On May 18, 2020, the Alcohol and Tobacco Tax and Trade Bureau (TTB) published new guidance (TTB G 2020-4) about tax-free withdrawals of distilled spirits and hand sanitizer under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and extended approval of the exemptions announced in TTB’s earlier hand sanitizer guidance through Dec. 31, 2020. (See our prior alert.)
Previous TTB guidance on hand sanitizers relieved distilled spirits permittees of certain Internal Revenue Code requirements through June 30, 2020, to facilitate hand sanitizer production. Congress then provided additional flexibilities for hand sanitizer production for all of calendar year 2020 through the CARES Act. The CARES Act allows distilled spirits plants to withdraw distilled spirits free of tax for use in, or contained in, hand sanitizer that is produced and distributed in a manner consistent with FDA guidance. Previously, this exemption was limited to hospitals and certain other designated producers.
Since the exemptions authorized under TTB’s prior guidance are separate from the CARES Act, distilled spirits permittees can continue to operate under those exemptions even if they also conduct separate operations under the CARES Act as discussed further below.
TTB G 2020-4
TTB is extending the exemptions authorized under its prior guidance through Dec. 31, 2020.
TTB also issued additional guidance in a question-and-answer format about tax-free withdrawals of distilled spirits and hand sanitizer under the CARES Act and TTB’s exemptions.
The TTB Q&A guidance clarifies a number of questions for distilled spirits plants (DSPs) and alcohol fuel plants (AFPs) producing alcohol for hand sanitizer. These include:
- Whether DSPs and ASPs may withdraw distilled spirits and hand sanitizer tax free
- Whether DSPs and ASPs may withdraw these products tax-free without updating TTB permits
- Reporting and recordkeeping requirements for DSPs
- Container, marking and labeling requirements
- Rules for imported distilled spirits
The Q&A also addresses questions for other parties in the hand sanitizer distribution chain:
- Whether other parties in the distribution chain (such as hospitals, state and local governments, and pharmacists) must obtain TTB permits
- Recordkeeping requirements for persons receiving alcohol for use in hand sanitizer
Washington National Tax observations
The extension of the TTB exemptions through Dec. 31, 2020 and guidance in the Q&A’s will be well received by the industry. The TTB guidance provides favorable answers to simplify the process for all parties involved in the process of producing hand sanitizer.