Tax Cuts and Jobs Act of 2017
Craft Beverage Modernization and Tax Reform
Summary of Excise Tax Provisions | Public Guidance | General Tax Reform Questions and Answers |
Beer Tax Reform Questions and Answers | Wine Tax Reform Questions and Answers |
Distilled Spirits Tax Reform Questions and Answers | MNBP Tax Reform Questions and Answers
The Craft Beverage Modernization (CBMA) portion of the Tax Cuts and Jobs Act of 2017 (Public Law 115-97) made changes to the Internal Revenue Code of 1986 (IRC) related to the alcohol provisions that are administered by TTB. The changes applied to calendar years 2018 and 2019.
On December 20, 2019, the President signed into law the Further Consolidated Appropriations Act, 2020, which among other things, extends the provisions of the CBMA related to alcohol for one year, through December 31, 2020.
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- Please visit our Tax and Fee Rates page to see the tax rates for distilled spirits, wine, and beer removed or imported in calendar years 2018 – 2020.
Summary of Distilled Spirits, Wine, and Beer Excise Tax Provisions
The highlights of the provisions of the Act related to distilled spirits, wine, and beer excise tax are summarized below. This summary is not intended to establish any policies regarding these provisions, but merely to summarize them.
The provisions of the Act discussed below are effective only during calendar years 2018 and 2019.
- Reduced Beer Tax Rates
- General: In general, the Act provides for a tax rate of $16 per barrel on the first six million barrels of beer brewed by the brewer and removed during the calendar year or imported by the importer into the United States during the calendar year. The Act provides for a rate of $18 per barrel on the remaining barrels not subject to the $16 rate.
- Foreign Manufacturer Election: In the case of beer brewed or produced outside of the United States and imported, the Act provides for foreign brewers to assign the reduced rate described in the previous bullet to importers who elect to receive it.
- Small Domestic Brewers: In the case of brewers in the United States who produce no more than two million barrels of beer during the calendar year, the Act provides for a rate of $3.50 per barrel on the first 60,000 barrels removed during such calendar year which have been brewed or produced by such brewer.
- General: In general, the Act provides for a tax rate of $16 per barrel on the first six million barrels of beer brewed by the brewer and removed during the calendar year or imported by the importer into the United States during the calendar year. The Act provides for a rate of $18 per barrel on the remaining barrels not subject to the $16 rate.
- Transfer of Beer in Bond: The Act authorizes the transfer of beer in bond between brewers who are not owned by the same corporation or other entity.
- Wine Tax Credits
- General: The Act allows three different credits on wine produced by the producer and removed during the calendar year or imported by the importer into the United States during the calendar year. The credits available under section 5041(c)(1) and (2) of the IRC do not apply during calendar years 2018 and 2019. Under the Act, the credits are equal to $1 per wine gallon on the first 30,000 wine gallons of wine removed or imported, 90 cents on the next 100,000 wine gallons removed or imported, and 53.5 cents on the next 620,000 wine gallons removed or imported. The tax credits apply to all wine tax rates, except that the Act provides adjusted credits for the hard cider tax rate under section 5041(b)(6) of the IRC (6.2 cents, 5.6 cents, and 3.3 cents, respectively).
- Foreign Manufacturer Election: In the case of wine produced outside of the United States and imported, the Act provides for foreign wine producers to assign the tax credits described in the previous bullet to importers who elect to receive them.
- General: The Act allows three different credits on wine produced by the producer and removed during the calendar year or imported by the importer into the United States during the calendar year. The credits available under section 5041(c)(1) and (2) of the IRC do not apply during calendar years 2018 and 2019. Under the Act, the credits are equal to $1 per wine gallon on the first 30,000 wine gallons of wine removed or imported, 90 cents on the next 100,000 wine gallons removed or imported, and 53.5 cents on the next 620,000 wine gallons removed or imported. The tax credits apply to all wine tax rates, except that the Act provides adjusted credits for the hard cider tax rate under section 5041(b)(6) of the IRC (6.2 cents, 5.6 cents, and 3.3 cents, respectively).
- Adjustment of Alcohol Content for Certain Still Wines: The Act authorizes application of the wine tax rate of $1.07 per wine gallon under section 5041(b)(1) to still wines containing not more than 16% alcohol by volume.
- Mead and Low Alcohol by Volume Wine
- General: The Act provides that certain “meads” and “low alcohol by volume wines” are deemed still wines subject to the wine tax rate of $1.07 per wine gallon under section 5041(b)(1) of the IRC.
- Definition of Mead: For purposes of this provision, the term “mead” means a wine containing not more than 0.64 gram of carbon dioxide per hundred milliliters of wine, which is derived solely from honey and water, which contains no fruit product or fruit flavoring, and which contains less than 8.5% alcohol by volume.
- Definition of Low Alcohol by Volume Wine: For purposes of this provision, the term “low alcohol by volume wine” means a wine containing not more than 0.64 gram of carbon dioxide per hundred milliliters of wine, which is derived primarily from grapes or from grape juice concentrate and water, which contains no fruit product or fruit flavoring other than grape, and which contains less than 8.5% alcohol by volume.
- General: The Act provides that certain “meads” and “low alcohol by volume wines” are deemed still wines subject to the wine tax rate of $1.07 per wine gallon under section 5041(b)(1) of the IRC.
- Reduced Distilled Spirits Tax Rates
- General: The Act provides for reduced tax rates on distilled spirits distilled or processed and removed during the calendar year or imported by the importer into the United States during the calendar year. These rates are equal to $2.70 per proof gallon on the first 100,000 proof gallons removed or imported, and $13.34 per proof gallon on the next 22.13 million proof gallons removed or imported. The tax rate for distilled spirits not subject to the reduced rates is $13.50 per proof gallon.
- Foreign Manufacturer Election: In the case of distilled spirits produced outside the United States and imported, the Act provides for foreign distilled spirits manufacturers to assign the reduced tax rates to importers who elect to receive them.
- Amendment of Section 7652(f)(2): The Act amends section 7652(f)(2) of the IRC to provide that the reduced rates of tax for distilled spirits are not taken into account when determining the amounts covered into the treasuries of Puerto Rico and the U.S. Virgin Islands.
- General: The Act provides for reduced tax rates on distilled spirits distilled or processed and removed during the calendar year or imported by the importer into the United States during the calendar year. These rates are equal to $2.70 per proof gallon on the first 100,000 proof gallons removed or imported, and $13.34 per proof gallon on the next 22.13 million proof gallons removed or imported. The tax rate for distilled spirits not subject to the reduced rates is $13.50 per proof gallon.
- Transfer in Bond of Non-Bulk Distilled Spirits: The Act authorizes the transfer in bond of distilled spirits between distilled spirits plants irrespective of whether the distilled spirits are transferred in bulk or non-bulk containers.
- Controlled Group: The Act provides that the quantities to which the credits and reduced rates apply shall be applied to the controlled group. The Act also provides that an importer electing to receive an assignment of a credit or reduced tax rate from a foreign manufacturer shall be deemed a member of the controlled group of the foreign manufacturer.
- Single Taxpayer: The Act provides that two or more entities (whether or not under common control) that produce products marketed under a similar brand, license, franchise, or other arrangement shall be treated as a single taxpayer for purposes of the credits and reduced rates.
Public Guidance
TTB issues formal public guidance in the form of rulings, procedures, delegation orders, industry circulars, and other publications issued to help the regulated industries understand TTB regulations, policies, and other requirements. See the related guidance below.
General Tax Reform Questions and Answers
Taxpayers continue to file taxes using TTB Form 5000.24 or TTB Form 5000.24sm, either on paper or through pay.gov. No new tax return forms are required to pay taxes under the new tax provisions.
Last reviewed/updated 01/12/2018
The reduced tax rates or tax credits became effective January 1, 2018, and they apply to products removed in calendar years 2018 or 2019 regardless of when the products were produced. (See the Act for the specific quantities of products eligible for the reduced tax rates or tax credits and any other limitations.)
Last reviewed/updated 01/12/2018
If you pay your taxes to TTB using the wrong tax rate and such payment results in an overpayment, you may seek a refund or credit using existing TTB procedures.
Last reviewed/updated 01/12/2018
U.S. Customs and Border Protection (CBP) is responsible for the collection of tax on imported alcohol products. Consequently, CBP has issued guidance on implementation of the Craft Beverage Modernization and Tax Reform Act of 2017 (as contained in Public Law 115-97) with respect to qualifying imports of beer, wine, and distilled spirits.
Last reviewed/updated 06/27/2018
To be eligible for quarterly or annual filing, an existing proprietor must reasonably expect that it will not exceed the applicable liability limits for excise taxes imposed on distilled spirits, wines and beer for the calendar year, and must not have exceeded those liability limits in the preceding calendar year. The liability in the preceding calendar year is the taxpayer's actual liability under the rates applicable during that time. For example, if a brewer was liable in the preceding calendar year for more than $50,000 in excise taxes imposed on beer, based on the tax rates applicable during that year, then the brewer is required by law to file returns semimonthly in the current calendar year. See 26 U.S.C. 5061(d)(4).
New proprietors commencing operations in 2018 may file quarterly or annually in 2018 if they reasonably expect, using the temporarily lower effective tax rates, that they will not exceed the applicable liability limits for quarterly or annual filing.
For more information regarding your eligibility to file quarterly or annually or whether you are required to obtain a bond, you may contact TTB's National Revenue Center. Click here for contact information.
Last reviewed/updated 02/05/2018
Importers and producers of wine, beer, and distilled spirits may be eligible for reduced tax rates or tax credits on the products they import or produce, respectively, depending on a number of variables. The guidance below contains information about your ability to take advantage of the reduced tax rates or new tax credits. Eligibility for the reduced tax rates or new tax credits may be limited by application of the relevant single taxpayer or controlled group rules.
Imported products. Domestic wineries, breweries, and distilled spirits plants that receive imported beer, wine, or distilled spirits withdrawn without payment of tax from customs custody may only take advantage of reduced tax rates or credits if they perform a production activity on the beer, wine, or distilled spirits (or process spirits, in the case of a distilled spirits processor) and, as a result, would be considered the producer (or the distiller or processor for distilled spirits).
Domestic Beer. A brewer who receives beer in bond, but who does not brew or produce the beer, is not eligible for the reduced tax rates on that beer when the brewer removes it. Beer eligible for the $16 reduced tax rates must be brewed by the brewer and removed by that brewer. The brewer must remove the beer during the time the statute is applicable. See 26 U.S.C. 5051(a)(1)(C)(i). Domestically produced beer eligible for the $3.50 reduced rate must be brewed or produced by the brewer and removed by that brewer or producer. The brewer or producer must remove the beer during the time the statute is applicable. See 26 U.S.C. 5051(a)(2)(A).
Domestic Wine. A wine premises that receives wine in bond, but does not produce the wine, is not eligible for the new tax credits on that wine when the wine premises removes it. Wine eligible for the new tax credits must be produced by the producer and removed by that producer. The producer must remove the wine during the time the statute is applicable. The transfer provisions under 26 U.S.C. 5041(c)(6) are dependent upon eligibility for the small domestic producer credit under 26 U.S.C. 5041(c)(1). Because the applicability of that credit is suspended, producers may not take advantage of the transfer provisions under section 5041(c)(6). For more detailed information about the impact of the Tax Cuts and Jobs Act of 2017 on non-producing wine premises (such as bonded wine cellars), please see the FAQ TR-W7.
Domestic Distilled Spirits. A distilled spirits plant that receives distilled spirits in bond, but that does not distill or process those spirits is not eligible for the reduced tax rates on those spirits. Distilled spirits eligible for the reduced tax rates must be distilled or processed by the distilled spirits plant and removed on determination of tax by that distiller or processor. The distiller or processor must remove the distilled spirits during the time the statute is applicable. See 26 U.S.C. 5001(c)(1).
Last reviewed/updated 03/02/2018
For beer and distilled spirits, the Act provides for reduced rates of tax for certain products removed during calendar years 2018 and 2019. Those rates should be used to calculate the tax due. The total tax due for distilled spirits should be shown on line 9 and the total tax due for beer should be shown on line 11.
For wine, the Act provides tax credits for certain products removed during the calendar years 2018 and 2019. The calculated tax due prior to accounting for the credit should be shown on line 10 and the credit should be calculated in Schedule B, with the resulting decreasing adjustment incorporated into line 20.
Last reviewed/updated 03/13/2018
No, you should not file a claim with TTB for refund of tax in such cases. U.S. Customs and Border Protection (CBP) recently published in the Federal Register (83 FR 40678) an Interim Rule that amended CBP regulations at 19 CFR 24.36(d) that describe the types of cases in which CBP is authorized to make refunds of alcohol or tobacco taxes paid upon importation.
Specifically, the Interim Rule added a provision authorizing CBP to refund alcohol excise taxes imposed under the Internal Revenue Code that are claimed pursuant to an assignment of a reduced tax rate or tax credit to an importer by a foreign producer under the CBMTRA. As a result, in order to file a claim for refund of tax in cases in which the full tax is paid on an entry and a foreign producer assignment was obtained, the importer would submit the claim to CBP following CBP’s procedure, and would not submit the claim to TTB. See CSMS #18-000403 for guidance from CBP regarding this type of refund claim.
Further, under the CBP regulations, in any instance in which a refund of an alcohol tax is not covered by § 24.36(d), the claim is still submitted to CBP, and then subsequently submitted to TTB on TTB F 5620.8, along with information from CBP regarding the entry, following the procedure set forth in the CBP regulations at § 24.36(e).
The tax rate of $1.07 per wine gallon applies to still wines having not more than 16 percent alcohol by volume. A claim is not required to obtain the lower tax rate for such wines, unless the tax was paid at the higher rate. With regard to imported wine, this lower tax rate is not dependent upon a foreign producer assignment, so it is not required pursuant to a foreign producer allocation. In the context of the CBMTRA, only claims for refunds that are claimed pursuant to an assignment of a reduced rate or tax credit by foreign producer assignment would be processed and refunded by CBP.
However, if an importer pays the $1.57 rate on still wines having over 14% but not over 16% alcohol by volume rather than the $1.07 rate and claims a refund, that refund claim would be submitted under U.S. Customs and Border Protection (CBP) regulations at 19 CFR 24.36(e) – that is, after it is processed by CBP, it would ultimately be submitted to TTB on TTB F 5620.8.
For claims that must be submitted to TTB (see FAQ TR-G9), a customs broker may file the claim with TTB if the importer has authorized the customs broker to file claims on behalf of the importer. The importer may authorize the customs broker to execute these claims using TTB F 5000.8 (Power of Attorney).
If a domestic producer of beer is in a controlled group with a foreign producer of beer whose beer is imported into the United States, the beer produced and removed by all domestic members of the controlled group and the beer produced by the foreign members of the controlled group and imported into the United States is treated as if it were the production and removal of one producer for the purpose of applying the reduced rates. If a domestic producer and a foreign producer are part of a controlled group, the combined removals of their beer into U.S. commerce would be subject to one quantitative limit.
No, unless the imported beer is made by a foreign producer whose quantitative limits otherwise apply to the domestic producer.
If a domestic importer and a domestic producer are part of a controlled group, the deeming rule for importers does not make the domestic producer part of the foreign producer’s controlled group. As stated in TR-G11, if a domestic producer and a foreign producer are part of a controlled group, the combined removals of their beer into U.S. commerce would be subject to one quantitative limit. In a scenario in which a domestic producer and an importer are members of the same controlled group, the quantities of beer produced by the domestic producer (and all of the domestic producers that are in the controlled group) would be combined with any beer produced by a foreign producing member of that controlled group and imported and released into U.S. commerce, regardless of the relationship between the domestic producer and the importer. If, however, a domestic producer and an importer are members of the same controlled group, and the importer is importing beer under an allocation from a foreign producer that is not part of the controlled group, the beer produced and removed by the domestic producer and the beer imported by the importer would not be combined for purposes of applying the reduced tax rates. In this instance, the domestic producer would take the reduced rates that apply to the quantities produced and removed domestically, and the importer would take the reduced rates that apply to the quantities imported under its allocation from the foreign producer that is not a part of the controlled group.
Beer Tax Reform Questions and Answers
For purposes of taking the reduced rate of tax allowed by the Act, beer is considered to have been “produced” if it is lawfully brewed or produced at a qualified brewery premises, including beer brewed by fermentation or produced by the addition of water or other liquids during any stage of production. The entire volume of beer to which water or other liquids had been added will be considered “produced” for purposes of applying the reduced tax rates. TTB expects these production activities to be undertaken in good faith in the ordinary course of production, and not solely for the purpose of obtaining a tax credit. Blending or combining two beers does not count as production for purposes of the reduced tax rate. Beer received in bond in containers and subsequently removed subject to tax, without any production activity occurring, is not eligible for a reduced tax rate. Beer received in bond and merely bottled is also not eligible for a reduced tax rate. The eligibility for the reduced rate is also subject to controlled group and single taxpayer rules in section 5051(a)(5), which may further limit the beer subject to the reduced rate upon removal by the brewer.
Last reviewed/updated 03/02/2018
Yes, an owner of multiple breweries that brew or produce beer must combine production and taxpaid removals of that beer for all its breweries when determining each brewery’s eligibility for the reduced rates because the owner, rather than each brewery, is considered the brewer or producer of the beer for purposes of the reduced rates in 26 U.S.C. 5051(a)(1) and (a)(2). For example, if a company owns two breweries that each produce and remove taxpaid 60,000 barrels of beer during the calendar year, the company’s total production and removals of 120,000 barrels will be applied to each brewery for purposes of determining each brewery’s eligibility for the reduced rates. The company therefore would not be eligible for the reduced rate of $3.50 per barrel on the full 60,000 barrels of beer removed taxpaid from each brewery. Rather, the company would be eligible to take the reduced rate of $3.50 per barrel on a total of 60,000 barrels of beer removed taxpaid from the breweries.
The answer is the same if instead the breweries are owned by two different entities that are members of the same controlled group. Under the Act, the quantities of beer eligible for the reduced rates shall be applied to the controlled group. See section 5051(a)(5)(A).
See TR-B3 for guidance about apportioning quantities of beer eligible for the reduced rates among breweries who are required to combine taxpaid removal totals.
Last reviewed/updated 04/25/2019
A single owner may apportion the quantity of beer eligible for the reduced rates among the breweries it owns, and a controlled group may apportion such quantities among its members. For example, if a company owns two breweries and is eligible to take the reduced rate of $3.50 on a total of 60,000 barrels of beer removed taxpaid from the breweries as specified in the Act, the company may apportion 30,000 barrels to each brewery for removal at the $3.50 rate. Each brewery should keep records indicating how the quantities will be apportioned among the breweries and make those records available to TTB officers upon request. Breweries who apportion the reduced rate of tax must also notify TTB about the apportionment, either by providing the annual notice described in 27 CFR 25.167 or by incorporating the information into the Brewer’s Notice as outlined in TTB Industry Circular 2002-1. However, the apportioned quantity would apply to the first eligible barrels removed during the calendar year from each applicable brewery. The apportionment may not be, for example, for a specific brand, regardless of when the beer is removed.
Last reviewed/updated 04/25/2019
Under these circumstances, the beer is not ineligible for the reduced rates solely because it is removed taxpaid from the brewery where no further production occurred. The owner of the breweries is considered the brewer or producer for purposes of the reduced rates in 26 U.S.C. 5051(a)(1) and (a)(2), so the owner may apply the reduced rates to beer removed from the breweries that it owns. The owner must combine its production and taxpaid removal totals for its breweries when determining its eligibility for the reduced rates.
The answer is not different if instead the breweries are owned by different entities that are members of the same controlled group. Under the Act, the quantities of beer eligible for the reduced rates shall be applied to the controlled group. See section 5051(a)(5)(A). A member of a controlled group may therefore apply the appropriate reduced rate to beer removed from its brewery in instances where the beer was produced at a brewery owned by another member of the controlled group. Members of the controlled group must combine the production and taxpaid removal totals for their breweries when determining their eligibility for the reduced rates.
Last reviewed/updated 04/25/2019
Wine Tax Reform Questions and Answers
The Act allows a credit against the excise taxes imposed on the first 750,000 wine gallons of wine produced by the producer and removed during the calendar year for consumption or sale. The credit applies to the first 750,000 wine gallons of wine removed during the calendar year, regardless of the class or classes of wine that make up the 750,000 gallons. As an example, if a winery produces wine that falls within the tax class for hard cider and also produces wine that falls within the tax class for still wine containing not more than 16 percent alcohol by volume and, in a calendar year first removes, subject to tax, 500,000 gallons of the wine classified as hard cider, and then removes, subject to tax, 400,000 gallons of the still wine, a credit is allowed on the tax applicable to the first 750,000 wine gallons of wine removed, which in this case would be the tax on the 500,000 gallons of wine classified as hard cider and the tax for the 250,000 gallons of the wine classified as still wine containing not more than 16 percent alcohol by volume. In this example, no credit would apply to the remaining 150,000 gallons of still wine removed.
See the Act for information on how to calculate the tax credit on the first 750,000 wine gallons removed in a calendar year. See 27 CFR part 24, subpart P, and TTB IC 2017-2 for information pertaining to eligibility for the hard cider tax class.
Last reviewed/updated 01/12/2018
The Act allows a credit against the excise taxes imposed by the IRC on the first 750,000 wine gallons of wine produced by the producer and removed during the calendar year for consumption or sale. The credit applies to the first 750,000 wine gallons of such wine, regardless of the class or classes of wine that make up the 750,000 gallons. For more information see question TR-W1 above.
Last reviewed/updated 01/12/2018
These tolerances remain unchanged. The recent tax law revisions, which amend a number of alcohol excise tax provisions in the Internal Revenue Code (IRC), do not affect TTB’s part 4 regulations, which are based on the Federal Alcohol Administration Act (not the IRC). TTB regulations at 27 CFR 4.36(b)(1) are set forth under the authority of the FAA Act and provide for an alcohol tolerance of 1 percent alcohol by volume for wines containing more than 14 percent alcohol by volume, and 1.5 percent alcohol by volume for wines containing 14 percent or less.
Last reviewed/updated 01/12/2018
Based on the amended statutory language, you must claim the credit applicable to the first wine gallons of wine removed. Under the IRC, as amended by the Act, there is either a $1.00 or a 6.2-cent credit on the "first 30,000 wine gallons of wine . . . which are produced by the producer and removed during the calendar year." The $1.00 credit applies unless the wine is taxed at the wine tax rate applicable to hard cider. If the wine tax rate applicable to hard cider applies, then the credit is 6.2 cents. For example, if you remove 40,000 wine gallons of wine during the return period, you must determine which types of wine were among the first 30,000 wine gallons removed. Within the first 30,000 wine gallons removed, the applicable credit is 6.2 cents per wine gallon if the wine is hard cider and $1.00 for all other wine. The taxpaid removal from bond record required by 27 CFR 24.310 should assist in making this determination.
Last reviewed/updated 02/01/2018
TTB has issued new versions of TTB Form 5120.17, Report of Wine Premises Operations, which provides for reporting wine gallons at the new alcohol content cutoff of 16 percent alcohol by volume. These versions carry a "temporary" designation, since the changes to the still wine tax class currently apply only to wine removed during calendar years 2018 and 2019. The temporary versions are now available on TTB.gov and in Pay.gov.
TTB F 5120.17 Temp - Report of Wine Premises Operations
TTB F 5120.17sm Temp - Report of Wine Premises Operations Smart Form
Use the old version of the form (available here) if you need to file an original or amended report of winery activity that occurred in calendar years 2017 or earlier.
Last reviewed/updated 02/01/2018
No, a table wine may not contain more than 14 percent alcohol by volume. TTB's part 4 wine labeling regulations concerning the standards of identity for table wines, which are based on the Federal Alcohol Administration Act, are not affected by recent revisions to the alcohol excise tax provisions in the Internal Revenue Code. The term "table wine" is defined in TTB's part 4 regulations as a wine having an alcohol content not in excess of 14 percent by volume. See 27 CFR 4.21(a)(2), 4.21(d)(2), 4.21(e)(3), and 4.21(f)(2).
Last reviewed/updated 02/05/2018
The new law that went into effect January 1, 2018, set forth new tax credits for wine (referred to as the “Special Rule”) and suspended, through the end of calendar year 2019, the previous tax credit for wine. The statutory provisions that allowed for a transfer of tax credits are also suspended, as they apply specifically only to the tax credit that has now been suspended by the new law. There is no provision in the new law that provides for a transfer of the new tax credits that apply to wine removed in 2018 and 2019. (See the addition of the “Special Rule” at 26 U.S.C. 5041(c)(8), stating that the tax credit provisions of 26 U.S.C 5041(c)(1) and (c)(2) do not apply after December 31, 2017 and before January 1, 2020, and the provisions of section 5041(c)(6) providing for the transfer of the credit by any person eligible for the credit under section 5041(c)(1).)
As a result, for calendar years 2018 and 2019, any wine that is removed from a wine premises that did not produce the wine is not eligible for the new tax credits. See FAQ TR-G6 for additional guidance on credits and reduced rates for products transferred in bond. See FAQ TR-W8 for what activities are considered “production” for purposes of the new tax credit.
While the Special Rule is in effect (that is, calendar years 2018 and 2019), a winery can only apply the new tax credits to wine produced by the winery. During this time, if wine is being held at premises that did not produce the wine, the producing wine premises can bring the wine back to its premises and remove the wine taxpaid from its premises in order to apply the new tax credits to the wine. Otherwise, a BWC or other wine premises that removes wine that it did not produce must tax pay the wine at the applicable tax rate, without application of credits that would otherwise be available to the producing wine premises under the Special Rule.
The Act was signed into law on December 22, 2017, and its provisions became effective within 10 days, on January 1, 2018. TTB recognizes that the exceptional circumstances of the short period between passage of the new law and its effective date limited the ability of businesses to adjust to the provisions in the new law, and that the transfer of wine from a BWC back to the producing winery may be expensive and burdensome, particularly for small wine producers. Based on these unique circumstances, TTB is authorizing an alternate procedure, applicable for a limited period of time, by which the wine producer may tax determine and tax pay the wine without physically returning the wine to its premises. See Industry Circular 2018-1A.
Last reviewed/updated 03/02/2018
For the purpose of taking the credit allowed by the Act, the activities considered to be “production” that are set forth at 27 CFR 24.278(e) will apply. These are the activities that were used prior to the Act to determine whether a person’s production of wine was within the production limit for the currently-suspended small domestic producer credit at 26 U.S.C. 5041(c)(1). In addition to the entire volume of wine produced by fermentation, a winery may count as production wine that has undergone the following activities, if undertaken in good faith in the ordinary course of production, and not solely for the purpose of obtaining a tax credit:
- Sweetening – Sweetening material is added after fermentation for the purpose of sweetening the wine.
- Addition of wine spirits – Certain brandy or wine spirits authorized to be used in wine production are added.
- Amelioration – Water, sugar, or a combination of both is added to wine to adjust the wine’s acid content.
- Production of formula wine – Formula wine includes wine that may contain added flavoring or wine treating materials.
The entire volume of wine that has undergone one of these production activities would be considered “produced” for purposes of applying the new tax credit. Blending that does not involve one of the operations listed above is not considered production. The eligibility for the new tax credit is also subject to controlled group and single taxpayer rules similar to those in section 5051(a)(5), which may further limit the wine eligible for the new tax credit. See 26 U.S.C. 5041(b)(4).
In addition, the production of sparkling wine and carbonated wine are also considered "production" for the purpose of taking the credit allowed by the Act. Please see FAQ TR-W11 below.
Last reviewed/updated 05/21/2018
As discussed in TR-W8, a winery may claim the new tax credits only on wine it produces (either by fermentation, sweetening, addition of wine spirits, amelioration, or production of formula wine) and removes from its own bonded premises for consumption or sale. If a winery bottles and removes a wine that is a blend of wine of its own production with wine produced by another winery, it may claim the new tax credit only on the portion of wine it produced and not on the portion produced by the other winery. For example, if you create a blended wine in which 85% of the wine was produced by you, with the remaining 15% comprising wine that you did not produce, you may claim the credit only on the 85% of the blend which you produced. The 15% which you did not produce must be taxpaid at the full rate. You should record the volume and source of the wine used in the blend in the bulk still wine record (see 27 CFR 24.301) to ensure you pay the correct amount of tax.
Last reviewed/updated 03/13/2018
Yes, a wine producer that has untaxpaid wine stored at a bonded winery may also take advantage of the Alternate Procedure at Industry Circular 2018-1A. If such a bonded winery does take advantage of the Alternate Procedure, the bonded winery at which the wine is stored must follow the instructions for the Bonded Wine Cellar set forth in the Industry Circular.
Last reviewed/updated 05/21/2018
Yes. TTB considers both sparkling wine and artificially carbonated wines created by a winery through secondary fermentation in a closed container or through injection of carbon dioxide to be "produced" for the purposes of applying the new tax credit. Prior to the Act, TTB included the production of champagne and other sparkling wines when determining whether a person's production of wine was within the production limit for the currently-suspended small domestic producer credit at 26 U.S.C. 5041(c)(1), even though sparkling wine was not eligible for that credit. See 27 CFR 24.278(e). Considering all methods of producing effervescent wine to be "production" activity is consistent with that regulatory interpretation. Accordingly, a winery that creates a sparkling wine or carbonated wine from a purchased still wine may claim the credit on the sparkling or carbonated wine when it removes the wine taxpaid from its bonded premises.
Last reviewed/updated 05/21/2018
No, only wine that you both produce and remove from your premises for consumption or sale is counted toward the gallonage limits to which the tax credits apply. Therefore, you do not count the 10,000 gallons removed by the BWC as part of your first 30,000 gallons of wine eligible for the $1 credit.
Last reviewed/updated 05/21/2018
No, you do not count any wine that you did not produce toward the gallonage limits to which the tax credits apply. The Act states that the $1 credit applies to the first 30,000 gallons of wine which are "produced by the producer and removed during the calendar year[,]" so those 30,000 gallons do not include wine you did not produce. You may claim the $1 credit for the first 30,000 gallons you produced and removed taxpaid in 2018, even if you already removed 30,000 gallons of purchased wine that year that you did not produce.
Last reviewed/updated 05/21/2018
No, the Act did not change how many Federal excise tax returns you must file, so you must still file a separate excise tax return for each bonded winery. However, you must combine the production and taxpaid removal totals for your three bonded wineries for the purpose of determining your eligibility for the tax credits in 26 U.S.C. 5041(c)(8).
Last reviewed/updated 05/21/2018
Yes, the wine that was transferred in bond for bottling and then transferred in bond back to you is eligible for the tax credits because you both produced it and will remove it from your premises for consumption or sale. This assumes the wine is among the first 750,000 gallons of your wine that you removed for consumption or sale from your premises during either 2018 or 2019, since this is the maximum number of gallons per year to which the credits apply in either 2018 or 2019.
Last reviewed/updated 05/21/2018
Neither Industry Circular 2018-1A nor Industry Circular 2018-1 (which was superseded by Industry Circular 2018-1A) can be applied to wine removed subject to tax from a BWC or Bonded Winery before the alternate procedure was authorized, that is, before March 2, 2018. The Industry Circulars establish an alternate procedure for transferring wine that is under bond and has not yet been taxpaid. The alternate procedure does not apply to wine that had, before issuance of the alternate procedure, already been removed subject to tax. We do not believe TTB has the authority to approve an alternate procedure that would allow for a “constructive” (through documentation only) transfer of wine between bonded facilities after the wine has, in fact, already been removed subject to tax, nor do we have the authority to approve an alternate procedure that would allow for a fictional return through documentation, rather than an actual physical return, of taxpaid product to bond after it had been removed for consumption or sale.
If you would like to voluntarily disclose an underpayment of tax, see TTB Industry Circular 2004-5, Voluntary Disclosure Program.
Last reviewed/updated 11/13/2018
Yes, an owner of multiple wineries must combine taxpaid removals for all the wineries when determining each winery’s eligibility for the tax credits because the owner, rather than each winery, is considered the producer of the wine for purposes of the tax credits in 26 U.S.C. 5041(c)(8). For example, if a company owns two wineries that each produce and remove taxpaid 30,000 wine gallons of wine during the calendar year, the company’s total removals of 60,000 gallons will be applied to each winery for purposes of determining each winery’s eligibility for the tax credits. The company therefore would not be eligible for the $1.00 tax credit (which applies to the first 30,000 gallons of wine produced by the producer and removed) on the full 60,000 wine gallons removed taxpaid from both wineries. Rather, the company would be eligible to take the $1.00 tax credit on a total of 30,000 gallons of wine removed taxpaid from the wineries.
The answer is the same if instead the wineries are owned by two different entities that are members of the same controlled group. Under the Act, the quantity of wine eligible for the tax credits shall be applied to the controlled group. See section 5041(c)(4).
See TR-W18 for guidance about apportioning quantities of wine eligible for the tax credits among wineries that are required to combine taxpaid removal totals.
See TR-W1 for guidance on application of tax credits to hard cider.
Last reviewed/updated 04/25/2019
A single owner may apportion the quantity of wine eligible for the tax credits among the wineries it owns, and a controlled group may apportion such quantities among its members. For example, if a company owns two wineries and is eligible to take the tax credit of $1.00 on a total of 30,000 wine gallons of wine removed from the wineries as specified in the Act, the company may apportion 15,000 wine gallons to each winery for removal subject to the $1.00 credit. Each winery should keep records indicating how the quantities will be apportioned among the wineries and make those records available to TTB officers upon request. However, the apportioned quantity would apply to the first eligible wine gallons removed from each applicable winery. The apportionment may not be, for example, for a specific brand, regardless of when the wine is removed.
See TR-W1 for guidance on application of tax credits to hard cider.
Last reviewed/updated 04/25/2019
Under these circumstances, the wine is not ineligible for the tax credits solely because it is removed from the winery that did not produce the wine. The owner of the wineries is considered the producer of the wine for purposes of the tax credits in 26 U.S.C. 5041(c)(8), so the owner may apply the tax credits to wine removed from either winery that it owns. The owner must combine its taxpaid removal totals for both its wineries when determining its eligibility for the tax credits.
The answer is not different if instead the two wineries are owned by different entities that are members of the same controlled group. Under the Act, the quantities of wine eligible for the tax credits shall be applied to the controlled group. See section 5041(c)(4). A member of the controlled group may therefore apply the tax credits to wine removed from its winery in instances where the wine was produced at a winery of another member of the controlled group. Members of a controlled group must combine the taxpaid removal totals for their wineries when determining their eligibility for the tax credits.
Last reviewed/updated 04/25/2019
Distilled Spirits Tax Reform Questions and Answers
No, if you have an approved TTB Form 5100.16, you do not have to file an additional application to receive transfers of bottled distilled spirits in bond. Your approved TTB Form 5100.16 specifies a limitation on the number of proof gallons transferred, but does not distinguish between bulk and non-bulk distilled spirits.
Last reviewed/updated 01/12/2018
An industry member cannot elect when to take the credits allowable under section 5010, and the reduced rates of tax on distilled spirits may affect the credits allowable under section 5010. The IRC provides for certain credits against the tax imposed on distilled spirits containing wine and flavors. The credits are determined at the same time the tax is determined on the distilled spirits containing the wine or flavors, and the credits are allowable at the time the tax is payable as if the credit constituted a reduction in the rate of tax. See 26 U.S.C. 5010(a), (b)(1)(A), and (b)(1)(B).
Under section 5010(b)(1)(A), taxes against which the credits are allowable are the taxes due on the distilled spirits product containing the wine or flavors that is removed from the bonded premises of a distilled spirits plant (DSP), imported into the United States, or otherwise brought into the United States. Therefore, the credits associated with the distilled spirits product containing the wine or flavors are allowable only against taxes due for the distilled spirits product containing that wine or those flavors. In addition, by equating allowance of the credits with a reduction in the rate of tax, section 5010(b)(1)(B) provides that credits associated with that distilled spirits product are allowable only to the extent they do not exceed the taxes due for that product. For example, if a DSP proprietor removes a distilled spirits product that is subject to a tax rate of $2.70 per proof gallon under 26 U.S.C. 5001(c)(1)(A) and the product contains wine and flavors for which the total credits allowable under section 5010 are $3.00 per proof gallon, the total allowable credits for that product would be limited to $2.70 per proof gallon and the DSP proprietor would be required to take the credits at the time the taxes are paid for the product.
Last reviewed/updated 02/01/2018
You may receive transfers in bond of non-bulk distilled spirits during calendar years 2018 and 2019 if you comply with applicable requirements pertaining to such transfers. Below is a non-exhaustive list of some requirements and other information you should be aware of if you are interested in receiving transfers in bond of non-bulk distilled spirits:
- You must receive approval from TTB using TTB Form 5100.16 for each DSP from which you will receive such transfers. When filling out Box 6a of the form, you should use a tax rate of $13.50 for calculating the quantity of distilled spirits authorized to be transferred, as required by the form.
- DSPs who transfer distilled spirits (consignors) and DSPs who receive such transfers (consignees) must keep records required by the regulations, including the transfer records required by 27 CFR 19.620 and 19.621. The transfer records must contain all of the information required by these regulations, including the serial numbers of cases transferred and, if applicable, information about calculating the credits for the use of eligible wines and eligible flavors. Additionally, the consignor should send, and the consignee should keep on file, any applicable documentation to substantiate label claims.
- When receiving bottled and other non-bulk distilled spirits as transfers in bond, DSPs must generally enter the distilled spirits into the processing account. If the distilled spirits will be dumped for redistillation, the distilled spirits may be entered into the production account.
- The bottler must apply for the Certificate of Label Approval (COLA) for the distilled spirits and should provide a copy of the COLA to the recipient of the bottled spirits transferred in bond. If the labels contain all information required under the regulations, no additional coding or other marking is required to be added to labels on bottles transferred in bond.
Last reviewed/updated 02/01/2018
Yes. However, as discussed in FAQ TR-D2, the credits associated with the product containing the wine or flavors are allowable only to the extent they do not exceed the taxes due for that product.
Last reviewed/updated 03/23/2018
Depending on the circumstances, the effective tax rate for the product is $13.16, $13.00, or $2.36.
Section 5001 of the IRC (26 U.S.C. 5001) provides for tax rates of $13.50, $13.34, and $2.70 per proof gallon of distilled spirits depending on the circumstances. Under section 5010(a)(2), there is allowed on each proof gallon of flavors content of distilled spirits a credit against the tax imposed by section 5001 equal to $13.50. Under section 5010(c)(2)(B)(iii), the term "flavors content" does not include alcohol derived from flavors to the extent such alcohol exceeds 2.5 percent of the finished product on a proof gallon basis.
Under section 5010, the flavors content credit for a distilled spirits product containing 2.5 percent eligible flavor on a proof gallon basis is equal to $0.34 per proof gallon, which is equal to 2.5 percent of $13.50 per proof gallon. Subtracting this credit rate from the tax rates of $13.50, $13.34, and $2.70 per proof gallon yields effective tax rates of $13.16, $13.00, and $2.36, respectively.
Last reviewed/updated 03/23/2018
No. The wine content credit under section 5010(a)(1) is based on the rate of tax which would be imposed on the wine under 26 U.S.C. 5041(b) but for its removal to the bonded premises of a DSP. Since this wine content credit is based on the rate of tax which would be imposed on the wine under section 5041(b), the new wine tax credits under section 5041(c)(8) are not taken into account when determining the wine content credit for distilled spirits under section 5010(a)(1).
Last reviewed/updated 03/23/2018
Yes, an owner of multiple DSPs that distill or process spirits must combine taxpaid removals of those spirits for all the DSPs when determining each DSP’s eligibility for the reduced rates because the owner, rather than each DSP, is considered the distiller or processor of the spirits for purposes of the reduced rates in 26 U.S.C. 5001(c)(1). For example, if a company owns two DSPs that each distill and remove taxpaid 100,000 proof gallons of spirits during the calendar year, the company’s total removals of 200,000 proof gallons will be applied to each DSP for purposes of determining each DSP’s eligibility for the reduced rates. The company therefore would not be eligible for the reduced rate of $2.70 per proof gallon on the full 100,000 proof gallons of spirits removed taxpaid from each DSP. Rather, the company would be eligible to take the reduced rate of $2.70 on a total of 100,000 proof gallons of spirits removed taxpaid from the DSPs.
The answer is the same if instead the DSPs are owned by two different entities that are members of the same controlled group. Under the Act, the quantities of spirits eligible for the reduced rates shall be applied to the controlled group. See section 5001(c)(2)(A).
See TR-D8 for guidance about apportioning quantities of distilled spirits eligible for the reduced rates among DSPs that are required to combine taxpaid removal totals.
Last reviewed/updated 04/25/2019
A single owner may apportion the quantity of distilled spirits eligible for the reduced rates among the DSPs it owns, and a controlled group may apportion such quantities among its members. For example, if a company owns two DSPs and is eligible to take the reduced rate of $2.70 on a total of 100,000 proof gallons of spirits removed from the DSPs as specified in the Act, the company may apportion 50,000 proof gallons to each DSP for removal at the $2.70 rate. Each DSP should keep records indicating how the quantities will be apportioned among the DSPs and make those records available to TTB officers upon request. However, the apportioned quantity would apply to the first eligible spirits removed from each applicable DSP. The apportionment may not be, for example, for a specific brand, regardless of when the spirits are removed.
Last reviewed/updated 04/25/2019
Under these circumstances, the spirits are not ineligible for the reduced rates solely because they are removed from the DSP that did not distill or process the spirits. The owner of the DSPs is considered the distiller or processor of the spirits for purposes of the reduced rates in 26 U.S.C. 5001(c)(1), so the owner may apply the reduced rates to spirits removed from the DSPs that it owns. The owner must combine its taxpaid removal totals for its DSPs when determining its eligibility for the reduced rates.
The answer is not different if instead the DSPs are owned by different entities that are members of the same controlled group. Under the Act, the quantities of spirits eligible for the reduced rates shall be applied to the controlled group. See section 5001(c)(2)(A). A member of a controlled group may therefore apply the reduced rates to spirits removed from its DSP in instances where the spirits were distilled or processed at a DSP owned by another member of the controlled group. Members of the controlled group must combine the taxpaid removal totals for their DSPs when determining their eligibility for the reduced rates.
Last reviewed/updated 04/25/2019
Nonbeverage Products (MNBP) Tax Reform Questions and Answers
The IRC provides for drawback of tax on each proof gallon at a rate of $1 less than the rate at which the distilled spirits tax has been paid or determined. See 26 U.S.C. 5114. The Act amends 26 U.S.C. 5001 to authorize reduced rates of excise tax on certain distilled spirits for 2018 and 2019. If the spirits used by an MNBP were taxed at a reduced rate, then the drawback rate will be $1 less than that rate. For example, if the spirits were taxed at a reduced rate of $2.70 per proof gallon, then the drawback rate would be $1.70 per proof gallon. The TTB regulations at 27 CFR 17.162 and 17.163 require MNBPs to maintain records of the effective tax rate paid on the spirits used to manufacture nonbeverage products. For this purpose, the effective tax rate includes the tax rate imposed by section 5001 (see 27 CFR 17.11), so these records must show the tax rate paid (including, as applicable, the reduced tax rate paid) on the spirits used.
Last reviewed/updated 07/09/2018
In cases where the drawback rate claimed for any product exceeds $1.70 per proof gallon, the MNBP must include a statement in Part IV of TTB Form 5154.2 describing the specific tax rate or rates paid on the spirits used to manufacture the product; if the MNBP provides supporting data for claims using another suitable format in accordance with 27 CFR 17.147(a), the MNBP must include this same statement in an appropriate location. Unless specifically requested by the National Revenue Center after the claim is submitted, the MNBP does not need to submit invoices from a distilled spirits plant to support its drawback claim. TTB may require additional supporting data when needed to determine the correctness of drawback claims, including information that shows that the spirits used were taxpaid or tax-determined at the applicable effective tax rate. See 27 CFR 17.147(a) (TTB can require additional supporting data to determine correctness of claim) and 27 CFR 17.146(b) (claim must show that the spirits on which drawback is claimed were taxpaid at the applicable effective tax rate). Drawback is allowed only to the extent that the claimant can establish, by evidence satisfactory to the appropriate TTB officer (in this case, officers at the National Revenue Center), the actual quantity of taxpaid or tax-determined spirits used in the manufacture of the product and the effective tax rate applicable to those spirits. See 27 CFR 17.141. TTB can deny claims if MNBPs do not provide information necessary to establish the appropriate drawback rate.
Last reviewed/updated 07/09/2018
CONTACT US
Please send us your questions about Craft Beverage Modernization and Tax Reform using the Regulations and Rulings Division contact form. TTB is developing responses to questions for future updates to this page.
Please direct correspondence to:
Alcohol and Tobacco Tax and Trade Bureau
Director, Regulations and Rulings Division
1310 G Street, NW., Box 12
Washington, DC 20005