You Be The Tax Judge: Ream v. Treasury
John Ream grew up in Ohio and worked as an aerospace engineer at Boeing in Seattle before starting to brew at home. What began with a homebrewing kit from his wife eventually became a business. Ream and his wife returned to Ohio and opened Trek Brewing Company, a brewery and taproom in Newark (the brewery closed its doors this summer).
But beer wasn’t Ream’s only interest. An engineer by training and a fan of rye and bourbon, he became interested in the science and craft of distilling. He researched the process and wanted to experiment with flavors and techniques by making small batches of whiskey at home for his own consumption—not for sale.
There was a problem: While federal law allows individuals to make beer and wine at home, it prohibits them from distilling spirits there.
And if you’re wondering where you’d find the federal rules that make home distilling illegal? Here’s a clue: They’re in Title 26, better known to you and me as the Tax Code.
Federal Excise Tax
The federal government imposes an excise tax on distilled spirits. As written in the Tax Code, the terms “distilled spirits”, “alcoholic spirits”, and “spirits” mean the substance known as ethyl alcohol, ethanol, or spirits of wine in any form. Common examples include whiskey, vodka, rum, tequila, gin, brandy, and high-alcohol wines, which are generally those above 24% alcohol (if wine stays under 24%, it is taxed under wine regulations; if it exceeds 24%, it loses its classification as a wine).
The tax is calculated based on proof gallons (the adjusted volume of pure alcohol content scaled to a 100-proof, or 50% ABV, baseline). Not only do distilled spirits usually have a higher alcohol content than wine and beer, but they are also taxed at a higher rate per alcohol content than other alcohol types—that means that cocktails and similar drinks are a real money-maker for the U.S. government.
The government maintains a complex regulatory system to ensure compliance with those rules. Among other things, distilled spirits must typically be produced on the bonded (basically, insured) premises of a registered distilled spirits plant. That means that you can’t just start making whiskey anywhere—you have to register with the federal government and comply with sometimes complicated rules involving operations, records, and, yes, tax payments.
To make sure that distillers follow the rules, revenue officers have broad authority to inspect the premises where distilled spirits are produced. But there’s one place where you generally cannot register a distilled spirits plant: your home. Federal law also provides that a distilled spirits plant cannot be located in a dwelling house or in a shed, yard, or enclosure connected with a dwelling house. It is also a crime to possess or use a still at home to produce distilled spirits (yes, that’s true even though you can buy kits online). The consequences can be significant: Violations can result in fines of up to $10,000, up to five years in prison, or both.
Background
These restrictions on distilled spirits aren’t new. They’re not even tied to Prohibition. They go much further back than that.
The first federal internal tax on domestically distilled spirits dates back to March 3, 1791. The so-called whiskey tax was not exactly popular. Opposition eventually erupted into the Whiskey Rebellion (clearly, we Americans love our whiskey). The tax was repealed under President Thomas Jefferson in 1802, brought back to help finance the War of 1812, repealed again, and eventually reinstated during the Civil War.
In 1867, after more than a month of testimony, a congressional committee reported that some of the most significant frauds against the federal government involved the manufacture and sale of spirits. So, on July 20, 1868, Congress passed legislation restricting the production of spirits at home.
Just over 100 years later, President Jimmy Carter signed legislation creating federal exemptions for beer and wine produced at home for personal or family use. But Congress didn’t create a similar exemption for distilled spirits. The prohibition on home distilling remained.
The law also included a tax component, and for good reason. Since Prohibition, distilled spirits have made up a significant portion of alcohol sales in the U.S. That’s still true today. According to the Distilled Spirits Council (yes, that’s really a thing), spirit sales have slightly outpaced beer sales for four years running. While some newer products, like ready-to-drink cocktails, have helped (reported sales have increased by double digits), the old reliable—vodka—tops the list with more than $7 billion in revenue in 2025.
But that production happens inside licensed stills and outside homes. According to the government, there is a practical reason: a commercial distillery operates on registered premises that federal revenue officers can inspect. A still operating inside someone’s home is considerably easier to hide—and a home is considerably harder for government agents to search.
Beyond site visits, federal regulations require extensive reporting. Among other things, you have to document production activities, inventories, and taxes. And since alcohol is taxed by production volume, not sales, it’s super important to keep accurate records. That includes production and storage logs, which you must also make available for inspection.
The Challenge for Ream
But even if Ream could meet all of those production, recordkeeping, and tax requirements, there was still a problem: He couldn’t legally do it at home.
And Ream wasn’t willing to break the law to make his point.
So, on January 30, 2024, he sued the Treasury Department, the Alcohol and Tobacco Tax and Trade Bureau, and federal officials in the U.S. District Court for the Southern District of Ohio. He did so before he ever bought a still or produced a drop of whiskey. That last part mattered a great deal.
Ream hadn’t started secretly making bourbon in his garage and gotten caught. In fact, he hadn’t made any whiskey at home at all. He went to court first, asking a federal judge to declare the prohibition unconstitutional and prevent the government from enforcing it against him.
The government argued that Ream had a problem: He hadn’t bought the still. He hadn’t tried to register it. He hadn’t distilled any whiskey. And no federal official had specifically threatened to prosecute him.
In March 2025, the district court agreed with the government and dismissed the case. The judge concluded that Ream hadn’t shown a sufficiently imminent threat of prosecution to give him standing to challenge the law.
Standing is a legal term that basically means the right to bring a lawsuit. To prove standing, you typically have to show three things:
- You suffered an actual, personal harm, not just a general complaint or hypothetical worry (often referred to as an injury);
- The harm is related to the behavior or law (often called causation); and
- The harm can be remedied in court (often called redressability).
Here, the judge never answered Ream’s constitutional question. So Ream appealed to the Sixth Circuit.
His position presented the appeals court with a bit of a Catch-22. Ream said he didn’t want to commit a federal felony simply to find out whether the law making his conduct a felony was constitutional. The government said he hadn’t gone far enough toward violating the law to show that he faced a real threat of prosecution.
But Ream’s appeal wasn’t just about whether he could get through the courthouse door. He also wanted the court to decide whether Congress had the constitutional authority to enact the home-distilling ban at all.
That’s where the tax argument comes in.
The Tax Piece
The government argued that the Constitution doesn’t merely give Congress the power to impose taxes. The Necessary and Proper Clause also permits Congress to enact laws necessary to carry out those powers. That means Congress may take reasonable steps to make sure it can collect the tax.
According to the government, the home-distilling ban is part of a larger regulatory system. Stills hidden inside homes make production difficult to detect and the resulting taxes difficult to collect. Requiring distilling to occur on registered and inspectable premises makes tax evasion harder.
Ream countered that accepting that argument would give Congress extraordinarily broad power. If Congress can prohibit home distilling because it makes the resulting tax more difficult to collect, he asked, what would stop Congress from imposing a tax on something else and then prohibiting people from doing it at home? Could it tax bread, for example, and then prohibit people from baking their own?
The Constitution expressly gives Congress the power to impose and collect taxes and excises. But, as Ream pointed out in his lawsuit, the law doesn’t tax home distilling. It prohibits it. That’s an important distinction, Ream argued. If the law allowed him to make whiskey at home, he could simply pay the federal excise tax and get to it. By preventing him from producing the whiskey in the first place, the government prevents the taxable event from occurring and prevents itself from collecting the tax.
You Be the Tax Judge
The Constitution gives Congress the power to impose and collect excise taxes. It also gives Congress the power to make laws that are “necessary and proper” for carrying out that power.
But does that authority allow Congress to prohibit home distilling to ensure that federal excise taxes on distilled spirits are collected? Or does the prohibition go too far because, rather than taxing home-distilled spirits, Congress has made producing them at home a crime?
It’s my new feature: You be the Tax Judge. This is a real case. How would you rule? Tell me what you think in the comments—and, more importantly, tell me why.
I’ll be back with the answer—and what the court had to say—later.
