sample bottles of all products?

[Iron Fish]

Our previous Head Distiller has kept a library of samples from each of our bottlings in case the TTB needs to test a specific batch. These bottles are kept in a locked cabinet in the production office, but they do not exist in our inventory or computer system. With a TTB inspection approaching, we are becoming worried that these samples we thought we were saving for the TTB may actually be in violation of the rules themselves. 

Can anyone advise me on the legality of this? do we need to have samples of all our distribution batches? If so, do we have to keep them in our computer inventory and pay taxes on them?

Thanks for any knowledge you can provide.

[adamOVD]

If it was me I would pay taxes on them when I put them into the cabinet and report them as "tax determined" on the second column of the Processing Report (line 33). I'm not sure if they would qualify as "withdrawn for research" (line 38), but I would imagine they would.  If he didn't enter them on on the processing report in one of those ways, they should still "exist" in the processing account, and would need to be inventoried every quarter.

[Jedd Haas]

If withdrawn tax free, they should have been recorded as withdrawn for research and development, and the disposition to the "library." There is a section in 27 CFR that explains the data that needs to be recorded in the daily records for these samples.

You don't have to pay taxes on library samples, but you do need to document the withdrawal. Once they're withdrawn, the are no longer part of your inventory. 

If the samples were withdrawn tax determined, then once again they are no longer part of your inventory. In that situation, I would suggest marking the bottles as "tax paid" along with the date of withdrawal and other supporting details as needed.