Rev. Ruling 57-173

Taxpaid Bulk Distilled Spirits

Advice has been requested with respect to the acquirement, receipt, storage, and sale of taxpaid bulk distilled spirits. The question presented and answers thereto are as follows:

Question 1 - May the holder of a basic permit, either as a distiller, warehouseman and bottler, or rectifier, who acquires taxpaid bulk spirits, store such spirits, prior to bottling, on premises under his control but covered only by a wholesaler's basic permit?

Answer - A distiller, rectifier, or warehouseman and bottler who acquires taxpaid bulk distilled spirits may store such spirits, prior to bottling, on premises under his control but covered only by a wholesaler's basic permit. Complete daily records covering the receipt and disposition of such bulk spirits must be maintained by the holder of the basic permit where the spirits are stored. Such transactions must also be included on Form 338, Wholesale Liquor Dealer's Monthly Report.

Question 2 - May the holder of a basic permit as a distiller, warehouseman and bottler, or rectifier, who has acquired taxpaid distilled spirits in original bulk containers, store such spirits in a commercial storage warehouse not under the control of the permittee, but in the hands of a third party who does not hold a basic permit?

Answer - Such bulk distilled spirits may be stored in a commercial storage warehouse not under the control of the distiller, warehouseman and bottler, or rectifier. Complete daily records covering the receipt and disposition of the bulk spirits must be maintained by the holder of the basic permit at the commercial storage premises and Form 338 must be submitted in accordance with the pertinent regulations.

Question 3 - What type of basic permit should be required to cover a "taxpaid" or "free" warehouse referred to in section 220.758 of the Regulations relating to the Production of Distilled Spirits? If it is covered by a wholesaler's basic permit because of the handling of spirits produced by other than the proprietor, by what right can these spirits be acquired and stored on such premises by the proprietor as a wholesaler, who is prohibited by the Federal Alcohol Administration Act from receiving spirits in bulk?

Answer - No basic permit is required for this purpose. Such bulk spirits can not be acquired and stored by the proprietor on taxpaid or free warehouse premises in his capacity as a wholesaler under the provisions of the Regulations relating to Bulk Sales and Bottling of Distilled Spirits may be received and stored on such premises only by a person holding a basic permit as a distiller, warehouseman and bottler, or rectifier. Daily records must be maintained by the holder of the basic permit at the premises where the spirits are stored, and Form 338 must be prepared.

Question 4 - Under section 3.12 of the Regulations relating to Bulk Sales and Bottling of Distilled Spirits, should the proprietor of a distillery or bonded warehouse who desires to establish a taxpaid warehouse for the purpose of receiving and storing bulk spirits be required to establish such warehouse in conjunction with or adjacent to the distillery or bonded warehouse premises, or may the taxpaid warehouse be located elsewhere, and, if located elsewhere, would a separate permit be required?

Answer - The proprietor may establish a taxpaid warehouse for the purpose of receiving and storing bulk spirits either in conjunction with, or adjacent to, the distillery or bonded warehouse premises, or taxpaid warehouse may be located elsewhere. No separate basic permit is required in either case. In this connection, see also the answer to Question No. 3, above.

Question 5 - May a rectifier establish a taxpaid warehouse off the qualified premises without procuring an additional permit?

Answer - A rectifier may establish a taxpaid warehouse off the qualified premises without procuring an additional permit. The proprietor must maintain complete daily records covering the receipt and disposition of such spirits at such taxpaid premises, and monthly report on Form 338 must be prepared.

Question 6 - In the event a proprietor of an internal revenue bonded warehouse is required to taxpay and withdraw packages of spirits from his warehouse, where may such taxpaid packages be stored pending their disposition?

Answer - The taxpaid bulk spirits in such case may be stored on any taxpaid premises or in commercial storage. Daily records must be maintained by the holder of the basic permit at the premises where the spirits are stored and a monthly report on Form 338 must be prepared.

Question 7 - May the proprietor of an internal revenue bonded warehouse, who is also a rectifier, store taxpaid spirits on a vacant lot which is not a part of either qualified premises but within the fenced enclosure of the premises under the control of the proprietor?

Answer - The answer to this question is in the affirmative. Daily records must be maintained and Form 338 submitted by the holder of the basic permit. While the storage of spirits under such conditions would appear to be undesirable from the standpoint of protection from the elements, this is a matter which is not precluded by existing law or regulations.

The provisions of the Federal Alcohol Administration Act restricting the acquisition and disposal of distilled spirits in bulk do not limit their physical receipt and disposal to premises actually conducted or controlled by distillers, warehousemen and bottlers, or rectifiers. Therefore, such bulk spirits may be stored on premises as indicated above, subject to the maintenance of the proper records by the holder of the basic permit who may legally acquire or receive such spirits in bulk under the provisions of the Regulations relating to Bulk Sales and Bottling of Distilled Spirits.

Bulk taxpaid spirits thus legally acquired and stored may be sold or disposed of only to persons authorized by the provisions of the above regulations to acquire such spirits. In the event the spirits are sold and the vendor is not entitled to the exemption afforded by section 5113(a) of the Internal Revenue Code of 1954 and section 194.184 of the Regulations relating to Liquor Dealers, the holder of the basic permit (distiller, warehouseman and bottler, or rectifier, as the case may be) selling the spirits must pay special tax as a wholesale liquor dealer as to each premises where the wholesale liquor dealer business is carried on. The fact that a wholesale liquor dealer, as such, may not acquire or dispose of distilled spirits in bulk under the Regulations relating to Bulk Sales and Bottling of Distilled Spirits does not preclude the acquisition or sale of distilled spirits in bulk by a distiller, warehouseman and bottler, or rectifier, in such capacity, who must, except where specifically exempted, qualify for the sale of such spirits in wholesale quantities under the internal revenue laws.

26 U.S.C. 5114; 26 CFR 220.758 (27 CFR 201.632)