United States

TTB finalizes regulations on certain alcohol tax return filing periods

Final regulations adopt temporary regulations with minimal changes

TAX ALERT  | 

On June 2, 2020, the Alcohol and Tobacco Tax and Trade Bureau (TTB) finalized temporary regulations regarding a new quarterly and annual return period for deferred payment of alcohol excise tax as well as bond requirements for taxpayers not liable for more than $50,000 in annual excise taxes (final regulations).

The final regulations implement the amendments enacted in 2015 by Public Law 114-113 (PATH Act). The PATH Act amendments apply to certain taxpayers who reasonably expect to be liable for not more than $50,000 in taxes imposed on beer, wine and distilled spirits for the calendar year and who were not liable for more than $50,000 in such taxes in the preceding calendar year (eligible taxpayer). With respect to tax return due dates, the PATH Act authorized a new annual return period for deferred payment of tax, in addition to the preexisting semimonthly or quarterly periods for the deferred payment of taxes. ‘Deferred payment’ refers to a payment of tax by the proprietor of a distilled spirits plant, wine premises or brewery after the product is removed from the facility, rather than payment immediately before or at the time the product is removed from the facility. To be eligible to use the annual deferred payment period, the taxpayer must reasonably expect to be liable for not more than $1,000 in excise tax imposed with respect to distilled spirits, wines and beer for the calendar year and must be liable for not more than $1,000 in such taxes in the preceding calendar year. To be eligible to use quarterly deferred payment periods, the taxpayer must reasonably expect to be liable for not more than $50,000 in such taxes imposed for the calendar year and must be liable for not more than $50,000 in such taxes in the preceding calendar year.

The PATH Act also removed bond requirements for certain eligible taxpayers if certain conditions were met. To be exempt from bond requirements, taxpayers must be eligible to use quarterly or annual return periods and must pay such taxes on a deferred basis. Even if taxpayers choose to pay taxes semimonthly, they still qualify for the bond exemption if they meet the criteria to pay taxes quarterly or annually. In addition, taxpayers are exempt from bond requirements with respect to distilled spirits and wine only to the extent those products are for nonindustrial use.

On Jan. 4, 2017 TTB issued temporary regulations implementing the PATH Act changes. These regulations are adopted in the final regulations.

At the same time, TTB also issued a Notice of Proposed Rulemaking (Notice No. 167) proposing an amendment to regulations governing reporting requirements for distilled spirits plants (DSPs) and brewers generally to align the frequency of submitting reports with the new tax filing periods. That is, an industry member who was eligible to pay tax annually or quarterly and did so, would also file reports either annually or quarterly, as applicable. This new requirement was intended to reduce regulatory burden. TTB also solicited comments on whether to make any amendments to current reporting requirements for bonded wine cellars (including bonded wineries), although current regulations for bonded wine cellars include reduced reporting requirements for certain proprietors who pay taxes using annual or quarterly return periods. TTB sought comment in Notice No. 167 on these new reporting requirements for proprietors who pay taxes less frequently under the PATH Act, but the PATH Act amendments did not require any changes to TTB’s reporting regulations for DSPs, bonded wine cellars or brewers. TTB did not receive comments in response to Notice No. 167 regarding the proposed reporting requirements for DSPs and brewers or regarding whether it should amend current reporting requirements for bonded wine cellars. Because no changes to TTB’s reporting regulations are required under the PATH Act amendments, TTB has decided not to move forward with new reporting regulations in this final rule. Instead, TTB is reviewing its current reporting requirements to identify any reductions it can make in the information collected and the frequency in reporting, and intends to address such changes in the future.

The final regulations also make miscellaneous technical amendments and corrections.

Washington National Tax Observations

The June 2, 2020 final regulations issued by the TTB finalize rules related to the more favorable annual and quarterly return period for deferred payment of tax excise tax return filing rules for certain eligible taxpayers reporting less than $50,000 of annual alcohol excise tax. Thus, these eligible taxpayers are not required to pay tax when the alcohol is removed from the production facility; rather, the taxes may be deferred until the return is due. Further, bond is not required if certain conditions are met. These changes affect small batch and craft producers of beer, wine and distilled spirits.

Additionally, it should be noted that the final regulations do not adopt the proposals contained in Notice No. 167 regarding reporting requirements. However, TTB is reviewing its current reporting requirements to identify any reductions it can make in the information collected and the frequency in reporting, and intends to address such changes in the future.

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