Jump to content
ADI Forums
geraldmarken

Selling spirits in bulk quantities

Recommended Posts

I operate a beverage DSP. I'm looking to sell spirits to a manufacturer of vanilla extract. They don't have a DSP. Can I sell them drums of alcohol? If so, what are the labeling requirements? Obviously the spirits would have to be taxpaid since this wouldn't be a transfer in bond.

If you're interested in knowing how the rest of the process would work, the extract producer would submit a non-beverage formula to the TTB, create the extract according to said formula, then apply for a drawback, in which case they would receive reimbursement for the excise tax (minus $1 per proof gallon).

I would greatly appreciate any help. The TTB has been wholly unhelpful.

Share this post


Link to post
Share on other sites
kkbodine    8

As far as I know, from the federal standpoint you just have to pay the tax and report the withdrawal on the appropriate monthly reports. Your state may have some rules about who can sell, transport, and/or receive bulk tax paid alcohol so check with them. I would create a label for the drum that states your company name, DSP #, address, type of spirit, proof gallons, wine gallons, and whatever else seems logical. There may be federal requirements somewhere in the regulations but that is what I have typically seen. We gave up producing vanilla extract for the past two years as vanilla bean prices have been very high.

Share this post


Link to post
Share on other sites

Thank you for the response. I've been doing some digging into the CFR and it seems to support what you're saying. 

Here are a couple relevant clauses:

27CFR1.1.95: Distillers, rectifiers, and other permittees engaged in the sale or other disposition of distilled spirits for nonindustrial use shall not sell or otherwise dispose of distilled spirits in bulk (other than alcohol) for industrial use, unless such distilled spirits are shipped or delivered directly to the industrial user thereof.

27CFR1.17.142(b): If a manufacturer of nonbeverage products is owned and operated by the same business entity that owns and operates a distilled spirits plant, the manufacturer's claim for drawback may be filed for credit on Form 2635 (5620.8). After the claim is approved, the distilled spirits plant may use the claim as an adjustment decreasing the taxes due in Schedule B of TTB Form 5000.24, Excise Tax Return. Adjustments resulting from an approved drawback claim are not subject to interest. This procedure may be utilized only if the manufacturer of nonbeverage products and the distilled spirits plant have the same employer identification number.

Share this post


Link to post
Share on other sites
dhdunbar    35

You may sell spirits in bulk to a person who is authorized to receive them.  That includes  manufacturers of non-beverage products.  Vanilla is a non-beverage product made according to FDA standards of identity.  You pay the tax on your next return.  You pass the tax on in your price.  

The manufacturer of non-beverage products files formulas, keeps records, etc, etc, and then submits a claim for drawback of the taxes for which he bore the burden due to your passing the tax on to him in your price.  If approved, they get back all by $1.00 per proof gallon.  As you note, special provisions apply if the same company owns the distillery and makes the non-beverage products, but they cannot make non-beverage products on your DSP premises.  

If you sell spirits  that will be used to make non-beverage products, the rules that apply to your operations and transactions are the part 19 sections that apply to industrial alcohol.  Persons who produce and deal in industrial alcohol must make application for and obtain an operating permit under the part 19.  The basic permit, issued under part 1, is good only for beverage alcohol.  Industrial alcohol has its own labeling requirements.  The rules that apply to the non-beverage manufacture are found in part 17.  

Note that the exemption from bonding that just came into play do not apply to industrial alcohol.  No matter how little tax you pay, if deal in industrial alcohol, you must have an operating bond and must also have a withdrawal bond if you want to defer the taxes.  I recall that the new regulations also require that you identify industrial alcohol at the time you make the production gauge and keep it segregated from beverage alcohol at all times after that.  Check that out.  I normally provide the citations to back up what I say, but I'm too busy to do that now.  

The key term you want to enter into your search engine to mine part 19 on these issues is "industrial alcohol."  

 

Share this post


Link to post
Share on other sites
15 hours ago, dhdunbar said:

 

If you sell spirits  that will be used to make non-beverage products, the rules that apply to your operations and transactions are the part 19 sections that apply to industrial alcohol.  Persons who produce and deal in industrial alcohol must make application for and obtain an operating permit under the part 19.  The basic permit, issued under part 1, is good only for beverage alcohol.  Industrial alcohol has its own labeling requirements.  The rules that apply to the non-beverage manufacture are found in part 17.  

 

Thank you so much for all of your information here. I'm trying to square your claim here ^^ with this clause:

27CFR1.1.95: Distillers, rectifiers, and other permittees engaged in the sale or other disposition of distilled spirits for nonindustrial use shall not sell or otherwise dispose of distilled spirits in bulk (other than alcohol) for industrial use, unless such distilled spirits are shipped or delivered directly to the industrial user thereof.

My interpretation of this is that a holder of a basic permit can sell bulk alcohol for industrial use, as long as they ship the alcohol directly to the industrial user. Do you have a different perspective on it?

I'd rather not amend my DSP for industrial if possible; this clause makes it seems like maybe this is possible? Let me know what you think. Thanks.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×