Rev. Ruling 62-73

Wholesale Liquor Dealer on DSP Premises Special Tax

Advice has been requested whether the proprietor of a distilled spirits plant operating a wholesale liquor dealer business on the general premises of a distilled spirits plant incurs liability for the special tax as a wholesale liquor dealer under the circumstances described below.

The proprietor of a distilled spirits plant operates a wholesale liquor dealer business on a general premises of his plant. He sells distilled spirits, wines and beer to retail dealer from stocks stored at his distilled spirits plant. "Drop shipment" sales are also made. They are shipments sent directly from another distilled spirits plant to the proprietor's customers.

Section 5113(a) of the Code provides, in part, that no proprietor of a distilled spirits plant shall be required to pay special tax under section 5111 or section 5121 of the Code on account of the sale at his principal office of distilled spirits, wines, or beer, which, at the time of sale, are stored at his distilled spirits plant, or had been removed from such premises to a taxpaid storeroom operated in connection therewith and stored therein. However, no such proprietor shall have more than one place of sale that shall be exempt from special tax.

Section 201.34 of the Distilled Spirits Plants Regulations states that the exemption from liquor dealer's occupational tax applies to the sale of spirits or wines which, at the time of sale, are stored at the proprietor's plant or had been removed from such plant to a taxpaid storeroom, the operations of which are integrated with the operations of such plant.

Revenue Ruling 60-383 holds that the proprietor of a distilled spirits plant may conduct the business of a wholesale liquor dealer on the "general" premises of such plant as "other business" under section 201.67 of the regulations upon approval of his application by the Assistant Regional Commissioner, Alcohol and Tobacco Tax, pursuant to section 201.73 of the regulations.

Section 201.34 of the regulations, relating to exemptions from the wholesale liquor dealer tax, mentions only spirits or wines and not beer. However, these regulations are concerned principally with the operations of a distilled spirits plant as they affect the plant's bonded and bottling premises. Since beer cannot be taken onto either bonded (except as provided in section 201.262 of the regulations) or bottling premises of a distilled spirits plant, the exemption provided by section 201.34 of the regulations is restricted to spirits or wines which are held at such plants or in a facility closely integrated with the operation of the plants.

However, the provisions of section 5113(a) of the Code afford an exemption from the wholesale liquor dealer tax for the sale of distilled spirits, wines, or beer which, at the time of sale, are stored on the general premises of a distilled spirits plant.

Accordingly, the proprietor of a distilled spirits plant operating a wholesale liquor dealer business on the general premises of a distilled spirits plant does not incur liability for special tax by reason of the sale of beer which, at the time of sale, is stored on such premises, provided an application submitted pursuant to the provisions of section 201.73 of the regulations and Revenue Ruling 60-383 has been approved by the Assistant Regional Commissioner, Alcohol and Tobacco Tax, to include the storage and sale of beer.

However, a proprietor making "drop shipments" of distilled spirits, wines, or beer incurs liability for the special tax since "drop shipments" do not constitute a sale of spirits, wines, or beer which at the time of sale had been stored at the plant or had been removed from the plant to a taxpaid storeroom as required by section 201.34 of the regulations.

The proprietor of a distilled spirits plant operating a wholesale liquor dealer business might handle distilled spirits only, wines only, or both distilled spirits and wines, or distilled spirits, wines and beer. Therefore, the application to conduct "other business" on the distilled spirits plant premises must specifically and entirely describe the operations involved and the building and equipment to be used.

26 U.S.C. 5113; 27 CFR 201.34