Tax alert

TTB releases updated guidance on calculating tax rates for alcohol

Jan 09, 2023
#
Consumer goods Supply chain Credits & incentives Federal tax Excise tax consulting
Food & beverage Business tax Policy Tax policy

Executive summary: Updated guidance for calculating tax rates for CBMA eligible imports

Due to a change in law, effective Jan. 1, 2023, importers of alcohol will need to apply to the Alcohol and Tobacco Tax and Trade Bureau (TTB) directly to claim reduced rates or refunds of alcohol excise tax. The TTB released updated guidance on Dec. 29, 2022 in Industry Circular 2022-3 which describes the procedures to calculate and use effective tax rates or standard effective tax rates (SETRs) for imported distilled spirits products that are eligible for CBMA tax benefits. 

TTB issues updated guidance on calculating tax rates for CBMA tax benefit eligible imports

The TTB recently published Industry Circular 2022-3 (Industry Circular) on calculating the tax rates for distilled spirits eligible for both Craft Beverage Modernization Act (CBMA) reduced tax rates along with tax credits for wine and flavor content.

This industry circular supersedes and restates the procedures outlined in Industry Circular 2018-4 for distilled spirit plants on how to calculate effective tax rates for distilled products that are eligible for the CMBA reduced tax rates. Additionally, the industry circular provides guidance for importers on how to calculate and use proper rates for imported distilled spirits products that qualify for the CMBA reduced rates.

Notably, in accordance with the guidance set forth for Distilled Spirits Products (DSPs), an importer may not claim a CBMA tax benefit for a product that exceeds the effective tax rate or standard effective tax rate (SETR) the importer paid to U.S. Customs and Border Protection (CBP). Claim amounts calculated by myTTB for CBMA tax benefits will not exceed the amount of tax paid to CBP.

Washington National Tax Takeaways

Due to the changes in law, importers can no longer apply for the CBMA tax benefits automatically when paying taxes to the CBP.  Instead, importers must pay the full tax rate initially to the CBP and subsequently submit refund claims to the TTB through the myTTB online system. 

Importers should be aware of the new calculations and procedures because the tax benefit will no longer be automatic. Importers should familiarize themselves with the new procedures to ensure they are not missing out on any opportunities to claim tax benefits.  

For more information, please consult with your tax and trade advisor. 

RSM contributors

Tax resources

Timely updates and analysis of changing federal, state and international tax policy and regulation.

Subscribe now

Choose from timely legislation and compliance alerts to monthly perspectives on the tax topics.

Washington National Tax

Experienced tax professionals track regulations, policies and legislation to help translate changes.