United States

TTB extends excise tax exemption on production of hand sanitizer

TAX ALERT  | 

On Dec. 18, 2020, the Alcohol and Tobacco Tax and Trade Bureau (TTB) published updated guidance (TTB G 2020-1B) relating to the tax-free withdrawals of distilled spirits and hand sanitizer under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Further, the guidance extends approval of the exemptions announced in TTB’s earlier hand sanitizer guidance through June 30, 2020. (See our prior alerts from May 19 and April 22.) 

Background

Previous TTB guidance on hand sanitizers relieved distilled spirits permittees of certain Internal Revenue Code requirements through June 30, 2021, which was further extended through Dec. 31, 2020, to facilitate hand sanitizer production. Congress also 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. 

TTB is extending the exemptions authorized under its prior guidance through June 30, 2021. TTB is also updating its guidance to authorize the additional formulas FDA has authorized since the March guidance. Under this guidance, denatured alcohol for use in hand sanitizer using any formulation authorized in current FDA guidance may be used without first obtaining formula approval from TTB. Distilled spirit plants may also remove these products from their premises free of tax.

Washington National Tax observations

The extension of the TTB exemptions through June 30, 2021 and the guidance allowing for the use of all FDA approved formulas without receiving specific formula approval will be well received by the industry. The TTB guidance updates the intent of the prior guidance by addressing the approved FDA formulas that have come into existence since the prior TTB guidance.

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