- Reduced Beer Tax Rates
- General: The 2020 Act makes permanent the reduced tax rates for beer that were previously enacted on a temporary basis. The reduced tax rate of $16 per barrel applies to the first six million barrels of beer brewed by the brewer and removed during the calendar year or imported by the importer into the United States during the calendar year. All remaining barrels not eligible for the $16 rate are subject to tax at a rate of $18 per barrel.
- Imports and Foreign Manufacturer Election: In the case of beer brewed or produced outside of the United States and imported, the 2020 Act makes permanent the provisions that allow foreign brewers to assign the $16 reduced rate to importers who elect to receive it, with a transition in 2023 to a refund system of providing the benefit of assigned reduced rates to importers. U.S. Customs and Border Protection (CBP) maintains administration over imports subject to CBMA for 2021-2022. See CBP guidance, for example CSMS #45315560 of December 31, 2020.
- Small Domestic Brewers: In the case of brewers in the United States who produce no more than two million barrels of beer during the calendar year, the 2020 Act makes permanent the reduced rate of $3.50 per barrel on the first 60,000 barrels removed during such calendar year which have been brewed or produced by such brewer.
- Transfer of Beer in Bond: The 2020 Act makes permanent the CBMA provision temporarily authorizing the transfer of beer in bond between brewers who are not owned by the same corporation or other entity.
- Wine Tax Credits
- General: The 2020 Act makes permanent the wine tax credits that were previously enacted on a temporary basis. Three different tax credits are allowed on wine produced by the producer and removed during the calendar year or imported by the importer into the United States during the calendar year. The credits are $1 per wine gallon on the first 30,000 wine gallons of wine removed or imported, 90 cents on the next 100,000 wine gallons removed or imported, and 53.5 cents on the next 620,000 wine gallons removed or imported. The tax credits apply to all wine tax rates, except that CBMA provides for adjusted credits for the hard cider tax rate (6.2 cents, 5.6 cents, and 3.3 cents, respectively). The 2020 Act continues to authorize domestic producers to transfer their tax credits to other bonded wine premises that receive the producers’ wine in bond.
- Imports and Foreign Manufacturer Election: In the case of wine produced outside of the United States and imported, the 2020 Act makes permanent the provisions that allow foreign wine producers to assign the tax credits described in the previous bullet to importers who elect to receive them, with a transition in 2023 to a refund system of providing the benefit of assigned tax credits to importers. U.S. Customs and Border Protection (CBP) maintains administration over imports subject to CBMA for 2021-2022. See CBP guidance, for example CSMS #45315560 of December 31, 2020.
- Adjustment of Alcohol Content for Certain Still Wines: The 2020 Act makes permanent the CBMA provision temporarily applying the tax rate of $1.07 per wine gallon under section 5041(b)(1) to still wines containing not more than 16% alcohol by volume.
- Mead and Low Alcohol by Volume Wine
- General: The 2020 Act makes permanent the temporary CBMA provisions deeming certain "meads" and "low alcohol by volume wines" to be still wines subject to the wine tax rate of $1.07 per wine gallon under section 5041(b)(1) of the IRC.
- Definition of Mead: For purposes of this provision, the term "mead" means a wine containing not more than 0.64 gram of carbon dioxide per hundred milliliters of wine, which is derived solely from honey and water, which contains no fruit product or fruit flavoring, and which contains less than 8.5% alcohol by volume.
- Definition of Low Alcohol by Volume Wine: For purposes of this provision, the term "low alcohol by volume wine" means a wine containing not more than 0.64 gram of carbon dioxide per hundred milliliters of wine, which is derived primarily from grapes or from grape juice concentrate and water, which contains no fruit product or fruit flavoring other than grape, and which contains less than 8.5% alcohol by volume.
- Reduced Distilled Spirits Tax Rates
- General: The 2020 Act makes permanent the reduced tax rates previously enacted on a temporary basis, with a change to the definition of eligible processing effective in 2022. Reduced rates are allowed on distilled spirits distilled or processed and removed during the calendar year or imported by the importer into the United States during the calendar year. These rates are $2.70 per proof gallon on the first 100,000 proof gallons removed or imported, and $13.34 per proof gallon on the next 22.13 million proof gallons removed or imported. (The tax rate for distilled spirits not subject to the reduced rates is $13.50 per proof gallon.) Beginning in 2022, only DSPs who perform a processing activity other than bottling are entitled to take a CBMA reduced rate on distilled spirits that they process and remove.
- Imports and Foreign Manufacturer Election: In the case of distilled spirits produced outside the United States and imported, the 2020 Act makes permanent the provisions that allow foreign distilled spirits manufacturers to assign the reduced tax rates to importers who elect to receive them, with a transition in 2023 to a refund system of providing the benefit of assigned reduced rates to importers. U.S. Customs and Border Protection (CBP) maintains administration over imports subject to CBMA for 2021-2022. See CBP guidance, for example CSMS #45315560 of December 31, 2020.
- Transfer in Bond of Non-Bulk Distilled Spirits: The temporary CBMA provisions authorized the transfer in bond of distilled spirits for beverage purposes between distilled spirits plants irrespective of whether the distilled spirits are transferred in bulk or non-bulk containers. (Prior to 2018, transfers of non-bulk or bottled distilled spirits for beverage purposes were prohibited.) Under the 2020 Act, effective January 1, 2021, transfers of bottled spirits for beverage purposes are not authorized except transfers between bonded premises belonging to the same person or members of a controlled group, and except certain transfers for storage or bottling where the spirits are transferred back to the original transferor.
- Controlled Group: The 2020 Act makes permanent the CBMA provisions applying the overall quantity limitations associated with CBMA tax credits and reduced rates to controlled groups of DSPs, wine premises, and breweries.
- Single Taxpayer: The temporary CBMA provisions provided that two or more entities (whether or not under common control) that produce products "marketed under a similar brand, license, franchise, or other arrangement" shall be treated as a single taxpayer for purposes of the credits and reduced rates. The 2020 Act makes permanent these provisions with amendments to apply the single taxpayer rule to DSPs who process distilled spirits. As revised, the single taxpayer provisions apply to two or more entities (whether or not under common control) that produce beer, wine, or distilled spirits, or process distilled spirits, under a license, franchise, or other arrangement.
- Transfers of non-bulk beverage distilled spirits are limited: Beginning January 1, 2021, the law prohibits the transfer of bottled spirits in bond except:
- between bonded premises belonging to the same person or members of the same controlled group; or
- if the distilled spirits are transferred in bond from the DSP who distilled or processed the spirits to another DSP for bottling or storage and returned to the transferor for removal, but only if the transferor retained title during the entire period between such distillation, or processing, and removal.
- Single Taxpayer provision for distilled spirits includes processing: Beginning January 1, 2021, entities who process distilled spirits are included in the Single Taxpayer provision for distilled spirits. Pursuant to rules issued by the Secretary, two or more entities (whether or not under common control) that produce or process distilled spirits under a license, franchise, or other arrangement shall be treated as a single taxpayer.
- Bottling distilled spirits will not be "processing" for reduced rate purposes: Effective January 1, 2022, only DSPs who perform a processing activity other than bottling are entitled to take a CBMA reduced rate on distilled spirits that they process and remove.
- Imports and Foreign Producer Election.
- Import Administration: Beginning in 2023, the reduced tax rates and tax credits on beer, wine, and distilled spirits produced outside the United States and imported will be administered by the Treasury Department under a refund system of providing the benefit of assigned reduced rates to importers. Since CBMA became effective, U.S. Customs and Border Protection (CBP) has administered imports subject to CBMA and will continue to do so for 2021-2022. See CBP guidance, for example CSMS #45315560 of December 31, 2020.
- Information requirements for foreign producers: A new provision (26 U.S.C. 6038E) requires a foreign producer that elects to make a reduced rate or credit assignment to provide information (including controlled group information) in accordance with requirements prescribed by the Secretary.
Industry Circular 2023-1, Alternate Procedure for Submission of CBMA Importer Claims
Industry Circular 2018-1A, Alternate Procedure for a Wine Producer to Tax Determine and Tax Pay Wine of Its Production That Is Stored Untaxpaid at a Bonded Wine Cellar (This Circular is SUSPENDED. For information regarding the transfer of wine tax credits, see FAQ TR-W7.)
Breweries, wineries, and distilled spirits plants can continue to file taxes using TTB Form 5000.24 or TTB Form 5000.24sm, either on paper or through Pay.gov. No new tax return forms are required.
Originally issued on 01/12/2018
Updated on 09/30/2021*
Yes. The reduced tax rates or tax credits apply to limited quantities of products removed during the calendar year regardless of when the products were produced. (See TTB’s Tax Rates for the specific quantities of products eligible for the reduced tax rates or tax credits and any other limitations.)
Originally issued on 01/12/2018
Updated on 09/30/2021*
Yes. If you pay your taxes to TTB using the wrong tax rate and such payment results in an overpayment, you may seek a refund or credit using existing TTB procedures.
Originally issued on 01/12/2018
Updated on 09/30/2021*
From 2018 through 2022, U.S. Customs and Border Protection (CBP) has administered the provisions applicable to the excise taxes paid by importers, including CBMA tax benefits. CBP has issued guidance to importers regarding the CBMA tax benefits. See CBP guidance, including the CSMS Messages at CBP’s website.
Beginning in 2023, the reduced excise tax rates or tax credits on imported products will be administered by the Treasury Department under a refund system. Information regarding TTB’s CBMA imports program is available on TTB’s Imports page.
Originally issued on 01/12/2018
Updated on 11/30/2022 to reflect additional information on TTB's imports program.
Importers and producers of wine, beer, and distilled spirits may be eligible for reduced tax rates or tax credits on the products they import or produce, respectively, depending on a number of variables. The guidance below contains information about your ability to take advantage of the reduced tax rates or tax credits. Eligibility for the reduced tax rates or tax credits may be limited by application of the relevant single taxpayer or controlled group rules.
Imported products. Domestic wineries, breweries, and distilled spirits plants that receive imported beer, wine, or distilled spirits withdrawn without payment of tax from customs custody may only take advantage of reduced tax rates or credits if they perform a production activity on the beer, wine, or distilled spirits (or perform an eligible processing activity on distilled spirits, in the case of a distilled spirits processor) and, as a result, would be considered the producer (or the distiller or processor for distilled spirits).
Domestic Beer. A brewer who receives beer in bond, but who does not brew or produce the beer, is not eligible for the reduced tax rates on that beer when the brewer removes it. Beer eligible for the $16 reduced tax rates must be brewed by the brewer and removed by that brewer. Domestically produced beer eligible for the $3.50 reduced rate must be brewed or produced by the brewer and removed by that brewer or producer.
Domestic Wine. A wine premises that receives wine in bond, but does not produce the wine, is not eligible to take tax credits on that wine when removing the wine subject to tax unless the producer of the wine has transferred the producing winery’s tax credits to the taxpayer wine premises. For more detailed information on how tax credits can be transferred to non-producing wine premises (such as bonded wine cellars), please see FAQ TR-W7.
Domestic Distilled Spirits. A distilled spirits plant that receives distilled spirits in bond, but that does not distill or perform an eligible processing activity on those spirits is not eligible for the reduced tax rates on those spirits. Distilled spirits eligible for the reduced tax rates must be distilled or processed by the distilled spirits plant and removed on determination of tax by that distiller or processor.
Originally issued on 03/02/2018
Updated on 09/30/2021*
For beer and distilled spirits, the CBMA reduced rates should be used to calculate the tax due for eligible products removed. The total tax due for distilled spirits should be shown on line 9 and the total tax due for beer should be shown on line 11.
For wine, the calculated tax due prior to accounting for the credit should be shown on line 10 and the CBMA tax credit, for eligible products removed, should be calculated in Schedule B, with the resulting decreasing adjustment incorporated into line 20.
Originally issued on 03/13/2018
Updated on 09/30/2021*
For claims that must be submitted to TTB (see FAQ TR-G9), a customs broker may file the claim with TTB if the importer has authorized the customs broker to file claims on behalf of the importer. The importer may authorize the customs broker to execute these claims using TTB F 5000.8 (Power of Attorney).
Originally issued on 08/14/2018
Updated on 09/30/2021*
If a domestic producer of beer is in a controlled group with a foreign producer of beer whose beer is imported into the United States, the beer produced and removed by all domestic members of the controlled group and the beer produced by the foreign members of the controlled group and imported into the United States is treated as if it were the production and removal of one producer for the purpose of applying the reduced rates. In other words, if a domestic producer and a foreign producer are part of a controlled group, the combined removals of their beer into U.S. commerce would be subject to one quantitative limit.
The answer would be the same for a domestic producer of wine that is in a controlled group with a foreign producer of wine as well as for a domestic distiller or distilled spirits processor that is in a controlled group with a foreign distilled spirits operation.
Originally issued on 08/14/2018
Updated on 09/30/2021*
No, unless the imported beer is made by a foreign producer whose quantitative limits otherwise apply to the domestic producer.
The deeming rule provides that an importer who takes an allocation from a foreign producer is deemed to be part of that foreign producer’s controlled group. However, if a domestic importer and a domestic producer are part of a controlled group, the deeming rule for importers does not make the domestic producer part of the foreign producer’s controlled group. As stated in TR-G11, if a domestic producer and a foreign producer are part of a controlled group, the combined removals of their beer into U.S. commerce would be subject to one quantitative limit. In a scenario in which a domestic producer and an importer are members of the same controlled group, the quantities of beer produced by the domestic producer (and all of the domestic producers that are in the controlled group) would be combined with any beer produced by a foreign producing member of that controlled group and imported and released into U.S. commerce, regardless of the relationship between the domestic producer and the importer. If, however, a domestic producer and an importer are members of the same controlled group, and the importer is importing beer under an allocation from a foreign producer that is not part of the controlled group, the beer produced and removed by the domestic producer and the beer imported by the importer would not be combined for purposes of applying the reduced tax rates. In this instance, the domestic producer would take the reduced rates that apply to the quantities produced and removed domestically, and the importer would take the reduced rates that apply to the quantities imported under its allocation from the foreign producer that is not a part of the controlled group.
The answer would be the same for a domestic producer of wine that is in a controlled group with an importer of wine as well as for a domestic distiller or distilled spirits processor that is in a controlled group with an importer of distilled spirits.
Originally issued on 08/14/2018
Updated on 09/30/2021*
For purposes of taking the CBMA reduced rate of tax, beer is considered to have been “produced” if it is lawfully brewed or produced at a qualified brewery premises, including beer brewed by fermentation or produced by the addition of water or other liquids during any stage of production. The entire volume of beer to which water or other liquids had been added will be considered “produced” for purposes of applying the reduced tax rates. Blending or combining two beers does not count as production for purposes of the reduced tax rate. Beer received in bond in containers and subsequently removed subject to tax, without any production activity occurring, is not eligible for a reduced tax rate. Beer received in bond and merely bottled is also not eligible for a reduced tax rate. The eligibility for the reduced rate is also subject to controlled group and single taxpayer rules in 26 U.S.C. 5051(a)(5), which may further limit the brewer’s application of the reduced rate.
Originally issued on 02/05/2018
Updated on 09/30/2021*
Yes, an owner of multiple breweries that brew or produce beer must combine production and taxpaid removals of that beer for all its breweries when determining each brewery’s eligibility for the reduced rates because the owner, rather than each brewery, is considered the brewer or producer of the beer for purposes of the reduced rates in 26 U.S.C. 5051(a)(1) and (a)(2). For example, if a company owns two breweries that each produce and remove taxpaid 60,000 barrels of beer during the calendar year, the company’s total production and removals of 120,000 barrels will be applied to each brewery for purposes of determining each brewery’s eligibility for the reduced rates. The company therefore would not be eligible for the reduced rate of $3.50 per barrel on the full 60,000 barrels of beer removed taxpaid from each brewery (i.e., the company’s total of 120,000 barrels). Rather, the company would be eligible to take the reduced rate of $3.50 per barrel on a total of 60,000 barrels of beer removed taxpaid from the breweries.
The answer is the same if instead the breweries are owned by two different entities that are members of the same controlled group. The quantities of beer eligible for the reduced rates shall be applied to the controlled group. See section 5051(a)(5)(A).
See TR-B3 for guidance about apportioning quantities of beer eligible for the reduced rates among breweries who are required to combine taxpaid removal totals.
Originally issued on 04/25/2019
Updated on 09/30/2021*
A single owner may apportion the quantity of beer eligible for the reduced rates among the breweries it owns, and a controlled group may apportion such quantities among its members. For example, if a company owns two breweries and is eligible to take the reduced rate of $3.50 on a total of 60,000 barrels of beer removed taxpaid from the breweries, the company may apportion 30,000 barrels to each brewery for removal at the $3.50 rate. Each brewery should keep records indicating how the quantities will be apportioned among the breweries and make those records available to TTB officers upon request. Breweries who produce no more than 2,000,000 barrels and apportion the $3.50 reduced rate of tax must also notify TTB about the apportionment, either by providing the annual notice described in 27 CFR 25.167 or by incorporating the information into the Brewer’s Notice as outlined in TTB Industry Circular 2002-1 (see current Line 15 of the Brewer’s Notice form). However, the apportioned quantity would apply to the first eligible barrels removed during the calendar year from each applicable brewery. The apportionment may not be, for example, for a specific brand, regardless of when the beer is removed.
Originally issued on 04/25/2019
Updated on 09/30/2021*
Under these circumstances, the beer is not ineligible for the reduced rates solely because it is removed taxpaid from the brewery where no further production occurred; however, the brewery owner’s total production across its breweries also may affect eligibility. The owner of the breweries is considered the brewer or producer for purposes of the reduced rates in 26 U.S.C. 5051(a)(1) and (a)(2), so the owner may apply the reduced rates to beer removed from the breweries that it owns. The owner must combine its production and taxpaid removal totals for its breweries when determining its eligibility for the reduced rates.
The answer is not different if instead the breweries are owned by different entities that are members of the same controlled group. The quantities of beer eligible for the reduced rates shall be applied to the controlled group. See section 5051(a)(5)(A). A member of a controlled group may therefore apply the appropriate reduced rate to beer removed from its brewery in instances where the beer was produced at a brewery owned by another member of the controlled group. Members of the controlled group must combine the production and taxpaid removal totals for their breweries when determining their eligibility for the reduced rates.
Originally issued on 04/25/2019
Updated on 09/30/2021*
No. The temporary CBMA provisions that have now been made permanent allow a credit against the excise taxes imposed on the first 750,000 wine gallons of wine produced by the producer and removed during the calendar year for consumption or sale. The credit applies to the first 750,000 wine gallons of wine removed during the calendar year, regardless of the class or classes of wine that make up the 750,000 gallons. As an example, if a winery produces wine that falls within the tax class for hard cider and also produces wine that falls within the tax class for still wine containing not more than 16 percent alcohol by volume and, in a calendar year first removes, subject to tax, 500,000 gallons of the wine classified as hard cider, and then removes, subject to tax, 400,000 gallons of the still wine, a credit is allowed on the tax applicable to the first 750,000 wine gallons of wine removed, which in this case would be the tax on the 500,000 gallons of wine classified as hard cider and the tax for 250,000 gallons (of the 400,000 gallons) of the wine classified as still wine containing not more than 16 percent alcohol by volume. In this example, no credit would apply to the remaining 150,000 gallons of still wine removed.
See 26 U.S.C. 5041(c)(1) for information on how to calculate the tax credit on the first 750,000 wine gallons removed in a calendar year.
Originally issued on 01/12/2018
Updated on 09/30/2021*
No. The temporary CBMA provisions that have now been made permanent allow a credit against the excise taxes imposed by the IRC on the first 750,000 wine gallons of wine produced by the producer and removed during the calendar year for consumption or sale. The credit applies to the first 750,000 wine gallons of such wine, regardless of the class or classes of wine that make up the 750,000 gallons. For more information, see question TR-W1 above.
Originally issued on 01/12/2018
Updated on 09/30/2021*
Yes. Labeling tolerances have not changed because they are based on provisions not affected by CBMA. The tax law revisions, which amend a number of alcohol excise tax provisions in the Internal Revenue Code (IRC), do not affect TTB’s part 4 regulations, which are based on the Federal Alcohol Administration Act (not the IRC) and generally address the labeling and advertising of wine. TTB regulations at 27 CFR 4.36(b)(1) are set forth under the authority of the FAA Act and provide for an alcohol tolerance of 1 percent alcohol by volume for wines containing more than 14 percent alcohol by volume, and 1.5 percent alcohol by volume for wines containing 14 percent or less.
Originally issued on 01/12/2018
Updated on 09/30/2021*
Under the temporary CBMA provisions that have now become permanent, you must claim the credit applicable to the first wine gallons of wine products removed during the calendar year regardless of when the products were produced. There is either a $1.00 or a 6.2-cent credit on the "first 30,000 wine gallons of wine . . . which are produced by the producer and removed during the calendar year." The $1.00 credit applies unless the wine is taxed at the wine tax rate applicable to hard cider. If the wine tax rate applicable to hard cider applies, then the credit is 6.2 cents. For example, if you remove 40,000 wine gallons of wine during the return period, you must determine which types of wine were among the first 30,000 wine gallons removed. Within the first 30,000 wine gallons removed, the applicable credit is 6.2 cents per wine gallon if the wine is hard cider and $1.00 for all other wine. The taxpaid removal from bond record required by 27 CFR 24.310 should assist in making this determination.
Originally issued on 01/12/2018
Updated on 09/30/2021*
No, a table wine may not contain more than 14 percent alcohol by volume. TTB's part 4 wine labeling regulations concerning the standards of identity for table wines, which are based on the Federal Alcohol Administration Act, are not affected by CBMA, which amended the IRC. The term "table wine" is defined in TTB's part 4 regulations as a wine having an alcohol content not in excess of 14 percent by volume. See 27 CFR 4.21(a)(5), 4.21(e)(6), and 4.21(f)(2).
Originally issued on 02/05/2018
Updated on 09/30/2021*
When first enacted, effective in 2018, the CBMA provisions authorized the use of the tax credit only on wine that was produced by the producer and removed from that producer’s premises. Subsequent changes to the statute effective retroactively to 2018 allow a domestic producer to transfer its tax credits credit to other bonded wine premises (such as a BWC) that taxably remove wine on the producer’s behalf. The following conditions in 26 U.S.C 5041(c)(5) must be met before a transferee (that is, a bonded wine premises that receives wine produced by another domestic producer) may take the tax credits on behalf of the domestic producer:
- The wine produced by the transferring domestic winery would be eligible for the tax credit(s) in section 5041(c)(1) if removed from the producer’s premises;
- The wine is removed by the transferee, who is liable for the tax;
- The producer holds title to the wine at the time of taxable removal; and
- The producer provides the transferee information necessary to properly determine the transferee’s credit.
The producer transfers the credit by providing written documentation to the transferee at the time of taxable removal similar to the documentation outlined in 27 CFR 24.278(b)(2)(iv)(A)-(D).
Originally issued on 03/02/2018
Updated on 09/30/2021*
For the purpose of taking the tax credit allowed under the temporary CBMA provisions that have now become permanent, the activities considered to be “production” are set forth below. These are also the activities that were used prior to 2018 to determine whether a person’s production of wine was within the production limit for the now expired small domestic producer credit. In addition to the entire volume of wine produced by fermentation, a winery may count as production wine that has undergone the following activities:
- Sweetening – Sweetening material is added after fermentation for the purpose of sweetening the wine, as allowed by regulations (e.g., for natural wine, 27 CFR 24.179, authorizing the use of sugar to sweeten natural wine of the winemaker’s “own production” as that term is defined in 27 CFR 24.10).
- Addition of wine spirits – Certain brandy or wine spirits authorized to be used in wine production are added, as allowed by regulations (e.g., for natural wine, 27 CFR 24.225, setting forth limitations on the use of wine spirits).
- Amelioration – Water, sugar, or a combination of both is added to wine to adjust the wine’s acid content, as allowed by regulations (e.g., for natural wine, 27 CFR 24.178, authorizing the amelioration after fermentation of natural wine at the bonded wine premises where the natural wine is produced).
- Production of formula wine – Formula wine includes wine that may contain added flavoring or wine treating materials, as authorized by an approved TTB formula.
The entire volume of wine that has undergone one of these production activities would be considered “produced” for purposes of applying the tax credit. Blending that does not involve one of the operations listed above is not considered production. The eligibility for the tax credit is also subject to controlled group and single taxpayer rules similar to those in 26 U.S.C. 5051(a)(5), which may further limit the wine eligible for the tax credit. See 26 U.S.C. 5041(c)(3).
In addition, the production of sparkling wine and carbonated wine are also considered "production" for the purpose of taking the credit allowed by the law. Please see FAQ TR-W11 below.
Originally issued on 05/21/2018
Updated on 09/30/2021*
Some of the product is eligible. As discussed in TR-W8, a winery may claim its own tax credits only on wine it produces (either by fermentation, sweetening, addition of wine spirits, amelioration, or production of formula wine, sparkling wine, or carbonated wine) and removes from its own bonded premises for consumption or sale. If a winery bottles and removes a wine that is a blend of wine of its own production with wine produced by another winery, it may claim the tax credit only on the portion of wine it produced and not on the portion produced by the other winery. For example, if you create a blended wine in which 85% of the wine was produced by you, with the remaining 15% comprising wine that you did not produce, you may claim your own tax credits only on the 85% of the blend which you produced. The 15% which you did not produce must be taxpaid at the full rate. You should record the volume and source of the wine used in the blend in the bulk still wine record (see 27 CFR 24.301) to ensure you pay the correct amount of tax.
Originally issued on 03/13/2018
Updated on 09/30/2021*
Yes. TTB considers both sparkling wine and artificially carbonated wines created by a winery through secondary fermentation in a closed container or through injection of carbon dioxide to be "produced" for the purposes of applying the tax credit. Prior to 2018, TTB included the production of champagne and other sparkling wines when determining whether a person's production of wine was within the production limit for the previous small domestic producer credit that is no longer in effect, even though sparkling wine was not eligible for that credit. Considering all methods of producing effervescent wine to be "production" activity is consistent with that regulatory interpretation. Accordingly, a winery that creates a sparkling wine or carbonated wine from a purchased still wine may claim the credit on the sparkling or carbonated wine when it removes the wine taxpaid from its bonded premises.
Originally issued on 05/21/2018
Updated on 09/30/2021*
No, you do not count any wine that you did not produce toward the gallonage limits to which the tax credits apply. The law states that the $1 credit applies to the first 30,000 gallons of wine products removed during the calendar year regardless of when the products were produced, so those 30,000 gallons do not include wine you did not produce. You may claim the $1 credit for the first 30,000 gallons you produced and removed taxpaid during the calendar year, even if you already removed 30,000 gallons of purchased wine that year that you did not produce.
Originally issued on 05/21/2018
Updated on 06/14/2022*
You must still file a separate excise tax return for each bonded winery. However, you must combine the production and taxpaid removal totals for your three bonded wineries for the purpose of determining your eligibility for the tax credits in 26 U.S.C. 5041(c)(1).
Originally issued on 05/21/2018
Updated on 09/30/2021*
Yes, the wine that was transferred in bond for bottling and then transferred in bond back to you is eligible for the tax credits because you produced it and will remove it from your premises for consumption or sale. This assumes the wine is among the first 750,000 gallons of your wine that were removed for consumption or sale during the calendar year by you (or by another bonded winery taxably removing it on your behalf as discussed in TR-W7), since this is the maximum number of gallons per calendar year to which the credits apply.
Originally issued on 05/21/2018
Updated on 09/30/2021*
Yes, an owner of multiple wineries must combine taxpaid removals for all the wineries when determining each winery’s eligibility for the tax credits because the owner, rather than each winery, is considered the producer of the wine for purposes of the tax credits in 26 U.S.C. 5041(c)(1). For example, if a company owns two wineries that each produce and remove taxpaid 30,000 wine gallons of wine during the calendar year, the company’s total removals of 60,000 gallons will be applied to each winery for purposes of determining each winery’s eligibility for the tax credits. The company therefore would not be eligible for the $1.00 tax credit (which applies to the first 30,000 gallons of wine produced by the producer and removed) on the full 60,000 wine gallons removed taxpaid from both wineries. Rather, the company would be eligible to take the $1.00 tax credit on a total of 30,000 gallons of wine removed taxpaid from the wineries.
The answer is the same if instead the wineries are owned by two different entities that are members of the same controlled group. Under the law, the quantity of wine eligible for the tax credits shall be applied to the controlled group. See section 5041(c)(3).
See TR-W18 for guidance about apportioning quantities of wine eligible for the tax credits among wineries that are required to combine taxpaid removal totals.
See TR-W1 for guidance on application of tax credits to hard cider.
Originally issued on 04/25/2019
Updated on 09/30/2021*
A single owner may apportion the quantity of wine eligible for the tax credits among the wineries it owns, and a controlled group may apportion such quantities among its members. For example, if a company owns two wineries and is eligible to take the tax credit of $1.00 on a total of 30,000 wine gallons of wine removed from the wineries as specified in the law, the company may apportion 15,000 wine gallons to each winery for removal subject to the $1.00 credit. Each winery should keep records indicating how the quantities will be apportioned among the wineries and make those records available to TTB officers upon request. However, the apportioned quantity would apply to the first eligible wine gallons removed from each applicable winery.
he apportionment may not be, for example, for a specific brand, regardless of when the wine is removed.
See TR-W1 for guidance on application of tax credits to hard cider.
Originally issued on 04/25/2019
Updated on 09/30/2021*
Under these circumstances, the wine is not ineligible for the tax credits solely because it is removed from the winery that did not produce the wine; however, the winery owner’s total production across its wineries may also affect eligibility. The owner of the winery is considered the producer of the wine for purposes of the tax credits in 26 U.S.C. 5041(c)(1), so the owner may apply the tax credits to wine removed from either winery that it owns. The owner must combine its taxpaid removal totals for both its wineries when determining its eligibility for the tax credits.
The answer is not different if instead the two wineries are owned by different entities that are members of the same controlled group. Under the law, the quantities of wine eligible for the tax credits shall be applied to the controlled group. See section 5041(c)(3). A member of the controlled group may therefore apply the tax credits to wine removed from its winery in instances where the wine was produced at a winery of another member of the controlled group. Members of a controlled group must combine the taxpaid removal totals for their wineries when determining their eligibility for the tax credits.
Originally issued on 04/25/2019
Updated on 09/30/2021*
If you have an approved TTB Form 5100.16, you do not have to file an additional application to receive transfers of bottled distilled spirits in bond. Your approved TTB Form 5100.16 specifies a limitation on the number of proof gallons transferred, but does not distinguish between bulk and non-bulk distilled spirits. Please see FAQ TR-D3 for more information about the requirements for in-bond transfers of non-bulk distilled spirits.
Originally issued on 01/12/2018
Updated on 09/30/2021*
An industry member cannot elect when to take the credits allowable under section 5010, and the reduced rates of tax on distilled spirits may affect the credits allowable under section 5010. The IRC provides for certain credits against the tax imposed on distilled spirits containing wine and flavors. The credits are determined at the same time the tax is determined on the distilled spirits containing the wine or flavors, and the credits are allowable at the time the tax is payable as if the credit constituted a reduction in the rate of tax. See 26 U.S.C. 5010(a), (b)(1)(A), and (b)(1)(B).
Under section 5010(b)(1)(A), taxes against which the credits are allowable are the taxes due on the distilled spirits product containing the wine or flavors that is removed from the bonded premises of a distilled spirits plant (DSP), imported into the United States, or otherwise brought into the United States. As stated, the credits associated with the distilled spirits product containing the wine or flavors are allowable only against taxes due for the distilled spirits product containing that wine or those flavors. In addition, by equating allowance of the credits with a reduction in the rate of tax, section 5010(b)(1)(B) provides that credits associated with that distilled spirits product are allowable only to the extent they do not exceed the taxes due for that product. For example, if a DSP proprietor removes a distilled spirits product that is subject to a tax rate of $2.70 per proof gallon under 26 U.S.C. 5001(c)(1)(A) and the product contains wine and flavors for which the total credits allowable under section 5010 are $3.00 per proof gallon, the total allowable credits for that product would be limited to $2.70 per proof gallon and the DSP proprietor would be required to take the credits at the time the taxes are paid for the product.
Originally issued on 02/01/2018
Updated on 09/30/2021*
In bond transfers of non-bulk distilled spirits are allowed between bonded premises belonging to the same person or members of a controlled group. In bond transfers of non-bulk distilled spirits are also allowed if the distilled spirits are transferred from the DSP who distilled or processed the spirits to another DSP for bottling or storage and returned to the transferor for removal, but only if the transferor retains title during the entire period between such distillation, or processing, and removal. You may receive transfers in bond of non-bulk distilled spirits if you comply with applicable requirements pertaining to such transfers. Below is a non-exhaustive list of some requirements and other information you should be aware of if you are interested in receiving transfers in bond of non-bulk distilled spirits:
- You must receive approval from TTB using TTB Form 5100.16 for each DSP from which you will receive such transfers. When filling out Box 6a of the form, if applicable, you should use a tax rate of $13.50 in the calculation to determine the maximum quantity of distilled spirits authorized to be transferred.
- DSPs who transfer distilled spirits (transferor) and DSPs who receive such transfers (transferees) must keep records required by the regulations, including the transfer records required by 27 CFR 19.620 and 19.621. The transfer records must contain all of the information required by these regulations, including the serial numbers of cases transferred and, if applicable, information about calculating the credits for the use of eligible wines and eligible flavors. Additionally, the transferor should send, and the transferee should keep on file, any applicable documentation to substantiate label claims.
- When receiving bottled and other non-bulk distilled spirits as transfers in bond, DSPs must generally enter the distilled spirits into the processing account. Note that entering the distilled spirits into the processing account does not mean that the transferee has performed an eligible processing activity on those spirits for purposes of the reduced rate. Please see FAQ TR-G6. If the distilled spirits will be dumped for redistillation, the distilled spirits may be entered into the production account.
- The bottler must apply for the Certificate of Label Approval (COLA) for the distilled spirits and should provide a copy of the COLA to the recipient of the bottled spirits transferred in bond. If the labels contain all information required under the regulations, no additional coding or other marking is required to be added to labels on bottles transferred in bond.
Originally issued on 02/01/2018
Updated on 09/30/2021*
Yes. However, as discussed in FAQ TR-D2, the credits associated with the product containing the wine or flavors are allowable only to the extent they do not exceed the taxes due for that product.
Originally issued on 03/23/2018
Updated on 09/30/2021*
Depending on the circumstances, the effective tax rate for the product is $13.16, $13.00, or $2.36.
Section 5001 of the IRC (26 U.S.C. 5001) provides for tax rates of $13.50, $13.34, and $2.70 per proof gallon of distilled spirits depending on the circumstances. Under section 5010(a)(2), there is allowed on each proof gallon of flavors content of distilled spirits a credit against the tax imposed by section 5001 equal to $13.50. Under section 5010(c)(2)(B)(iii), the term "flavors content" does not include alcohol derived from flavors to the extent such alcohol exceeds 2.5 percent of the finished product on a proof gallon basis.
Under section 5010, the flavors content credit for a distilled spirits product containing 2.5 percent eligible flavor on a proof gallon basis is equal to $0.34 per proof gallon, which is equal to 2.5 percent of $13.50 per proof gallon. Subtracting this credit rate from the tax rates of $13.50, $13.34, and $2.70 per proof gallon yields effective tax rates of $13.16, $13.00, and $2.36, respectively.
Originally issued on 03/23/2018
Updated on 09/30/2021*
No. The wine content credit under 26 U.S.C. 5010(a)(1) is based on the rate of tax which would be imposed on the wine under 26 U.S.C. 5041(b) but for its removal to the bonded premises of a DSP. Since this wine content credit is based on the rate of tax which would be imposed on the wine under section 5041(b), the new wine tax credits under section 5041(c)(1) are not taken into account when determining the wine content credit for distilled spirits under section 5010(a)(1).
Originally issued on 03/23/2018
Updated on 09/30/2021*
Yes, an owner of multiple DSPs that distill or process spirits, or perform an eligible processing activity, must combine taxpaid removals of those spirits for all the DSPs when determining each DSP’s eligibility for the reduced rates because the owner, rather than each DSP, is considered the distiller or processor of the spirits for purposes of the reduced rates in 26 U.S.C. 5001(c)(1). For example, if a company owns two DSPs that each distill and remove taxpaid 100,000 proof gallons of spirits during the calendar year, the company’s total removals of 200,000 proof gallons will be applied to each DSP for purposes of determining each DSP’s eligibility for the reduced rates. The company therefore would not be eligible for the reduced rate of $2.70 per proof gallon on the full 100,000 proof gallons of spirits removed taxpaid from each DSP (i.e., for 200,000 proof gallons overall). Rather, the company would be eligible to take the reduced rate of $2.70 on a total of 100,000 proof gallons of spirits removed taxpaid from the DSPs.
The answer is the same if instead the DSPs are owned by two different entities that are members of the same controlled group. The quantities of spirits eligible for the reduced rates shall be applied to the controlled group. See section 5001(c)(2)(A).
See TR-D8 for guidance about apportioning quantities of distilled spirits eligible for the reduced rates among DSPs that are required to combine taxpaid removal totals.
Originally issued on 04/25/2019
Updated on 09/30/2021*
A single owner may apportion the quantity of distilled spirits eligible for the reduced rates among the DSPs it owns, and a controlled group may apportion such quantities among its members. For example, if a company owns two DSPs and is eligible to take the reduced rate of $2.70 on a total of 100,000 proof gallons of spirits removed from the DSPs, the company may apportion 50,000 proof gallons to each DSP for removal at the $2.70 rate. Each DSP should keep records indicating how the quantities will be apportioned among the DSPs and make those records available to TTB officers upon request. However, the apportioned quantity would apply to the first eligible spirits removed from each applicable DSP. The apportionment may not be, for example, for a specific brand, regardless of when the spirits are removed.
Originally issued on 04/25/2019
Updated on 09/30/2021*
Under these circumstances, the spirits are not ineligible for the reduced rates solely because they are removed from the DSP that did not distill or process the spirits; however, a DSP owner’s total production across DSPs may also affect eligibility. The owner of the DSPs is considered the distiller or processor of the spirits for purposes of the reduced rates in 26 U.S.C. 5001(c)(1), so the owner may apply the reduced rates to spirits removed from the DSPs that it owns. The owner must combine its taxpaid removal totals for its DSPs when determining its eligibility for the reduced rates.
The answer is not different if instead the DSPs are owned by different entities that are members of the same controlled group. The quantities of spirits eligible for the reduced rates shall be applied to the controlled group. See section 5001(c)(2)(A). A member of a controlled group may therefore apply the reduced rates to spirits removed from its DSP in instances where the spirits were distilled or processed at a DSP owned by another member of the controlled group. Members of the controlled group must combine the taxpaid removal totals for their DSPs when determining their eligibility for the reduced rates.
Originally issued on 04/25/2019
Updated on 09/30/2021*
A proprietor of a distilled spirits plant (DSP) may transfer bulk distilled spirits, whether beverage or industrial, in bond without payment of tax to another distilled spirits plant (DSP) under 26 U.S.C. 5212. Please see FAQ TR-D3 regarding requirements for such transfers.
As of January 1, 2021, under 26 U.S.C. 5212, bottled beverage distilled spirits may be transferred in bond without payment of tax only:
- between DSPs belonging to the same person or members of a controlled group, or
- if the distilled spirits are transferred in bond from the DSP who distilled or processed the spirits (“transferor”) to another DSP (“transferee”) for bottling or storage and returned to the transferor for removal, but only if the transferor retained title during the entire period between such distillation, or processing, and removal.
A proprietor of a DSP may transfer bottled industrial distilled spirits in bond to another DSP.
Originally issued on 12/14/2021
Updated on 12/14/2021*
In the normal process of bottling the spirits, the transferee in this scenario may add water to the distilled spirits as necessary to ensure appropriate label proof during bottling. The amount of water added may not be so much that the addition of such water would change the class or type (as set forth in 27 CFR part 5, Subpart I) of the distilled spirit. Other than storage and bottling (including the addition of water as previously described), the transferee is not permitted to conduct any other operations on the distilled spirits prior to returning the distilled spirits in bond to the transferor under 26 U.S.C. 5212. Adding water for other purposes - for example, to reconstitute concentrate - is not “storage” or “bottling” activity. Transferees who conduct other operations on the distilled spirits are not permitted to return the distilled spirits in bond to the transferor.
Originally issued on 12/14/2021
Updated on 12/14/2021*
Reduced tax rates are allowed on distilled spirits that are distilled or processed by a DSP and removed by a DSP during the calendar year. A DSP is considered a processor of distilled spirits if it “manufactures, mixes, or otherwise processes distilled spirits” or “manufactures any article.” See 26 U.S.C. 5002(a)(5)(A). “The term ‘processor’ includes (but is not limited to) a rectifier, bottler, or denaturer.” See 26 U.S.C. 5002(a)(5)(B). For distilled spirits removed after December 31, 2021, “[a] distilled spirit shall not be treated as processed [for reduced rate purposes] unless a process described in [26 U.S.C. 5002(a)(5)(A)] (other than bottling) is performed with respect to such distilled spirit.” See 26 U.S.C. 5001(c)(5).
For purposes of the reduced rates, a DSP is considered a processor of distilled spirits if it:
- manufactures distilled spirits,
- mixes distilled spirits with materials including flavors, wines, water (except that the addition of water during the normal process of bottling for the purpose of ensuring label proof does not constitute “processing” for reduced rate purposes), or other distilled spirits of any type, and/or
- otherwise physically changes the distilled spirits inside the container, including filtering distilled spirits to remove material from those distilled spirits.
Processing does not include changing the marks or labels on distilled spirits containers or repacking containers of distilled spirits without physically changing the distilled spirits inside the containers.
Note: Eligibility for the reduced tax rates or new tax credits may be limited by application of the single taxpayer or controlled group rules.
Originally issued on 12/14/2021
Updated on 12/14/2021*
The IRC provides for drawback of tax on each proof gallon at a rate of $1 less than the rate at which the distilled spirits tax has been paid or determined. See 26 U.S.C. 5114. Section 5001 of the IRC (26 U.S.C. 5001) authorizes reduced rates of excise tax on certain distilled spirits. If the spirits used by an MNBP were taxed at a reduced rate, then the drawback rate will be $1 less than that rate. For example, if the spirits were taxed at a reduced rate of $2.70 per proof gallon, then the drawback rate would be $1.70 per proof gallon. The TTB regulations at 27 CFR 17.162 and 17.163 require MNBPs to maintain records of the effective tax rate paid on the spirits used to manufacture nonbeverage products. For this purpose, the effective tax rate includes the tax rate imposed by section 5001 (see 27 CFR 17.11), so these records must show the tax rate paid (including, as applicable, the reduced tax rate paid) on the spirits used.
Originally issued on 07/09/2018
Updated on 09/30/2021*
MNBP claimants must report the correct drawback rate for distilled spirits used to manufacture nonbeverage products on TTB Form 5154.2, Supporting Data for Nonbeverage Drawback Claims (or on an alternate format that presents the same information). See 27 CFR 17.147(a). As explained in TR-O1, the drawback rate is $1 less than the effective tax rate paid or determined by the DSP.
Unless specifically requested by the National Revenue Center after the claim is submitted, the MNBP does not need to submit invoices from a distilled spirits plant to support its drawback claim. TTB may also require additional supporting data when needed to determine the correctness of drawback claims, including information that shows that the spirits used were taxpaid or tax-determined at the applicable effective tax rate. See 27 CFR 17.147(a) (TTB can require additional supporting data to determine correctness of claim) and 27 CFR 17.146(b) (claim must show that the spirits on which drawback is claimed were taxpaid at the applicable effective tax rate). Drawback is allowed only to the extent that the claimant can establish, by evidence satisfactory to the appropriate TTB officer, the actual quantity of taxpaid or tax-determined spirits used in the manufacture of the product and the effective tax rate applicable to those spirits. See 27 CFR 17.141. If the MNBP does not provide information necessary to establish the appropriate drawback rate, TTB can deny the claim or—if the claim has already been allowed—may seek repayment from the MNBP.
Originally issued on 07/09/2018
Updated on 09/30/2021*
Regulations at 27 CFR 19.626 require DSPs to provide to their MNBP customers a record of each shipment. A DSP should provide accurate information about the distilled spirits tax rate(s) paid on each shipment of distilled spirits purchased by the MNBP at the time of removal from the bonded premises or as adjusted through a claim for refund or amended tax return. An MNBP is not eligible to receive a refund that is greater than the amount of tax a DSP ultimately paid on the spirits. The IRC at 26 U.S.C. 7211 imposes a criminal penalty on anyone who knowingly overstates to a purchaser the amount of Federal excise tax paid.
Originally issued on 09/30/2021