an existing alcohol product, you need to petition for a brewing/vintner/rectification/distilling license.
2) If you create a product containing alcohol, it is by default potable and requires approval from the TTB. Potable products need to be sold through the three-tier alcohol sales network, requires permits and bonding. You cannot sell a potable product without a TTB approval.
3) If the product containing alcohol is not for beverage purposes (spirits, beer, wine), you can petition the TTB to get the formulation to be evaluated and classified as a non beverage alcohol product. As a non beverage product, you can claim back some excise taxes and sell as a food item, though your labels, production facilities and GRAS status fall under FDA/USDA jurisdiction. This approval/classification is provided via TTB form 5154.1
There are lots of people under the misassumption that if you take, for example, Everclear that you have paid tax on when purchased retail - mix up a bitter using that alcohol, that then you can re-sell it because it used an existing alcohol product. That's just not true. In fact, in many states, it may be considered an "adulterated spirit" and considered to be forbidden.
Bars and restaurants who make an intermediate product (e.g.: infusion or bitter) using commercial alcohol for use in a cocktail fall into a grey area. California, for example, says that technically infusing an alcohol and putting it back in the same bottle is expressly forbidden. I'm not a lawyer, but it looks like the law was written to protect consumers who see a bottle, for example, of Beefeater - expecting Beefeater to be in it, but instead, it's Gibley's. I bet that if it goes to court, simply putting the infusion in a generic bottle with a clear label/menu notation that says "house made infusion of XXX into XXX" should be legal. Essentially, it's the same thing as making a compound butter by mixing herbs into a commercial butter for use by the restaurant when making a meal.
So, to get back to what you initially asked: I'm not sure if they are legal or not - but my suspicion based on what I have heard is that as of right now, they are not TTB legal and their labels don't seem to be FDA compliant.
By the way - they make some absolutely great products. I really hope that they do become fully legal - and here's an open invitation for them to contact us. If we can be of any assistance so they can legally get to market, we'd be glad to help.