DISTILLED SPIRITS TAX INCREASE AND
THE EFFECT ON MNBP CLAIMANTS
Manufacturers of Non-Beverage Products and Others Concerned
Purpose. This Industry Circular is issued to advise
manufacturers of non-beverage products of certain provisions
of Public Law 98-369 and its impact on their bond coverage
and recordkeeping requirements.
Background. Public Law 98-369, entitled the Deficit
Reduction Act of 1984, was enacted on July 18, 1984. Section
27 of this Act increased the rate of tax on distilled spirits
by $2.00 from $10.50 to $12.50 per proof gallon. This tax
increase is effective on October 1, 1985.
Effect on Bond Coverage. Manufacturers who have notified
the Regional Director (Compliance) and filed a bond may file
claims on a monthly instead of a quarterly basis. If not in
the maximum penal sum, ATF Form 5530.3 (Bond for Drawback
Under 26 U.S.C. 5131, formerly Form 1730) will need to be
reviewed by these manufacturers to determine whether a
superseding or strengthening bond will be required to cover
any increased tax liability due to the increased tax rate.
Unless the bond is in the maximum penal sum, you are
cautioned that when the limit of liability under a bond has
been reached, no further drawback on monthly claims will be
allowed until prior charges against the bond have been
satisfied.
Recordkeeping Requirements for MNBP Claimants. All
manufacturers of non-beverage products filing claims for
drawback are reminded that records must be maintained, per 27
CFR 197.109(b), documenting that distilled spirits on which
drawback is claimed were fully taxpaid or tax-determined at
the distilled spirits tax rate. For claims filed after
October 1, 1985, these records should show the rate of tax
paid on those distilled spirits. In addition, supporting
product batch records should show whether the distilled
spirits used in the product were taxpaid at the old or new
tax rate.
Inquiries. Questions concerning this Industry Circular
should be addressed to the appropriate Regional Director
(Compliance) for the ATF region in which your business is
located.
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