PC 131 has been enacted, effectively permitting Tennessee wineries and distilleries to collaborate in producing fortified wine. Here are the main points to consider:
Distilleries can acquire wine from a licensed Tennessee winery and proceed to distill, blend, or fortify the wine.
Distilleries may perform distillation, blending, or fortification for licensed Tennessee wineries, provided that only wine spirits are used and no grain spirits are introduced. The finished product can be transported back to the winery.
Wineries are allowed to blend wine with fortified wine, distilled wine, or other wines, as long as only wine spirits are used and no grain spirits are introduced.
State taxes do not apply to the above transfers between distilleries and wineries.
Distilleries are not permitted to sell wine received from a winery. However, they can sell wine they have purchased, distilled, and/or blended on their own. Additionally, be aware that a federal winery permit from the TTB may be required if you are handling bulk wine or blending without distillation.
Link to Public Chapter 131: https://publications.tnsosfiles.com/acts/113/pub/pc0131.pdf