When is excise tax assessed?

[natbouman]

I've tried to find the answer to this by searching the forum and going to the gov't websites but I must have missed it somehow, so I'm just going to ask this even though I sound like an idiot. When are proof gallons calculated for determining the amount you have to pay for excise tax? More specifically, is this calculated before or after aging? It would seem awfully unfair if excise tax were paid on spirit before aging (but then again, the whole excise tax thing is awful anyway).

[kkbodine]

Upon withdrawal from bond. So, generally, once bottled and removed from the DSP. Or removed in bulk. The actual payment won't be due until it is time to file your tax return. Often quarterly but possibly more often depending on your size/bond limits/...

[dhdunbar]

Let me add that, presuming you are removing cased goods, you determine the tax when you remove it from bond unless it a withdrawal that you can make free of tax - like export - and you determine the amount of the tax based on the label proof and bottle size. You can find instructions on how to gauge in Part 30 of the regulations. That section is called the gauging manual. Here is what it says:

Where the quantity of spirits in a case is to be determined by volume, such determination shall be made by ascertaining the contents of one bottle in the case and multiplying that figure by the number of bottles in the case. For cases containing bottles filled according to the metric system of measure, the quantity determined shall be converted to wine gallons, as provided in §19.722 of this chapter. The wine gallons of spirits thus determined for one case may then be multiplied by the number of cases containing spirits at the same proof when determining the quantity of spirits for more than one case. The proof gallons of spirits in cases shall be determined by multiplying the wine gallons by the proof (divided by 100).

If you have a deferral bond, you can defer taxpayment. Most small distillers can defer to quarterly returns. But remember, you must have sufficient bond to cover all of the liability that you build up and the discipline to set the money aside. You can find all you need to know about taxpayments in Part 19, starting at section 19.225.