ACCELERATED PAYMENTS OF CERTAIN EXCISE TAXES

To: All Distilled Spirits, Wine, Beer, Tobacco Products, and Cigarette Papers and Tubes Taxpayers.

Purpose. This industry circular advises all alcohol and tobacco excise taxpayers of legislation which requires an accelerated tax payment during the month of September.

Background. The Uruguay Round Agreements Act enacted on December 8, 1994, amended the law relating to the payment of certain excise taxes. The new law permanently accelerates the payment of taxes due on distilled spirits, wine, beer, tobacco products, and cigarette papers and tribes for the second semimonthly period of September. The new law splits the second semimonthly period of September into two payment periods and requires receipt of payment as described below.

The new requirement does not apply to wine excise taxes that are remitted on an annual basis.

TAXPAYERS REQUIRED TO FILE BY EFT

For those taxpayers required to file their payments by electronic fund transfer (EFT), the accelerated payment period is from September 16 - September 26. Payment of taxes and a return for the accelerated period is due on or before September 29. If September 29 is a Saturday, the payment of taxes is due on Friday, September 28. If September 29 is a Sunday, the payment of taxes is due on Monday, September 30.

Tax payment and a return for the remaining four days of the semimonthly period, September 27-30, is due on October 14.

Safe harbor. Under a safe harbor, the accelerated payment requirement is satisfied if the taxpayer pays an amount equal to 11/15th (73.3 percent) of the taxpayer's liability for the first semimonthly period in September and any underpayment of tax for the accelerated period is paid by October 14. Taxpayers should show any increasing or decreasing adjustments for the accelerated period in schedule A or B of the tax return due on October 14.

Example: Payment of tax for the month of September.

1. Facts. X, a taxpayer required to pay taxes by electronic fund transfer, incurred tax liability in the amount of $30,000 for the first semimonthly period of September. For the period September 16-26, X incurred tax liability in the amount of $45,000, and for the period September 27-30, X incurred tax liability in the amount of $2,000.
2. Payment requirement. X's payment of tax in the amount of $30,000 for the first semimonthly period of September is due no later than September 29. X's payment of tax for the period September 16-26 is also due no later than September 29. X may use the safe harbor rule to determine the amount of payment due for the period of September 16-26. Under the safe harbor rule, X's payment of tax must equal $21,990.00, 11/15ths of the tax liability incurred during the first semimonthly period of September.
   
   Additionally, X's payment of tax in the amount of $2,000 for the period September 27-30 must be paid no later than October 14. X must also pay the underpayment of tax, $23,010.00, for the period September 16-26, no later than October 14.

Return Periods and Due Dates:

(a) The actual due date is Oct. 14, but since Oct. 14 falls on a Saturday, the return and tax payment is due on Friday, Oct. 13, the preceding day.

(b) The safe harbor rule is not applicable to Sept. l-15; 100% tax payment must be made.

(c) This amount includes the underpayment of $23,010 plus $2,000 for the period Sept. 27-30.

TAXPAYERS NOT REQUIRED TO FILE BY EFT

Special rules apply to taxpayers who are not required to remit taxes by electronic fund transfer for the calendar year. For these taxpayers, the accelerated payment period is from September 16 - September 25. Payment of taxes and a return for the period is due on or before September 28. If September 28 is a Saturday, the payment of taxes is due on Friday, September 27. If September 28 is a Sunday, the payment of taxes is due on Monday, September 29.

Tax payment and a return for the remaining five days of the semimonthly period, September 26-30, is due on October 14.

Safe Harbor. Under a safe harbor, the accelerated payment requirement is satisfied if the taxpayer pays an amount equal to 2/3rds (66.7 percent) of the taxpayer's liability for the first semimonthly period in September and any underpayment of tax for the accelerated period is paid by October 14. Taxpayers should show any increasing or decreasing adjust:ments for the accelerated period in schedule A or B of the tax return due on October 14.

Example: Payment of tax for the month of September.

1. Facts. X, a taxpayer who pays taxes by check, cash or money order, incurred tax liability in the amount of $5,000 for the first semimonthly period of September. For the period of September 16-25, X incurred tax liability in the amount of $6,000, and for the period September 26-30, X incurred tax liability in the amount of $1,000.
2. Payment requirement. X's payment of tax in the amount of $5,000 for the first semimonthly period of September is due no later than September 29. X's payment of tax for the period September 16-25 is due no later than September 28. X may use the safe harbor rule to determine the amount of payment due for the period September 16-25. Under the safe harbor rule, X's payment of tax must equal $3,335, 2/3rds of the tax liability incurred during the first semimonthly period of September.
   
   Additionally, X's payment of tax in the amount of $1,000 for the period September 26-30 must be paid no later than October 14. X must also pay the underpayment of tax, $2,665, for the period September 16-25, no later than October 14.
   

Return Periods and Due Dates.

(a) The actual due date is Oct. 14, but since Oct. 14 falls on a Saturday, the return and tax payment is due on Friday, Oct. 13, the preceding day.

(b) The safe harbor rule is not applicable to Sept. l-15; 100% tax payment must be made.

(c) This amount includes the underpayment of $2,665 and $1,000 for the period of Sept. 26-30, 1995.

Questions regarding this industry circular should be directed to your District Technical Services Office.

John W. Magaw

Director