On May 1, 2020, the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued seven Frequently Asked Questions providing guidance for refund claims on taxpaid beer for brewers when unmerchantable beer is destroyed during COVID-19.
Under existing excise tax rules, beer is generally taxed upon removal from the brewery and the brewer is liable for tax. A brewer may claim a refund of tax for taxpaid beer that is returned to the brewer for destruction. A brewer may also claim a refund if taxpaid beer is received at a distilled spirits plant for use in the production of distilled spirits. The existing regulations require the brewer submit to TTB a Notice of Intent to destroy the taxpaid beer and also abide by a 12-day waiting period.
Due to business disruptions brewers are facing during COVID-19, the FAQs provide the following relief:
- TTB is waiving the requirement that brewers submit a Notice of Intent to TTB to destroy taxpaid beer in the marketplace. This waiver extends through July 1, 2020. Further, this waiver also alleviates the 12-day waiting period required under TTB regulations.
- TTB is allowing unmerchantable beer in the marketplace to be destroyed without first returning it to the brewery.
- TTB also provided guidance for brewers to claim refunds for taxpaid unmerchantable beer that is transferred to a distilled spirits plant for use in the production of hand sanitizer.
The specific FAQs are as follows:
- COV-B1: Because of COVID-19, I have unmerchantable beer in the marketplace. Can that taxpaid or tax-determined beer be destroyed without returning it to my brewery and can I be relieved of the tax on that beer?
- COV-B2: Do I have to notify TTB before I destroy taxpaid beer off brewery premises as described in COV-B1 above?
- COV-B3: Because of COVID-19, I have beer on hand at my brewery premises that I am not going to be able to sell. Can beer on my premises be transferred to a distilled spirits plant (DSP) for use in the production of hand sanitizer without payment of tax?
- COV-B4: Because of COVID-19, some of my beer in the marketplace has reached or exceeded its freshness date. Can that taxpaid or tax-determined beer be transferred to a DSP for use in the production of hand sanitizer and can I be relieved of the tax for beer transferred to a DSP?
- COV-B5: Do I have to notify TTB before I destroy taxpaid beer off brewery premises as described in COV-B4 above?
- COV-B6: What must I do to be relieved of or refunded the tax on taxpaid beer that is destroyed off brewery premises?
- COV-B7: I am a brewer that produced and paid taxes on beer that is in kegs in the marketplace, and I would like to destroy that beer without returning it to my brewery. To save costs, can the beer be removed from the kegs and transferred to a DSP or otherwise destroyed by a wholesaler on behalf of my brewery?
The relaxation of some of the TTB requirements will be a welcome relief for brewers seeking refunds of tax on products that have become unmerchantable, destroyed or diverted for production of hand sanitizer. Through the period of July 1, 2020, TTB is permitting beer in the marketplace to be destroyed off premises, without first returning it to the brewer’s premises, and the brewer may be relieved of, or refunded, the tax. Further, due to business disruptions brewers are facing during COVID-19, TTB is waiving the brewer’s Notice of Intent to TTB to destroy taxpaid beer as well as the 12-day waiting period; however, brewers must maintain records showing the information ordinarily required by the Notice.
Further, the FAQs remind brewers of the existing rules and recordkeeping requirements related to transfers of beer to distilled spirits plants for use as a distilling material. In such cases where there is taxpaid beer, TTB is waiving the regulatory Notice requirements as discussed above.
For assistance with filing TTB excise tax refund claims, please consult with your tax advisor.