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Everything posted by dhdunbar

  1. Inventory Requirements - barrels

    This is getting a bit specific, but ... Tank vs. package is not account dependent. Further, there is nothing in the regulations that definitively differentiates a tank from a package. One part of the reg (19.75 maybe) says something don't need to list portable bulk containers of less than 101 gallons unless they meet the criteria for a tank under 19.182, but 19.182 only says, if you have a tank, then you must equip it with ... and totes have none of what is required by 19.182. Nor do barrels or drums. That does not say that a metal container of some size, say a million gallons, noit so equipped, would qualify as a drum. It would certainly be a tank, and if it didn't have what 19.182 required, it would be in violation of that section. But beyond that we have anomalies that TTB has not chosen to address, as far as I know. Webster - Tank - a large receptacle or storage chamber, especially for liquid or gas. Large? TTB may intend that anything larger than 101 gallons be equipped as required for tanks. They have not said so. Their de facto acceptance of 275 gallon and larger plastic totes may be taken as an answer not otherwise given. The same question could apply to how large an oak barrel can you have to store whiskey? At what point does an oak tank not serve as a container fit for aging? That is a question I will not ask until I have to answer a question for a client. Finally, a metal drum is a package and need not be inventoried. The section for processing inventories is Sec. 19.371 "A proprietor must take a physical inventory of all wines and bulk spirits (except packages) held in the processing account at the close of each calendar quarter." Holler by PM if you want me to go still further into this on your behalf :-).
  2. Inventory Requirements - barrels

    You found the section that has your answer, but getting the answer requires that you know that a barrel is a package. If the regulation uses a word, like "package", and you are not sure of what it means, look to definitions section (19.1) for answers . In this case, package means "A cask or barrel or similar wooden container, or a drum or similar metal container." So you need not inventory the spirits you have in barrels. Note, this would not exclude, as I read it, larger plastic totes, which are an anomaly. They are not tanks, they are not packages, unless we take "drum" to be inclusive, which i think is not intended. So totes, I suppose, are portable bulk containers with a capacity of over 101 gallons. The regulations do not address how to handle that kind of container. Container is also a defined term, by the way. It means "A receptacle, vessel, or form of bottle, can, package,tank or pipeline (where specifically included) used or capable of being used to contain, store, transfer, convey, remove, or withdraw spirits and denatured spirits." TTB fixes anomalies when they present problems. Since they have not dealt with the tote issue, they apparently do not perceive a problem that is worthy of the time necessary to give an answer. I've treated the totes question like a sleeping dog. I chose not to kick it.
  3. Canned Cocktails?

    Here's something from from 5.47 a(2) that causes me to question screw caps - "For metal containers which have the general shape and design of a can, which have a closure which is an integral part of the container, and which cannot be readily reclosed after opening"— leads to conclude that TTB may hold that cans with a screw cap are considered to be containers that must meet the standards of fill for bottles. There is no reason, in law, that that should be the case, but they obviously went to the trouble of adding the extra language integral and reclosing language for some perceived reason. Would TTB even take note of this? Who knows? But I'd hate to see someone invest in screw tops only to find that TTB puts the kibosh on such a container. I suggest asking first.
  4. Vodka Spritzer - standard of identity?

    This is an rather complicated question. 1. You cannot remove a product like vodka and carbonated water from the DSP premises in bulk (1.80). 2. You can do so in cans (see another post I made today on the issue of cans). 3. Removed in a can, it is not vodka, because it is not 80 proof (5.22). It would be a specialty item (5.35). 4. A fanciful name is required. So is a statement of composition unless it is a recognized cocktail, which I doubt. 5. If you remove the vodka (80 proof or more) , to the tasting room, in one gallon containers, and dump it into a barrel, then mix it with seltzer, and you have rectified it. 6. But premixing cocktails is deemed exempt rectification if you comply with some rules that TTB published years ago about premixing batches of margaritas. As I recall, that ruling is not easily found. My recollection is that it must be mixed for immediate consumption, which is defined to be consumption within 24 hours. I can't give the site right now because do not know it. 7. Similarly, the premixing doesn't violate rules that prohibit a retail form serving from other than the original container in which bottled. 8. Again, I would have to search for that ruling. It is going to say whether the premixing is possible. 9. But remember, if it is possible to premix, in a bulk container, under the rules I've not cited, you must do so on the tavern on the brewery premises (yes, you can serve spirits and wine there, as I assume you know) using spirits that were in containers of one gallon or less, that were properly labeled when you withdrew them from the DSP on tax determination an d received them on the tavern premises. 10. Neutral spirits are spirits distilled at more than 190 from any substance. It does not matter that the distilling material was derived from beer or wine. In whatever dilustions, it is a spirit and subject to spirits standards of identity (unless it is a mixture that is more than 50% wine on a proof gallon basis (5.11), which seems not to be what you have in mind at at.
  5. Canned Cocktails?

    Growlers in the tasting room are not allowed for at least two reasons. 1. The tasting room is not on bonded premises. If it is, TTB erred in approving it (19.52 ). All DSP operations, which include bottling, must take place on bonded premises. So no bottling on other than bonded premises (see definitions of distilled spirits operations and bonded premises in 19.1). 2. You cannot remove spirits in bulk (containers of more than one gallon) from the DSP to anyone not qualified to receive bulk spirits . The proprietor of a tasting room, retail area, is not among those qualified to receive spirits in bulk at any place other than the bonded premises (27 CFR 1.80 and following). Bottling is a processing operation. The bottling line must be on bonded premises when you conduct the bottling operations (19.1 again). You could alternate an adjacent brewery line from brewery to DSP, but it must be adjacent (19.143). You could probably qualify an outside area to DSP premises (you can have outside tanks - 19.74 -, so ...), but I'd want to frame that proposal carefully. Ditto from alternating an outside area that is designated as general premises to use as bonded premises (19.143 again). TTB talks about containers. Containers for sale to consumers can be either approved liquor bottles or cans. 5.11 - "Bottle. Any container, irrespective of the material from which made, used for the sale of distilled spirits at retail." The standards of fill for cans is found in 5.47a(2) For metal containers which have the general shape and design of a can, which have a closure which is an integral part of the container, and which cannot be readily reclosed after opening— 355 milliliters - 200 milliliters 100 milliliters 50 milliliters
  6. TTB forms for change in ownership?

    If you originally filed online, then forget the notices, etc. You make amendments using Permits Online. TTB will then do whatever is needed. Just do it within 30 days and sit back and wait. If they want an OOI application, they will ask for it, etc. The ball lands in TTB's court. If you submitted the original application on paper, then you will have to submit on notices, etc, as described in 19.114, referenced above, on paper. Write TTB, following the guidelines of 19.114 for changes in those who hold an equity interest, and 19.115 for changes in persons who exercise control in the manner of an officer or director in a corporation or a manager in a manager managed LLC. The important point - do follow the 30-day rule here too. Make sure that you are aware of the provisions of Section 1.42, which I will quote here: In the event of any change in the ownership, management, or control of any business operated pursuant to a basic permit (if the permittee is a corporation, if any change occurs in the officers, directors, or persons owning or controlling more than 10 percent of the voting stock of said corporation) the permittee shall immediately notify the appropriate TTB officer of such change, giving the names and addresses of all new persons participating in the ownership, management, or control of such business, or in the case of a corporation, the names and addresses of such new officers, directors, or persons owning or controlling more than 10 percent of the voting stock. Notice to the appropriate TTB officer of any such change shall be accompanied or supplemented by such data in reference to the personal or business history of such persons as the appropriate TTB officer may require. Reference, above, to the operating permit under part 19 is probably misleading. If you are engaged in the business of producing or processing beverage alcohol, and if TTB determines, after you give notice, that there has been a change in legal or actual control, it will require that you obtain a new basic permit under the FAA Act. That is not the operating permit described above, which is a permit you have if you are engaging in operations in industrial, not beverage, alcohol. Beverage alcohol is covered by the FAA basic permit, unless all you do is store, in which case an operating permit is required because of quirks in the way the law is worded. So, the approach is different depending on whether you originally filed online or on paper. But tell TTB within 30 days and ask that they respond appropriately within the allotted time. Call them and email them and establish a record that you have tried to comply. I try to answer general questions here in a general way. Details matter, and anything more than general answers can be misleading or misunderstood.
  7. Silk City says it well. Section 19.147 describes what you must do when you go out of business. One of the things you have to do is provide a written statement affirming that you have lawfully disposed of all spirits, denatured spirits, articles, wines, liquor bottles, and other pertinent items. Transfer in bond to another DSP for beverage use is a lawful disposition. That can be either in bulk, or as Silk City points out, in bottles, but remember you must have an approved application from the receiving DSP before you can do that (19.403). The restrictions on bulk sales are in 27 CFR 1.80. Note that they allow sales not only to DSP's, but to anyone qualified to receive spirits in bulk, but that is not generally feasible. Other than exotic sales to persons who operate customs manufacturing bonded warehouses, the other uses are all for industrial alcohol. Most DSP's are not qualified to produce or handle industrial alcohol. It requires an operating permit under the Internal Revenue Code (See section 19.92 and following), and if you have no bond, you had to declare that you would not be conducting such operations. If you do conduct them, you would have to buy a bond. Finally, since you designated the spirits as beverage alcohol at the time of the production gauge (even if you did not know you did this, you did so by default under the provisions of certain sections of the regulation I will not bore you with here) so would have to make application to redesignate them (19.487) before removing them to, say, someone who makes rum cake, which would trigger the operating permit and bonding requirements and ... So, even if you could declare the alcohol to be industrial rather than nonindustrial (the law's word for what we call "beverage'), you''d have more hurdles than you probably want. Note, if you do destroy the alcohol, recognize that, while, under 19.459, TTB does not access taxes on spirits voluntarily destroyed in the manner described in that section, you must follow the rules in 19.459, , which require that you gauge the spirits. Further, gauges of spirits destroyed are required by 19.283 and that requires that you prepare a gauge record (19.618) and record of destruction (19.617). Because you may be destroying a significant quantity of spirits, and will be attesting to their lawful disposition, make sure you dot the "i's" and cross the "t's" to protect against having to file a claim (19.462) and the possibility of denial, however remote that may be.
  8. Fermentation Open tank or Closed?

    Okay, I'm not a distiller, but I recall some real C02 problems around large, open top fermenters for wine. Perhaps the size mitigates. I'll leave it as a question about whether someone should take care to vent properly. I sure don't know.
  9. Storage Account

    I have never thought about that. I don't know why they put the PS identifier into the mix. I can't see that it is going to affect class and type. First, part 5 does not contain the word "steamed" nor "soaked." It makes no exception of the sort, "which has been stored in new charred oak that was not steamed or water soaked prior to use." You can't bury such an important requirement in an obscure section addressing cooperage identification, and that is the only place the issue appears in either part 5 or part 19. Second, the "PS" designation is stated in addition to one of the other required identifiers, not in lieu of, so the record would still show the CH or R designations necessary to establish, for example, whether a whiskey otherwise made in accordance with the standards of bourbon, 51% or more corn, etc, should be designated, based on the type of cooperate in which it was stored, as "bourbon" or as "whiskey distilled from bourbon mash." The container does not lose its CH designation because it was soaked. Therefore, I've got to believe it would be new charred for purposes of part 5 standards of identity and aging requirements. While TTB, or some predecessor agency, must have had some reason for requiring the PS designation, figuring that out would be a research project for which I do not have the time. Since it would require a research project, I conclude it is not something that has ever been an issue. Since it has never been an issue, I think it comes under things listed beneath the heading, don't kick a sleeping dog.
  10. Storage Account

    When you made your production gauge, you should have reported that you made whiskey, which you designate as "whiskey designate" (see 19.305 Identification of spirits. "Upon completion of the production gauge, the proprietor must identify containers of spirits as provided in subpart S of this part. When the proprietor intends to enter spirits into bonded storage for later packaging in wooden packages, the proprietor may identify the spirits with the designation to which they would be entitled if drawn into wooden packages, followed by the word ``Designate,'' for example, ``Bourbon Whisky Designate.'' You report it as whiskey (over 160 or 160 and under, depending on the proof of distillation" in part 1. You report it as whiskey entered into tanks in part III of the form. You apparently reported it correctly on your production report. There is no entry on the storage account where you show the type of storage. You are correct about that. You are also correct that it is information found in the distillery records. Your records must establish that the product is eligible for the designation stated on the label. When the spirits are in tanks, you must keep the tank record required by 19.592. When you transfer them to oak, you must keep the record required by 19.590(b)(5) and create the package record required by 19.591. The transfer is also recorded on the gauge record (19.618), which you must prepare when you package spirits from a tank in the storage account. The gauge record must include "Cooperage identification (``C'' for charred, ``REC'' for recharred, ``P'' for plain, ``PAR'' for paraffined, ``G'' for glued, or ``R'' for reused, and ``PS'' if a barrel has been steamed or water soaked before filling). That requirement is buried pretty deeply in the regulations, but it is essential if you want to be able to prove your bourbon, rye, wheat or malt whiskey was aged in new charred oak, or that your whiskey distilled from malt mash was aged, Scotch style, in used oak, etc. It is also what justifies age claims. Hope this helps. ;
  11. Hi Everyone from NC

    Shhh>! Don't openly advertise that you are distilling prior to getting TTB's permission.
  12. Bond termination

    For this reason, it may be beneficial to keep your bond in place. There are many other mitigating circumstances as to why you may want to keep your bond in place that I will address in a separate post. I disagree about keeping the bond in place. Yes, whether you are required to have a bond is determined solely by the amount of tax you paid last year or reasonably expect to pay this year. So it would be possible to have a million dollar tax liability for operations (you are storing a lot of bourbon for future removal) and have no bond coverage because you are exempt from all bonding based on your withdrawals of less than $50K. So, the question, "So, do I need a bond?" is legitimate. Let's look at that. The prospect of having TTB chasing you for money is scary, but as I see it, the question is whether you should fear that less because you have a bond. First, it is unlikely that you will have losses by theft, fire or disaster and you generally are not responsible for paying the taxes on such losses. You are liable for taxes on theft if the theft involved collusion by you or an employee or agent (provided you keep your doors locked or have locks on outside tanks or conveyances). Losses by fire or disaster require a claim, but they are infrequent, at best, and the claim process is not odious. Further, you'd be a damned fool not to file the claim, because it you don't someone is going to come looking for the money. The regulations require payment of tax unless you file a claim. They do not say, well, if the claim seems to burdensome, just don't pay it and let the bonding company suffer the consequences of your failure. Do you think the surety will pay when you did not file the claim required to get out of the liability? No? I agree. So you are going to need to file the claim bond or no bond. If you just say screw it, the surety will come looking for its pound of flesh. That is, the bond is not a get out of it free card. If InsuranceMan knows differently, I'll bow to his experience, but I've never seen a bond application on which the proprietor and at least some of the principals, individually, did not indemnify the surety against loss in the event that the surety has to pay because the proprietor would not. The proprietor and its named principals jointly and severally liable to make the surety whole. The process goes like this, in the unlikely event that TTB determines that you are liable for taxes on product lost, etc, they will assess the taxes against you, not the bonding company. In most cases, they will entertain an offer in compromise for a part of the liability. If they demand payment, either of the entire amount or a portion of it, you must make it. You do not go to your bonding company, get money, and pay it. You dig into your own pocket. If your pocket is not deep enough, and if TTB will not accept a compromise you propose, they then collect from the bonding company Guess what happens next. :-) The bonding company comes after the proprietor and any persons who personally indemnified it against loss. Don't want to pay the surety? Be prepared to appear in court at a hearing where they seek to discover your assets and then try to grab them for the debt you owe as an indemnifier. In short, you are going to pay one way or the other. Now, if I'm wrong about this, I'll gladly tip my hat in the direction of the person who can show me the error of my analysis. In the meantime, for those who like to read regulations, look at: Sec. 19.254 discuss circumstances under which TTB will assess taxes. Sec. 19.461 discusses losses and shortages in general. It provides, in part, Except as otherwise provided in paragraph (b) of this section, TTB will not collect tax on spirits,denatured spirits, or wines that are lost, destroyed, or otherwise unaccounted for while in bond, and if the tax has already been paid, TTB will refund the tax. [The emphasis is mine]. It then explains the circumstances when it will collect tax. Read this section. Then, there are a lot of sections related to claims, some of which will probably have you scratching your head. But I return to the point - you are going to have to file the claim or suffer the consequences of not doing so. Please, if I am wrong about any of this, yell loudly. I've got the notify me of replies button turned on.
  13. Shipping

    Yes, I made the comment only because when someone tells you something, you should not take their word for it. Okay, sometimes you should, because you don't need a source if a TTB officer tells you you are required to put serial numbers on your cases or your gauge records must be serially numbered - everyone knows that, right :-). But when we get to talking about things that can result in material violations, getting them to cite a source avoids off-the-cuff and perhaps ill considered answers that can either (1) prevent you from doing something you may do, or (2) convince you to do something that you may not do. My advice to clients is always, don't trust any answer, even mine, without a citation of the source on which I am relying. I expect clients to challenge me with the question, "How did you reach that conclusion?" I don't take it as an insult. I take it as an exercise of due diligence :-).
  14. Shipping

    The TTB agent provided correct information. The agent should have given a source, and you should ask for one when you receive advice like this. Then you can verify and see for yourself what lies behind it. TTB explains its position in Revenue ruling 2001-1. You can read the whole of it at: https://ttb.gov/rulings/2000-1.ht Here is what it held. Held: The Webb-Kenyon Act is a law relating to the enforcement of the Twenty-first Amendment and is a condition of the basic permit under 27 U.S.C. § 204(d) for violations of which ATF may suspend or revoke the basic permit. Held Further: Under these provisions of law, ATF could under appropriate circumstances take administrative action against a basic permit where a basic permittee ships alcoholic beverages into a State in violation of the laws of that State. ATF will intervene when it is determined that there is a continuing, material, adverse impact upon a State through the actions of a basic permittee located outside the boundaries of the affected State. However, while ATF is vested with authority to regulate interstate commerce in alcoholic beverages pursuant to the FAA Act, the extent of this authority does not extend to situations where an out-of-State retailer is making the shipment into the State of the consumer. Note that TTB does not have jurisdiction to action against a retailer. States can. And against carriers as well. FedEx and other carriers do not need that grief. Neither do you. Wineries fought long and hard to get reciprocity agreements in place. The state wine associations and others pushed. It was not something that happened overnight.
  15. There has been some speculation about the new ability to transfer bottled spirits in bond. Yes, it is now allowed. But I want to give a warning; do not be too hasty in making business plans. Wait until TTB issues some regulations. While you will certainly be able to ship and receive bottled spirits in bond, it appears that bottled spirits that you receive in bond will not be eligible for the reduced tax rate unless you either produced or processed the spirits prior to their bottling. That is my reading of the change. I may be reading it wrong, but I think I am right. Yes, TTB does allow a winery that receives bottled wine in bond to remove it at the tax rate (after the small producers credit) that would have applied if the shipping winery had removed it on tax determination for its winery. But the law specifically provides for that. I don't see any such provision in the language attached to the new reduced rates on spirits. For spirits, congress specifically says the rate only applies to spirits produced or processed by the person making the removal. So, if you want to send spirits you have produced or processed to another DSP for bottling, say in 50 ml container or cans, you could do so, and if they returned the packages to you, you could remove them at the rate to which you are eligible at the time of removal. That would appear to be the intent behind the recent changes. It does not appear that congress intends to let a small distilled spirits plant buy spirits in bottles from a large distiller, receive them by transfer in bond, and then remove them at the small distillers rate. I suspect that most of the craft advocates among you will be glad for that. So, my advice is reign-in any enthusiasm you may have for transfering bottled spirits in bond until TTB has its say on the matter. Reply ↓
  16. Tax on Spirits Transferred in Bond in Bottles

    You can establish non-contiguous premises as a part of the existing DSP and use it for storage of spirits. When the two locations are part of the same DSP, you can ship bottled goods from one to the other, and remove them from either location. The thing is, you could do that before the change. The problem, to which DISCUS has objected in the past, is the proximity TTB requires. DISCUS lobbies for 200 miles; TTB allows 10. So, the intent has to be to allow a transfer of bottled goods between two separate DSP's. I was not a fly on the wall to the discussions and so have no knowledge of what was discussed. I suspect that the intent is to allow someone who either produces or processes a product to ship that product to a different DSP for bottling and receive the bottled goods back on its DSP premises. That would allow someone to get spirits canned by another DSP, or get spirits bottled in a size for which they have no facility, and then accept the return of those spirits in bond prior to the time of removal. Removing bottled spirits, at the reduced rate, from a DSP which did not produce, process, or bottle the spirits, is the issue. I don't see that the law allows that, but TTB may be able to read intent in a way that permits it. That may also be a problem, because normally, when a change is made to the law, there is some record of meetings and hearings, etc, what is called legislative history, wherein the intent is expressed, but I doubt that it exists here. All of this is reading T-leaves. We shall see what TTB thinks about what the law allows when TTB expresses its opinion. That is not likely to be soon if the people who write the regulations are not working. To see what TTB has to say about things, as they decide, visit https://www.ttb.gov/alcohol/craft-beverage-modernization-and-tax-reform.shtml. Here is all that it has had to say to date. reduced tax rates 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 equal to $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. The reduced tax rates or tax credits became effective January 1, 2018, and they apply to products removed in calendar years 2018 or 2019 regardless of when the products were produced. (See the Act for the specific quantities of products eligible for the reduced tax rates or tax credits and any other limitations.) Foreign Manufacturer Election: In the case of distilled spirits produced outside the United States and imported, the Act provides for foreign distilled spirits manufacturers to assign the reduced tax rates to importers who elect to receive them. Amendment of Section 7652(f)(2): The Act amends section 7652(f)(2) of the IRC to provide that the reduced rates of tax for distilled spirits are not taken into account when determining the amounts covered into the treasuries of Puerto Rico and the U.S. Virgin Islands. Transfer in Bond of Non-Bulk Distilled Spirits: The Act authorizes the transfer in bond of distilled spirits between distilled spirits plants irrespective of whether the distilled spirits are transferred in bulk or non-bulk containers. Controlled Group: The Act provides that the quantities to which the credits and reduced rates apply shall be applied to the controlled group. The Act also provides that an importer electing to receive an assignment of a credit or reduced tax rate from a foreign manufacturer shall be deemed a member of the controlled group of the foreign manufacturer. Single Taxpayer: The Act provides 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. Taxpayers 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 to pay taxes under the new tax provisions. Stay tuned.
  17. Nothing precludes additional information on the barrels. Wineries have used barcodes and computer programs to track the way in which they have used their barrels for a long time - at least back into the 1990's.
  18. How to get a response from TTB?

    Call and leave a message in response to their first announcement that they are busy helping other people. They usually return the calls. Things can get messed up, but they try.
  19. Forms Question

    I'm surprise no one answered this, but it is stuck in general discussion. You do not need a "form." The local brew will be hard pressed to find this in his copy of the beer regulations. Part 25 provides only for the removal of beer withoutr payment of tax, from the brewery, by pipeline,m to a contiguous DSP. Tell the brewer not to fret. The brewer regulations were never amended to reflect changes made by a 1997 amendment of the Internal Revenue Code. Yea, I know that is 20 years, but it is true. The DSP regulations were amended and we rely on them. Sec. 19.296 , headed "Fermented materials" provides that a DSP may receive, as fermenting material, "beer received from a brewery without payment of tax, or beer that was removed from a brewery upon determination of tax." This can be from any brewery. It does not need to be contiguous. Note that there is no reference to "in bond." For wonks, that is because (1) the tax on beer does not attach until it is removed for consumption or sale, so (2) beer on a brewery premises is not "in bond," as are spirits on a DSP premises, where the tax attaches to the spirits at the time they come into existence. DSP's need an operating bond and a withdrawal bond. Brewers need only the withdrawal bond. Yes, in common use of the language, the removal of beer for delivery to a DSP would be a removal for sale, seemingly triggering a tax liability, but definitions matter. The term {"removed for consumption or sale is defined in part 25." As used in part 25 it means, "Except when used with respect to beer removed without payment of tax as authorized by law, (a) the sale and transfer of possession of beer for consumption at the brewery, or (b) any removal of beer from the brewery." Since beer sent to a DSP as fermenting material (not for consumption in the DSP's tasting room :-)) is withdrawn free of tax, it is not a removal for consumption or sale. The tax does not attach. The beer is not in bond. The brewery just ships it. It does not enter your bond (but is received on your bonded premises). The regulations require records of the beer you receive and use. You (the DSP)DSP must record the receipt and use in your daily production records (19.584). You will need to keep commercial documents, like the brewers invoice or bill of lading, to substantiate the receipt. And, although the regulations are silent on this, you will need to have records that substantiate label claims. Because the beer comes from a brewery, it will be a 100% grain product, suitable for whiskey production as well as NSG, but if you want to claim that the resulting distillate meets the standard of rye whiskey, for example, the brew must provide a statement that the beer it ships you was made from a grain bill of at least 51% rye.
  20. There is no requirement that you mark small containers used for fermenting with serial numbers. In fact, in most cases, even barrels that contain spirits do not have serial numbers. Packages that contain spirits filled during production or stoage operations must be marked with a lot identification number (19.485). A package is "a cask or barrel or similar wooden container, or a drum or similar metal container (19.1). Although the definition does not include plastic or glass containers that function as barrels - no, I do not know why it does not, but would guess it was simply an oversight when the regulations were rewritten in 2011) - I assume it applies to those sorts of containers. As used in part 19, the term lot identification number is synonymous with the term package identification numbers (19.1). The requirement is more easily understood in terms of lots. As the term "lot number" implies, different packages may bear the same lot number (see 19.485 for details on this). The lot identification number is coded to show, , among other things, the year and month and day on which the package was filled. It does not include a unique identifying number for each of the individual packages into which a lot of spirits is filled. TTB can require a separate serial number on a package, at the time of filling or withdrawal from bond, but this is not required unless "the appropriate TTB officer" explicitly requires it. Unless TTB tells you, put a serial number on packages, you need not do so. However, TTB does require a "temporary" serial number, "for control purposes," on spirits that are transferred in bond in an unsecured conveyance or gauged after tampering within the storage account (19.485). For the curious, TTB explains securing devices, for use on conveyances, in 19.441. To round things out, with information not germain to your question, you need to make a separate, package gauge record (19.619) when you fill packages on the production gauge (19.289). Further, when packages are held in the storage account, you must keep package summary records that show the date of deposit to and transfer from the storage account, along with the quantity remaining in the account (19.591). Although that section does not specifically mention the lot identification number, it seems a handy way to approach things. I explain all of the above only to show how TTB uses the terms and why none of it applies to packages used for fermentation. Finally, the fact that TTB does not require a serial number on packages used for fermentation does not preclude you from assigning a temporary number for your own record keeping purposes. If it helps you track and evaluate the samples, use serial numbers, temporary or permanent, with whatever form of coded identification you might chose to use. Write it with marker, crayon, whatever you chose if you chose.
  21. New tax reform

    My reading of the amendment, which is the only way to answer these questions until TTB rules, is that you must pay for December removals at the rate in effect at the time of the removal, not the time of deferred payment. I see no doubt in this case. To be eligible for the reduced rate, the spirits must be removed during the calendar years to which the rate applies. The language of the amended section is clear: SEC. 13807. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED SPIRITS. (a) In General.—Section 5001 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection: “(c) Reduced Rate For 2018 And 2019.— “(1) IN GENERAL.—In the case of a distilled spirits operation, the otherwise applicable tax rate under subsection (a)(1) shall be— “(A) $2.70 per proof gallon on the first 100,000 proof gallons of distilled spirits, and “(B) $13.34 per proof gallon on the first 22,130,000 of proof gallons of distilled spirits to which subparagraph (A) does not apply, which have been distilled or processed by such operation and removed during the calendar year for consumption or sale, or which have been imported by the importer into the United States during the calendar year. The emphasis is mine. Note that it appears that if a DSP receives bottled spirits that it neither bottled nor processed, the tax rate is $13.34. I had not caught that before. Such omissions, by amateur like me, are the reason we have to wait for TTB to issue the rules. They should have a number of persons reading the amendments and arriving at the official interpretation of what they mean.
  22. Get your Federal Permit? How long did it take?

    Jessica, your experience describes why one can't rely on the times people list here. As to "bothering" TTB, I've got some sympathy for their position on that. The rule about not calling until the average time has elapsed is intended to isolate the specialist from repeated distractions that contribute to increase processing times. I also have sympathy for the specialists who are buried in virtual paper. And, I have sympathy for management which is told, repeatedly, by congress, that it must do more with less. At some point that is not possible. However, I have less sympathy for management's failure to devise a way of triaging applications, like yours, that only require a couple of tweaks from those that require, shall I call it, major surgical repair. I also have less sympathy - perhaps little sympathy - for a managerial style that puts specialists in fear of minor errors, yet does not put a stop to the systemic inconsistency of one specialist demanding what another prohibits in responses to the information required for the application. The NRC is badly in need of a (1) a sense of materiality and (2) reasonable internal controls, which only management can impose, that require information that is consistent with the regulatory scheme in parts 1 and 19. It appears that this is now left to the imagination of specialists, who, even with the best of intentions, lack both (1) the perspective and (2) the time to develop the perspective, that is needed to determine whether the information provided in an application is material to approval. And yes, if asked, I can certainly give specific examples of the NRC's fundamental misunderstanding of the scheme of regulation that is in place. Finally, the physicist Richard Feynman once said, " If the professors of English will complain to me that the students who come to the universities, after all those years of study, still cannot spell "friend," I say to them that something's the matter with the way you spell friend." TTB's annual report says that 75% of the applications they receive require correction. I'd apply the Feynman rule to that. We'll see if the new and purportedly improved and now delayed permits online system corrects the situation. I suspect it will not.
  23. Get your Federal Permit? How long did it take?

    I've occasionally warned against taking seriously times given in this thread. TTB publishes average times. The most recent was 88 days for a DSP, which is certainly an improvement over the time it was taking a year ago, but I don't put much stock in averages. The mean means little, pun intended I guess, unless you can also describe the distribution around it, i.e., the range, mode, and median. Averages are subject to statistic trick - you know, liars and damn liars. If TTB wants to lower average times, each month it can deliberately process one or two to completion quickly. Presto, the average gets lowered with no real improvement in service. I'm not saying, and do not mean to imply, that TTB does this; I'm saying averages don't mean much. The same applies to times people report here. They are isolated instances; a fews dots on a graph. They can create unreasonable expectations and fears. So, I don't advertise times because it can be misleading. Yes, most applications are getting reviewed more quickly these days. But that does not mean they all are, and the date that a specialist first picks up an application is crucial. TTB deals them, to the specialists, like cards. Get a specialist who is quick and you can get a request for correction, sometimes, but not often, within two weeks, as I did a couple of times in the last two months. So what happened? In one of those two instances, TTB's secure email system failed to make delivery of a response to a request for correction and there went my chance for glory :-). I say that in jest. To to be very clear about the responses within two weeks, - that was not due to my competence as a consultant. It had only to do with the luck of the draw. I could have submitted a half complete application and got a response in the same time. So could you. If either of us gets a different specialist, it may be two months, and if we draw one who is retiring soon, all bets are off. Jessica describes a horror situation. No application should take as long as hers did. Hers was the outlier. As a consultant I get some outliers too. Hopefully not that long, but can't I claim it will not happen. I can't. I'll add, not only do I not advertise times, I don't advertise period, unless these responses on the forum are advertising, which I guess they are, but I make them as a return to an industry that makes my business possible. When I retire again, which, as I promise myself, I will do someday, I will probably keep on answering questions on these threads. You guys have been good to me the last few years. I appreciate that.
  24. New tax reform

    Thanks Joe - I think we are all bound to misread/interpret some of what others say here. Two things: On the Need to Consult an Attorney I'm not advocating getting a lawyer, or a consultant :-), where the law and regulation are easily understood. But, when visions of legally avoiding a tax begin to dance in one's head after receiving what is touted as a universal Christmas gift of tax reform, remember that the government writes rules that are dizzyingly complex to plug any clever loopholes one thinks one might be able to find in those rules. Big players with big money attorneys already have tried all the angles around controlled group legislation that might pop up in your dreams. That is why the amendment that provides for a reduced tax rate includes controlled group provisions and references an already existing section of the Internal Revenue Code that was devised, over time and from experience, to plug any loopholes, of which persons, with acronyms like MBA after their names, have tried to take advantage. I wrote what I did to say whoa, don't go to fast. For most of the people using this forum, controlled groups will never be an issue. On Transfers of Bottled Spirits in Bond The provision allowing transfers of bottled spirits in bond is illustrative of the task that TTB faces. Those familiar with the structure of the regulations know that they contain rules that describe what must, must not and may, but need be done. When I teach it, I say it's like driving, you must have a license; you must not speed; and you may, but need not, make a left hand turn at the next corner, but, if you do make that turn, you must do it from the proper land and only after the proper signal. Transfers of bottled spirits in bond are an example of a "may rule ." Therefore, TTB makes rules that describe what you must do if you make such transfers. Part 19 contains sections that give the rules and sections that describe the records that are required. TTB now faces the task of making rules for the transfer of bottled spirits and the records which persons who make such transfers must keep. So, they must go through the regulations in a rigorous way - I'd say with the proverbial fine-toothed comb - to find all provisions that must be amended to establish the rules and recordkeeping requirements to accommodate the transfer of bottled spirits. That will take awhile. Here are the sort of questions they will have to ask. Since it is a transfer in bond, does the language of the bond form need to be changed? Yes, most of you will no longer need a bond, so that will be moot in your cases, but TTB still must answer it because if some of your dreams come true, you will someday need a bond. Does the language of the Application to transfer spirits in bond need to be changed? What changes must be made to the rules covering making the shipment? For example, do they want to require that the transfer record include the serial numbers of the cases transferred? What changes must be made to the rules imposed o the person receiving the shipment? For example, do they want to include specific provisions that apply to the discovery and reporting of in-transit breakage? What changes must be made to the rules for claims on spirits that are lost due to in-transit breakage? How should the receiving DSP record and report shortages that they discover at the time of receipt? Remember, the spirits travel in the bond of the consignee, which means the consignee is responsible for the taxes. Remember, also, that TTB takes a position that any shortages in bottled spirits held in the processing account are taxable. But what happens in the case of a dispute, over the number of cases in the shipment, between the shipping DSP and the receiving DSP? What rules should cover the security (seals, locks, etc) required for shipments of bottle spirits? Into which account would you receive bottled spirits? Should TTB now make provisions to allow storage of bottled spirits in the storage account? Remember, a person may not establish a DSP qualified only as a processor, so unless changes are made, a person could not establish a warehouse for the storage of packaged goods only. Can TTB changes those rules, or are they set in law. That is a list of questions that I've generated as I write, off the top of my head. Some may not be a problem, others will be. And TTB has until when to decide what it must do, what it may want to do, and what it is going to require? And as I type this, other questions occur. For example, "How do the label approval requirements fit into this new scheme?" would seem to be a major one. Just for kicks, I'll quote one potentially problematic regulation; 5.55 Certificates of label approval. (a) Requirement. Distilled spirits shall not be bottled or removed from a plant, except as provided in paragraph (b) of this section, unless the proprietor possesses a certificate of label approval, TTB Form 5100.31, covering the labels on the bottle, issued by the appropriate TTB officer pursuant to application on such form. A It seems like some sort of amendment probably is in order. Perhaps a statement to the effect, for purposes of Sec. 5.55, a distilled spirits plant that has received bottled spirits, in bond, must possess a copy of the COLA issued to the bottler, covering the labels on the bottled spirits in has received in bond, before it can remove the spirits form its plant, in bond, or withdraw them on payment of tax. Sigh. And how do you assign responsibility for the tax liability on overfilled and/or overproofed product withdrawn on determination of tax by someone other than the bottler. As the King of Siam said to Anna, "Etcetera, etcetera, etcetera." Now, I for one, am going to sit back and wait for TTB to answer those sorts of questions. You guys can decide on the proper business strategy and the necessary tactics after TTB has done its thing.
  25. New tax reform

    Yes, the quantities are correct. But, remember, to qualify not to have a bond, you must pay some tax. If you pay nothing, you have to have a bond. Don't blame TTB for that. It is how congress wrote the law :_).