**BUREAU OF ALCOHOL, TOBACCO AND FIREARMS**

**Alcohol & Tobacco**

**Office of Alcohol and Tobacco**

# Santa Rita Hills Viticultural Area - Establishment and Judicial Challenge  {#santa-rita-hills-viticultural-area---establishment-and-judicial-challenge .unnumbered}

*By Robert Tobiassen (202) 927-7772*

![](media/image1.wmf)ATF issued a final regulation in T.D. ATF No. 454,
that establishes the Santa Rita Hills American Viticultural Area (AVA)
in California. Prior to the regulation becoming effective on July 30,
2001, Vina Santa Rita, a winery in Chile, filed suit in the United
States District Court for the District of Columbia alleging that ATF was
arbitrary and capricious in issuing the regulation and that the
establishment of the Santa Rita Hills AVA infringed and diluted its
trademark that employs \"Santa Rita.\" (See, [Sociedad Anonima Vina
Santa Rita v. United States Department of the Treasury, et
al]{.underline}, U.S. Dist Ct, DC, Civil Action No. 01-1573 (CKK).)

On August 13, 2001, in a lengthy memorandum opinion and order, the
District Court denied the plaintiff's motion for a temporary restraining
order (TRO) and preliminary injunction (PI) to enjoin the regulation
from going into effect. The denial of the TRO and PI is only a
preliminary ruling and is customarily followed by a ruling on the merits
after a full hearing. However, subsequently the plaintiff voluntarily
dismissed its lawsuit. In alleging that ATF was arbitrary and capricious
in issuing the final regulation, Vina Santa Rita made three assertions:
first, ATF was creating confusion among wine consumers in violation of
the statutory mandate of the Federal Alcohol Administration Act by
selecting the name \"Santa Rita Hills;\" second, that the ATF decision
to select this name conflicts with the Lanham Act (the Federal trademark
law); and third, ATF failed to consider alternative names. The
memorandum opinion states that ATF articulated adequate reasons in the
final rule to show that there is no confusion. Specifically, it notes
that other wine labels bearing \"Santa Rita\" have been approved without
any complaints or confusion and that other information on the wine label
will inform the consumer about the origins of the wine from either Chile
or California. Additionally, it notes that the evidence in the
administrative record before the agency at the time it issued the
regulation supported the application of the name Santa Rita Hills to
this AVA. Regarding the allegation of conflict with the Lanham Act, the
memorandum opinion states that some actual use is required before an
infringement or dilution arises and that ATF has not used the name by
merely establishing the AVA. Additionally, it observes that the Lanham
Act recognizes an interplay between trademarks and geographical
designation and allows for the latter, and notes that the AVA is a
designation that describes the geographic origin of the product. ATF is
simply recognizing an existing geographic area. Finally, the memorandum
opinion states that ATF has been consistent in its policy when
establishing AVAs with names that include trademarks. ATF has rejected
the name when confusion is present or has used modifiers such as
\"District\", \"Valley,\" or \"Hills\" to distinguish the AVA name.
Regarding the allegation that ATF failed to consider alternative names,
the memorandum opinion states that no alternative names had been
seriously put forth during the notice and comment period, so there were
no alternative names for ATF to have considered.

On the remaining counts alleging that by establishing the Santa Rita
Hills AVA, ATF infringed and diluted the trademarks owned by Vina Santa
Rita, the memorandum opinion states that these issues are not ripe for
adjudication. Until a wine label is approved by ATF and used by a
winery, the court cannot adjudicate whether a particular use results in
an infringement or dilution. The court considered the remaining elements
of harm and public interest and determined that they did not support a
TRO and PI.

# ![](media/image2.wmf) Requirements for {#requirements-for .unnumbered}

#  Paying Federal Excise  {#paying-federal-excise .unnumbered}

# Tax by Electronic Fund  {#tax-by-electronic-fund .unnumbered}

*By Phyllis St. Clair (513) 684-3334*

##  

Alcohol and Tobacco Excise taxpayers who are liable during any calendar
year for a **[gross]{.underline}** amount (tax due prior to decreasing
adjustments) of \$5 million or more in excise taxes must pay such taxes
during the following year by Electronic Fund Transfer (EFT). This
includes taxes imposed on distilled spirits, wines, or beer, or on
tobacco products and cigarette papers and tubes. This requirement does
not apply to taxpayers who are only liable for firearms and ammunition
excise taxes, although they may voluntarily pay by EFT.

The term "taxpayer" includes a controlled group of business entities as
defined in Title 28, United States Code, Sections 5061(e)(3) and
5703(b)(3). Examples of this type of business structure include, but are
not limited to: parent-subsidiary controlled groups; brother-sister
controlled groups, and combined groups. Fifty-one (51) percent stock
ownership in a corporation need not be direct but may be acquired
through an option to buy stock, attribution from partnerships,
corporations, or estates and by family holdings. Therefore, if, in any
calendar year, the combined liability of the controlled group is \$5
million or more, then, during the following calendar year, each member
of the controlled group is required to pay applicable excise taxes by
EFT.

Any taxpayer required to make tax payments by EFT may not use cash,
check or money order to make such payments. Doing so will subject the
taxpayer to the failure to make deposit penalty imposed by 26 U.S.C.
6656.

The \$5 million threshold applies separately to the tax on distilled
spirits products, wine products and beer products. However it does apply
to a combined tax liability on tobacco products and cigarette papers and
tubes.

When a taxpayer not currently making tax payments by EFT, reaches the
\$5 million threshold, the Chief, National Revenue Center, must be
notified, in writing, of that fact. The notice will constitute an
agreement to make tax payments by EFT.

The written notification, due on or before January 10 of the year in
which the taxpayer is required to begin using EFT, should identify each
of the taxpayer's premises that are required to make tax payments by
EFT. Each location should be identified by name (as it appears on the
tax returns), registry or plant number, plant address, and employer
identification number. Taxpayers already using EFT are not required to
notify the Chief, National Revenue Center of their continued use of EFT
in succeeding years.

Additional information about the requirement to pay excise taxes by EFT
and about preparing Fedwire messages for payments made in connection
with ATF tax returns should be directed to the Chief, National Revenue
Center at (513) 684-3334 or 1-800-398-2282.

![](media/image3.wmf)**Products Made with Fuel Alcohol**

*By Steve Simon (202) 927-8210*

Alcohol produced at an Alcohol Fuel Plant (AFP) is restricted by law to
use "exclusively for fuel use" (26 U.S.C. 5181). This means that alcohol
produced at an AFP may not be used on the premises, or removed from the
premises, for any purpose except for use as fuel.

But what is "fuel"? ATF has received requests to use fuel alcohol in the
manufacture of products such as charcoal lighter fluid, firelighter gel,
and chafing dish "fuel." These requests must be turned down, because
these products are not within the intent of the law restricting the
alcohol to "fuel use."

Although the law does not contain a definition of "fuel use," the
legislative history states that AFP's were authorized because "Congress
concluded that it was important to encourage the development of energy
sources other than petroleum products for use in motor fuels." Based on
this statement in the Senate Finance Committee report for the Crude Oil
Windfall Profit Tax Act of 1980, ATF has concluded that "fuel use"
in 26 U.S.C. 5181 means only the use of alcohol in motor fuel products
that decrease reliance on petroleum. This includes the use of fuel
alcohol to manufacture gasoline additives such as

ETBE (ethyl tertiary butyl ether), which are burned in the engine of a
motor vehicle.

The restriction to "exclusively for fuel use" applies as well to
alcoholic byproducts produced at an AFP. Such byproducts may not be used
for other than fuel purposes. For example, the residue of distillation
may not be used for animal feed unless the residue contains no
significant alcohol.

AFP proprietors who wish to use alcohol produced at their plants for
purposes other than fuel use must requalify their plants as regular
distilled spirits plants (DSP's). Information on doing this may be
obtained from the ATF National Revenue Center by calling 1-800-398-2282.

![](media/image4.png)

**Digital Maps**

*By Marjorie Ruhf (202) 927-8210*

A vendor of digital maps based on United States Geological Survey
(U.S.G.S.) maps has asked if the Bureau of Alcohol, Tobacco and Firearms
(ATF) will accept a customized digital copy of the appropriate U.S.G.S.
map in support of a viticultural area petition. We have decided that we
will accept copies of U.S.G.S. maps that have been scanned, customized
and reprinted, under certain conditions. Vendors should be aware that
viticultural area petitions and their supporting materials, including
maps, are public documents. For more information, contact the
Regulations Division at (202) 927-8210.