MODIFIED PROCEDURES CONCERNING NORMAL STORAGE
LOSSES FROM PACKAGES OF SPIRITS IN BOND
Proprietors of distilled spirits
plants and others concerned:
The purpose of this industry circular is to advise you of the provisions of a revenue
procedure which will soon be published in the Internal Revenue Bulletin. This
revenue procedure will supersede Revenue Procedure 68-18 (reported in Industry
Circular 68-8) and will allow for soakage in determining losses from tampered packages
of distilled spirits in bonded storage. The revenue procedure will be published
substantially as follows:
SEC. 2. BACKGROUND.
Section 5006(b)(1) of the Internal Revenue Code of 1954 and 26 CFR 201.301(a)
provide that when it is found that a package of distilled spirits in bond has
sustained a loss due to theft or unauthorized voluntary destruction, immediate
taxpayment of the original quantity of spirits entered for deposit in storage in
the package may be required. An exception is made that where losses from any cause
other than theft or unauthorized voluntary destruction can be established by the
proprietor to the satisfaction of the Assistant Regional Commissioner, Alcohol and
Tobacco Tax, the tax on the loss so established may be credited against the tax on
the original quantity. Acceptable procedures for determining normal storage losses
for packages filled by individual gauge and by average fill methods are prescribed
below.
SEC. 3. METHODS FOR DETERMINING LOSSES.
.01 Packages filled by the individual gauge method. In order to credit the tax
on normal storage losses against the tax on the original quantity of spirits entered
for deposit in a package filled by the individual gauge method, when such package has
sustained a loss due to theft or unauthorized voluntary destruction, the proprietor
should:
(a) Determine the loss from the tampered package by
actual gauge or by using the present gross weight, present
proof, and original tare of the package, and subtracting
the tax gallons so obtained from the original tax gallons
entered into the package.
(b) Weigh ten similar packages containing the same
kind of spirits produced on the same day as the spirits in
the tampered package and stored under similar conditions.
(c) Select, from the ten packages weighed, the package
which, on the basis of original and present gross weights,
appears to have sustained the least loss.
(d) Determine the loss from the comparison package by
the same method used to determine the loss from the tampered
package. The tax gallon loss so determined will be considered
the normal storage loss from the tampered package.
(e) Subtract the tax gallons considered to be the
normal storage loss from the total tax gallon loss from
the tampered package.
The quantity determined in (e) above will be considered as a loss due to theft or unauthorized voluntary destruction and must be taxpaid in accordance with the
provisions of 26 CFR Part 201.
.02 Packages filled by average fill methods. In order to credit the tax
on normal storage losses against the tax on the original quantity of spirits
entered for deposit in a package filled by an average fill method, when such
package has sustained a loss due to theft or unauthorized voluntary destruction,
the proprietor should:
(a) Gauge the tampered package by weight and proof.
(b) Weigh ten similar packages containing the same
kind of spirits produced on the same day as the spirits
in the tampered package and stored under similar conditions.
(c) Select from the ten packages weighed the package
with the heaviest gross weight.
(d) Subtract the gross weight of the tampered package
from the gross weight of the comparison package.
(e) Convert the difference between the gross weights
of the two packages to tax gallons, using the proof of the
spirits in the tampered package.
The quantity determined in (e) above will be considered as a loss due to theft or unauthorized voluntary destruction and must be taxpaid in accordance with the
provisions of 26 CFR Part 201.
SEC. 4. EFFECT ON OTHER DOCUMENTS.
This Revenue Procedure supersedes Revenue Procedure 68-18, I.R.B. 1968-17, 29.
Inquiries concerning this circular should refer to its number and be addressed to your Assistant Regional Commissioner, Alcohol and Tobacco Tax.
Harold A. Serr
Director, Alcohol and Tobacco Tax Division |