RECORDS COVERING RECEIPT AND USE
OF TAX-FREE ALCOHOL
Users of tax-free alcohol
and others concerned:
Purpose. The purpose of this industry circular
is to inform you that Revenue Procedure 62-10 is
modified and superseded by a new ATF procedure which
will be published in a future quarterly issue of the
Alcohol, Tobacco and Firearms Bulletin. The same
information contained in Revenue Procedure 62-10 was
also published in Industry Circular No. 61-4. The
new procedure will read substantially as follows:
Section 1. PURPOSE.
The purpose of this ATF Procedure is to supply
tax-free alcohol permittees with instructions and
aids to assist them in the maintenance of records
with respect to tax-free alcohol and to simplify the
task of preparing annual reports on Form 1451
(5150.28), Report of Tax-Free Alcohol User. Most of
the instructions and aids contained in this procedure
originally appeared in Industry Circular No. 61-4,
dated January 26, 1961, and in Revenue Procedure
62-10, C. B. 1962-1, 437 (Internal Revenue). The
material originally contained in Industry Circular
No. 61-4 and Revenue Procedure 62-10 is republished
here in order to increase the availability of the
material and to extend the conversion table which
appeared in those publications so that the conversion
table includes some metric equivalencies.
Sec. 2. BACKGROUND.
The Distribution and Use of Tax-Free Alcohol
Regulations require that records be kept in suffi-
cient detail to enable any internal revenue officer
to verify all transactions and to ascertain that per-
mittees have complied with the law and regulations.
These regulations also require that the records be
such as to enable permittees to prepare the annual
report, Form 1451. Since figures reported on Form
1451 are to be in proof gallons, permittees are
required to identify, on their records, the proof of
all alcohol together with the actual quantities for
each transaction. Regulations also require that
permittees take an inventory at the close of each
month and keep such inventory as a part of their
records.
Sec. 3. BASIC RECORD.
.01 Alcohol Received. - The copy of the Form
1473, Shipment and Receipt Specially Denatured,
Tax-Free, or Recovered Spirits, which permittees
receive covering each shipment of tax-free alcohol
will serve as the basic record of alcohol received.
Permittees should make the proper notation on this
copy (and on the original which is forwarded to the
appropriate Regional Regulatory Administrator, ATF)
of any losses in transit. The quantity reported on
the Form 1473, minus any loss or deficiency in
transit, is the quantity which must be reported on
Form 1451 as "received."
.02 Use of Alcohol. - Each time alcohol is with-
drawn from the permittee's supply for any use, an
entry should be made on his records, showing the
quantity (liquid measure), the proof, and the purpose
of removal. Permittees need not convert each sepa-
rate quantity so removed to proof gallons unless so
desired. Instead, they may total the quantity of
alcohol of the same proof removed during the period
of one calendar month, and then convert the figure
representing the month's removals to total proof
gallons removed. The resulting total, or combined
total if there is alcohol of more than one proof,
will be shown in column (e) of Form 1451 for that
month.
.03 Monthly Inventory. - At the close of each
month, an inventory must be taken of all alcohol
remaining in stock. First, the permittee must deter-
mine the quantity remaining in each package or tank.
If all of the alcohol is of the same proof, he must
add these figures and convert the resulting figure to
proof gallons. Where there is alcohol of different
proofs in stock, the permittee must add the quantity
for each proof separately, convert the total quantity
for each proof to proof gallons and then total the
proof gallons thus obtained. This is the total quan-
tity, in proof gallons, on hand at the end of the
month.
.04 Losses or Gains.
1. After completing the above computations,
the permittee will now have records showing all alco-
hol received and used during the month and on hand at
the end of the month. (This latter, of course, also
becomes the quantity on hand at the beginning of the
following month to be reported in column (b) for that
month.) From these figures the permittee can deter-
mine any gains or losses during the month, as follows:
2. Add the quantity received during the
month to the quantity on hand at the beginning of the
month, and subtract therefrom the quantities used
during the month. If the resulting figure is less
than the quantity determined from the inventory as on
hand at the end of the month, the difference between
the two figures represents a gain (Example A). If it
is more than the quantity revealed by the inventory,
it represents a loss (Example B).
Example A: |
On hand March 1 1980............................195 pg
Received during month............................110 pg
Total.........................305 pg
Used during month..................................200 pg
Resulting figure.......................................105 pg
Quantity on hand, March 31
as shown by inventory............................106 pg
Gain during month......................................1 pg |
Example B: |
On hand April 1, 1980.............................106 pg
Received during month...........................110 pg
Total........................216 pg
Used during month.................................100 pg
Losses by casualty or theft........................2 pg*
Resulting figure......................................114 pg
Inventory, April 30, 1980.......................112 pg
Additional losses during month.................2 pg |
*The regulations require that permittees show in
their records all losses by theft or casualty or other
unusual losses and that entries covering these losses
be made in their records at the time of such losses
or when they are discovered. Therefore, these known
losses must be taken into account in order to deter-
mine any additional loss at the end of the month.
However, all losses must be totaled and the combined
figure (in the example--4 p.g.) entered in column (h)
of Form 1451.
.05 Recovered Alcohol or Alcohol Received from
the General Services Administration.
1. Permittees receiving alcohol from the
General Services Administration or recovering tax-
free alcohol must account for such alcohol separately
in their records and inventory and make separate
entries on Form 1451, appropriately identified. If
recovered alcohol is shipped to a distilled spirits
plant for restoration, the approximate quantity
thereof, in proof gallons, should be entered in column
(e), followed by an asterisk, and an explanation of
the entry should be shown elsewhere on the form,
identifying the distilled spirits plant to which
shipment was made.
2. While the above procedures do not cover
every transaction, they demonstrate the type of
records which can be kept to meet regulatory require-
ments. The records must be in sufficient detail to
show each transaction and to enable permittees to
prepare Form 1451. Also, a record of the inventory
taken at the close of each month, along with all
other records, must be maintained for a period of
three years from the date of the report on Form 1451
covering the transactions. Permittees should observe
the instructions on the back of Form 1451 when making
entries from their records to the form.
.06 Conversion Table.
1. Use of the table below may prove helpful
in converting volume measures to proof gallons for
alcohol of 190 or 200 degrees of proof.
Fluid Wine Proof Proof
ounces Volume measures gallons gallons gallons
190 proof 200 proof
2. In computing proof gallons to the
nearest tenth for entry to Form 1451, all fractional
parts of five-hundredths or more shall be increased
to the next tenth; for example, 4.275 proof gallons
will be reported as 4.3 proof gallons. Fractional
parts of less than five-hundredths shall be dropped;
for example, 4.126 proof gallons will be reported as
4.1 proof gallons.
Sec. 4. EFFECT ON OTHER DOCUMENTS.
Revenue Procedure 62-10, C.B. 1962-1, 437
(Internal Revenue) is superseded.
Sec. 5. INQUIRIES.
Inquiries concerning this circular should refer
to it by number and be addressed to the Assistant Director, Regulatory Enforcement, Bureau of Alcohol,
Tobacco and Firearms, 1200 Pennsylvania Avenue, NW.,
Washington, DC 20226.
Acting Director
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