Colorado SB 26-094: A Potential Game-Changer for Craft Distillers and Colorado’s Alternating Proprietor Framework

A bill introduced in the Colorado Senate this session could meaningfully reshape how craft producers across the state share facilities, split costs, and bring new products to market. Colorado Senate Bill 26-094 proposes to expand Colorado’s alternating proprietor framework in two significant ways: opening it up to distillers for the first time, and creating a new “alternating premises” arrangement that would allow one licensee to bottle, package, and store alcohol beverages on behalf of an adjacent licensee. For brewers, vintners, and distillers alike, this is worth paying close attention to.

Before diving into what the bill would change, it helps to understand how Colorado’s current alternating proprietor system works — and where it falls short.

A Note on SB 26-094’s Own Summary: The official bill summary states that “currently, a person licensed as a manufacturer of spirituous liquors, malt liquors, or vinous liquors; a brew pub; a vintner’s restaurant; or a limited winery may allow another licensee to manufacture and store vinous liquors and malt liquors on the first licensee’s premises.” That description misstates current law in an important respect. Under current Colorado law and Regulation 47-432, distilled spirits manufacturers are not eligible to participate in alternating proprietor arrangements at all — as either a host or a tenant. Only manufacturers of malt or vinous liquor (breweries, wineries, brew pubs, vintner’s restaurants, and limited wineries) may currently do so. Correcting this gap is precisely the point of the bill.

What Is an Alternating Proprietor Arrangement?

An alternating proprietor (AP) arrangement allows one licensed manufacturer — the “host” — to make a portion of its licensed premises available to another licensed manufacturer — the “tenant.” The tenant takes legal possession of that shared space during a designated time period, uses it to produce its own product, and then returns possession to the host. The two operations are legally separate and distinct; an AP is not a joint venture.

In practical terms, an AP arrangement lets a startup brewery or winery access professional production equipment — fermentation tanks, bottling lines, barrel storage — without the capital cost of building its own facility. The AP host generates revenue from underutilized space and equipment. Colorado’s AP framework is governed by Regulation 47-432 and the underlying statutes at C.R.S. §§ 44-3-402, 44-3-403, 44-3-417, and 44-3-422.

Current Colorado Law: Who Can Participate in an Alternating Proprietorship — and Who Can’t

Under current Colorado law, the following license types are eligible to participate in an AP arrangement, either as a host or as a tenant: manufacturer licensees under § 44-3-402 producing malt or vinous liquor, limited winery licensees under § 44-3-403, brew pub licensees under § 44-3-417, and vintner’s restaurant licensees under § 44-3-422.

Notably absent from that list are distilleries and distillery pubs (§ 44-3-426). Despite the craft spirits industry thriving in Colorado, producers of spirituous liquors have been entirely excluded from the AP framework. A craft distillery cannot currently serve as a host or tenant in an AP arrangement under any circumstances.

There is also a strict product-type constraint that is important to understand. AP arrangements are siloed by liquor type — a host licensed solely for vinous liquor may only allow vinous liquor production on its AP premises, and a host licensed solely for malt liquor may only allow malt liquor production. Regulation 47-432 is explicit on this point. Cross-industry arrangements — for example, a winery hosting a brewery tenant, or vice versa — are not authorized under current law.

How Current AP Arrangements Work in Practice

The AP Agreement

A written alternating proprietor agreement between the host and tenant is required. It must specify the shared premises area, the time frames for possession, how each party maintains control of its operations, and how alcohol beverage stock will be identified and segregated. The agreement must be approved by the Colorado Liquor Enforcement Division (LED), and any changes or termination must be reported to the Division promptly.

Physical Separation and Control

The host must always maintain its own “dedicated premises,” which always includes its retail sales area and any consumer tasting space. The AP premises must be physically distinguished from the host’s dedicated area using placards, partitions, or other physical means. At all times during the tenancy, the tenant must maintain possession, title, and control over its raw materials and manufacturing operations. Employees may be shared if the agreement provides for it, but the operations themselves must remain legally separate and distinct.

No Retail Sales from AP Premises

Neither the host nor the tenant may conduct retail sales of alcohol beverages from the alternating proprietor licensed premises. Retail activity must remain in the licensee’s dedicated premises.

Record-Keeping and Excise Tax Reporting

Both host and tenant must maintain detailed records of raw material movements and transfers of finished product. Each tenant must file a monthly report with the LED accompanying its Monthly Report of Excise Tax.

What SB 26-094 Would Change

Introduced in the 2026 session and sponsored by Senator Lindstedt, SB 26-094 would make two major structural changes to Colorado’s alcohol manufacturing framework.

Change 1: Distillers Could Participate in Alternating Proprietorships

The bill adds distillery pub licensees under § 44-3-426 to the list of eligible participants in the existing alternating proprietor framework. It also expressly authorizes distilleries — manufacturer licensees under § 44-3-402 producing spirituous liquors — to manufacture spirits on alternating proprietor licensed premises. The definition of “alternating proprietor licensed premises” itself would be amended to include spirituous liquors alongside malt and vinous liquors.

This means, for the first time in Colorado, a licensed distillery could host a startup spirits producer and share its stills, fermentation vessels, and production space. Conversely, a new distillery without its own facility could use an established producer’s equipment under an AP arrangement while building out its own space or testing market demand. Importantly, this expansion applies within the spirits category — the bill does not create cross-industry AP arrangements between, for example, a distillery host and a brewery tenant.

Change 2: A New “Alternating Premises” Arrangement

This is the more novel and potentially far-reaching change. The bill creates an entirely new concept: the “alternating premises licensed premises.” The bill defines this as a distinct and definite area owned by or in possession of a licensee “within which the licensee is authorized to manufacture and store vinous liquors, spirituous liquors, or malt liquors on behalf of “another licensee. The critical word here is “manufacture,” which in the Colorado Liquor Code context encompasses not just fermentation and distillation but the full range of production activities including blending, bottling, and packaging. This is the key to understanding what the alternating premises concept actually enables.

A licensee uses its own licensed premises and equipment to bottle, package, and store alcohol beverages on behalf of an adjacent licensee — without the other licensee ever taking possession of the premises, and without the performing licensee being authorized to produce a category of alcohol it is not itself licensed to make. A practical illustration: a licensed brewery with a high-capacity bottling line could use that line to bottle a neighboring distillery’s ready-to-drink (RTD) cocktail product and store it on the brewery’s premises pending distribution. The brewery is not distilling spirits — it remains squarely within its own license — but it is performing bottling and storage services for the distillery’s product. That is the type of cross-industry collaboration the alternating premises concept appears designed to enable.

This also would explain why the bill created a separate concept rather than simply amending the existing AP framework. Under the existing AP arrangement, the tenant takes legal possession of the host’s space and runs its own independent operation. The alternating premises arrangement is structurally different: the host retains possession of its own premises and performs services on another licensee’s product. The adjacency requirement reinforces this — it keeps the product and the relationship local and traceable, which makes sense when one producer’s product is moving to and from a neighboring facility for bottling and storage. Retail sales from the alternating premises would not be permitted.

What This Means for Colorado Producers

If SB 26-094 passes, the practical implications for craft producers in Colorado are significant. For distilleries, established operations with excess capacity could monetize their equipment by hosting emerging spirits brands under an AP arrangement. Startups and entrepreneurs could bring a spirits concept to market without the substantial capital required to build a distillery from scratch. Distillery pubs, currently excluded entirely from the framework, would also gain access.

The new alternating premises concept opens up meaningful opportunities for producers with adjacent facilities. A brewery, winery, or distillery with excess bottling or storage capacity could potentially provide those services to a neighboring licensed producer across license types — something not currently possible under Colorado law. The key point is that the performing licensee is not being authorized to produce a category of alcohol outside its own license; it is providing bottling, packaging, and storage services using its existing licensed premises and equipment. As with the expanded AP framework, the LED will need to develop rules to implement this arrangement in practice.

It is worth emphasizing what the bill does not do: it does not open the door to cross-industry AP arrangements. A distillery still could not host a brewery tenant, and a winery still could not host a distillery tenant. The product-type discipline that characterizes the current framework remains intact under the bill as introduced.

Current Status and Timeline

SB 26-094 has been introduced and referred to the Senate Business, Labor, & Technology Committee. The bill currently has no House sponsor.

If the bill passes and is not subject to a referendum petition, it would take effect on August 12, 2026, the day following the expiration of the 90-day petition period after the General Assembly’s adjournment (assuming adjournment sine die on May 13, 2026). If a referendum petition is filed, the bill would not take effect unless approved by voters in November 2026.

The state licensing authority would also need to promulgate new rules to implement the alternating premises framework. That rulemaking process would unfold after the effective date, and industry stakeholders will have an opportunity to participate and provide input.

Finally, it is critical to note that Colorado state law is not the only regulatory framework that applies to alternating proprietor arrangements. The federal Alcohol and Tobacco Tax and Trade Bureau (TTB) has its own requirements governing APs at the federal level, including rules around alternating proprietor permits, formula approvals, and production records. A full treatment of the TTB Alternating Proprietor framework is beyond the scope of this post, but any producer considering an AP arrangement — under current law or the proposed new framework — should ensure they are in compliance with both state and federal requirements.

This publication is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this publication is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel. The views and opinions expressed herein represent those of the individual author(s) only and are not necessarily the views of Clark Hill PLC or Clark Hill Solicitors LLP. Although we attempt to ensure that postings on our website are complete, accurate, and up to date, we assume no responsibility for their completeness, accuracy, or timeliness.

Producers with questions about how these changes may affect their operations should consult a licensed Colorado attorney familiar with alcohol beverage law.