Title 27—Alcohol, Tobacco Products and Firearms--Volume 1
PART 19—DISTILLED SPIRITS PLANTS
§ 19.0   Scope.
This part concerns the operation of distilled spirits plants in the United States. Topics covered in this part include: Permits and registration procedures; bond requirements; payment of taxes; filing of claims; production, storage, and processing operations; and maintenance of records.
§ 19.1   Definitions.
As used in this part, the following terms shall have the meanings indicated unless either the context in which they are used requires a different meaning, or a different definition is prescribed for a particular subpart, section, or portion of this part:
Accurate mass flow meter. A mass flow meter for making volume determinations of bulk distilled spirits. A mass flow meter used for tax determination of bulk spirits must be certified by the manufacturer of the meter or other qualified person as accurate within a tolerance of plus or minus 0.1 percent. A mass flow meter used for all other required volume determinations of bulk spirits must be certified by the manufacturer of the meter or other qualified person as accurate within a tolerance of plus or minus 0.5 percent.
Administrator. The Administrator of the Alcohol and Tobacco Tax and Trade Bureau, the Department of the Treasury, Washington, D.C., or a delegate or designee of the Administrator.
Alcoholic flavoring materials. Any nonbeverage product on which drawback has been or will be claimed under 26 U.S.C. 5111-5114, and any flavor imported free of tax which is unfit for beverage purposes. This term includes eligible flavors but does not include flavorings or flavoring extracts manufactured on the bonded premises of a distilled spirits plant as an intermediate product.
Application for registration. The application for registration of a distilled spirits plant that is required by 26 U.S.C. 5171(c).
Appropriate TTB officer. An officer or employee of the Alcohol and Tobacco Tax and Trade Bureau (TTB) authorized to perform any functions relating to the administration or enforcement of this part by TTB Order 1135.19, Delegation of the Administrator's Authorities in 27 CFR Part 19, Distilled Spirits Plants.
Article. A product containing denatured spirits, which was manufactured under this part or part 20 of this chapter.
Bank. Any commercial bank.
Banking day. Any day that a bank is open to the public to carry on substantially all of its banking functions.
Basic permit. The document that authorizes a person to engage in a designated business or activity under the Federal Alcohol Administration Act.
Bond. A bond is a formal guarantee for payment of monies due to TTB, including taxes imposed by 26 U.S.C. chapter 51, and any related fines, penalties or interest that the proprietor of a distilled spirits plant may incur, up to an amount specified by the bond (the bond “penal sum”).
Bonded premises. The premises of a distilled spirits plant, or part thereof, as described in the application for registration, on which the conduct of distilled spirits operations defined in 26 U.S.C. 5002 is authorized. This term includes premises described in the preceding sentence even if the proprietor, as authorized under the exemption set forth in § 19.151(d), has not provided a bond for the premises.
Bottler. A proprietor of a distilled spirits plant qualified under this part as a processor that bottles distilled spirits.
Bulk container. Any container approved by TTB having a capacity in excess of one wine gallon.
Bulk conveyance. A tank car, tank truck, tank ship, tank barge, or a compartment of any such conveyance, or any other container approved by the Administrator for the conveyance of comparable quantities of spirits, including denatured spirits and wines.
Bulk distilled spirits. Distilled spirits in a container having a capacity in excess of one wine gallon.
Business day. Any day, other than a Saturday, a Sunday, or a legal holiday (which includes any holiday in the District of Columbia and any statewide holiday in the particular State in which the claim, report, or return, as the case may be, is required to be filed, or the act is required to be performed).
Calendar quarter and quarterly. These terms refer to the 3-month periods ending on March 31, June 30, September 30, or December 31.
Carrier. Any person, company, corporation, or organization, including a proprietor, owner, consignor, consignee, or bailee, who transports distilled spirits, denatured spirits, or wine in any manner for itself or others.
CFR. The Code of Federal Regulations.
Commercial bank. A bank, whether or not a member of the Federal Reserve system, which has access to the Federal Reserve Communications System or Fedwire (a communications network that allows Federal Reserve system member banks to effect a transfer of funds for their customers (or other commercial banks) to the Treasury Account at the Federal Reserve Bank of New York).
Container. A receptacle, vessel, or form of bottle, can, package, tank or pipeline (where specifically included) used or capable of being used to contain, store, transfer, convey, remove, or withdraw spirits and denatured spirits.
Denaturant or denaturing material. Any material authorized by part 21 of this chapter for addition to spirits in the production of denatured spirits.
Denatured spirits. Spirits to which denaturants have been added as provided in part 21 of this chapter.
Director of the service center. A director of an Internal Revenue Service Center.
Distilled spirits operations. Any authorized distilling, warehousing, or processing operation conducted on the bonded premises of a plant qualified under this part.
Distilled spirits plant. An establishment which is qualified under this part to conduct distilled spirits operations.
Distiller. Any person who:
(1) Produces distilled spirits from any source or substance;
(2) Brews or makes mash, wort, or wash fit for distillation or for the production of distilled spirits (other than making or using of mash, wort, or wash in the authorized production of wine or beer, or in the production of vinegar by fermentation);
(3) By any process separates alcoholic spirits from any fermented substance; or
(4) Making or keeping mash, wort, or wash, has a still in his possession or use.
Distilling material. Any fermented or other alcoholic substance capable of, or intended for use in, the original distillation or other original processing of spirits.
District director. A district director of the Internal Revenue Service.
Effective tax rate. The net tax rate, after reduction for any credit allowable under 26 U.S.C. 5010 for wine and flavor content, at which the tax imposed on distilled spirits by 26 U.S.C. 5001 or 7652 is paid or determined.
Electronic fund transfer or EFT. Any transfer of funds effected by the proprietor's commercial bank, either directly or through a correspondent banking relationship, via the Federal Reserve Communications System or Fedwire to the Treasury Account at the Federal Reserve Bank of New York.
Eligible flavor. A flavor which:
(1) Is of a type that is eligible for drawback of tax under 26 U.S.C. 5114;
(2) Was not manufactured on the premises of a distilled spirits plant; and
(3) Was not subjected to distillation on distilled spirits plant premises such that the flavor does not remain in the finished product.
Eligible wine. Wine on which tax would be imposed by paragraph (1), (2), or (3) of 26 U.S.C. 5041(b) but for its removal to distilled spirits plant premises and which has not been subject to distillation at a distilled spirits plant after receipt in bond.
Export or exportation. A separation of goods from the mass of goods belonging to the United States with the intention of uniting them with goods belonging to a foreign country or any possession of the United States, including the Commonwealth of Puerto Rico, the U.S. Virgin Islands, American Samoa, and Guam.
Fermenting material. Any material that will be subject to a process of fermentation in order to produce distilling material.
Fiduciary. A guardian, trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for any person.
Fiscal year. The period October 1st of one calendar year through September 30th of the following calendar year.
From bond. When used with reference to withdrawals of distilled spirits, this phrase includes withdrawals from the premises of a distilled spirits plant even if the proprietor, as authorized under the exemption set forth in § 19.151(d), has not provided a bond for the premises.
Gallon or wine gallon. The liquid measure equivalent to the volume of 231 cubic inches.
General premises. Any business office, service facility, or other part of the premises described in the notice of registration other than bonded premises.
In bond. When used to describe spirits, denatured spirits, articles, or wine, this term refers to spirits, denatured spirits, articles, or wine held under bond to secure the payment of the taxes imposed by 26 U.S.C. chapter 51, and on which those taxes have not been determined. Spirits, denatured spirits, articles, or wine are considered to be held under bond if they are held by a proprietor who is liable for the tax, even if the proprietor is not required to provide a bond under this chapter. The term also refers to such spirits, denatured spirits, articles, or wine on the bonded premises of a distilled spirits plant, and such spirits, denatured spirits, or wines that are in transit between bonded premises (including, in the case of wine, bonded wine cellar premises). In addition, the term refers to spirits in transit from customs custody to bonded premises, and spirits withdrawn without payment of tax under 26 U.S.C. 5214, and with respect to which relief from liability has not occurred under 26 U.S.C. 5005(e)(2).
Industrial use. When used with reference to spirits, the meaning given to the term in § 19.472.
Intermediate product. Any product manufactured according to an approved formula under part 5 of this chapter, intended not for sale as such but for use in the manufacture of a distilled spirits product.
IRC. The Internal Revenue Code of 1986, as amended.
Kind. Except as provided in § 19.487, when used with reference to spirits, this term means class and type as prescribed in part 5 of this chapter. When used with reference to wines, this term means the class and type of wine as prescribed in part 4 of this chapter.
Letterhead application. A letter on a company's letterhead or other piece of paper that clearly shows the company name from a company representative with signature authority. A letterhead application is subject to TTB approval prior to any change requested in the letter.
Letterhead notice. A letter on a company's letterhead or other piece of paper that clearly shows the company name from a company representative with signature authority. A letterhead notice does not require approval by TTB prior to the change.
Liquor bottle. A bottle made of glass or earthenware, or of other suitable material approved by the Food and Drug Administration, which has been designed or is intended for use as a container for distilled spirits for sale for beverage purposes and which has been determined by the Administrator to adequately protect the revenue.
Liter. A metric unit of capacity equal to 1,000 cubic centimeters or 1,000 milliliters (ml) of alcoholic beverage, and equivalent to 33.814 fluid ounces.
Lot identification number. The package identification number described in § 19.485.
Mash, wort, wash. Any fermented material capable of, or intended for, use as a distilling material.
National Revenue Center: TTB's National Revenue Center, in Cincinnati, Ohio.
Nonindustrial use. When used with reference to spirits, the meaning given to the term in § 19.472.
Operating permit. The document issued pursuant to 26 U.S.C. 5171(d), that authorizes a person to engage in the business or operation described in the document.
Package. A cask or barrel or similar wooden container, or a drum or similar metal container.
Package identification number. The lot identification number described in § 19.490.
Person. An individual, trust, estate, partnership, association, company, corporation, limited liability company, limited liability partnership, or other entity recognized by law as a person.
Plant or distilled spirits plant. An establishment qualified under this part for distilling, warehousing, processing, or any combination thereof.
Plant number. The number assigned to a distilled spirits plant by TTB.
Processor. Except as otherwise provided in 26 U.S.C. 5002(a)(6), any person qualified under this part who manufactures, mixes, bottles, or otherwise processes distilled spirits or denatured spirits or who manufactures any article.
Proof. The ethyl alcohol content of a liquid at 60 degrees Fahrenheit, stated as twice the percentage of ethyl alcohol by volume.
Proof gallon. A gallon of liquid at 60 degrees Fahrenheit which contains 50 percent by volume of ethyl alcohol having a specific gravity of 0.7939 at 60 degrees Fahrenheit referred to water at 60 degrees Fahrenheit as unity, or the alcoholic equivalent thereof.
Proof of distillation. The composite proof of the spirits when the production gauge is made, or, if the spirits are reduced in proof prior to the production gauge, the proof of the spirits prior to that reduction, unless the spirits are subsequently redistilled at a higher proof than the proof prior to reduction.
Proprietor. The person qualified under this part to operate a distilled spirits plant.
Reconditioning. The dumping of distilled spirits products in bond after their bottling or packaging, for filtration, clarification, stabilization, reformulation, or other purposes, other than destruction, denaturation, redistillation, or rebottling.
Recovered article. An article containing specially denatured spirits salvaged without all of its original ingredients, or an article containing completely denatured alcohol salvaged without all of the denaturants for completely denatured alcohol, as provided in part 20 of this chapter.
Season. The period from January 1st through June 30th (spring season) or the period from July 1st through December 31st (fall season).
Secretary of the Treasury or Secretary. The Secretary of the Treasury or a delegate of the Secretary.
Service center. An Internal Revenue Service Center in any of the Internal Revenue regions.
Spirits or distilled spirits. The substance known as ethyl alcohol, ethanol, or spirits of wine in any form (including all dilutions and mixtures thereof, from whatever source or by whatever process produced) but not denatured spirits unless specifically stated. The term does not include mixtures of distilled spirits and wine, bottled at 48° proof or less, if the mixture contains more than 50 percent wine on a proof gallon basis.
Spirits residues. Residues, containing distilled spirits, of a manufacturing process related to the production of an article under part 20 of this chapter.
Tax-determined or determined. When used with reference to any distilled spirits to be withdrawn from bond on determination of tax, that the taxable quantity of spirits has been established.
Taxpaid. When used with reference to distilled spirits, all applicable taxes imposed by law on those spirits have been determined or paid as provided by law.
This chapter. Title 27 of the Code of Federal Regulations, Chapter I, Alcohol and Tobacco Tax and Trade Bureau, Department of the Treasury (27 CFR chapter I).
To bond. When used with reference to returns of distilled spirits, this phrase includes returns to the premises of a distilled spirits plant even if the proprietor, as authorized under the exemption set forth in § 19.151(d), has not provided a bond for the premises.
Transfer in bond. The removal of spirits, denatured spirits and wines from one bonded premises to another bonded premises.
Treasury Account. The General Account of the Department of the Treasury at the Federal Reserve Bank of New York.
TTB. The Alcohol and Tobacco Tax and Trade Bureau of the Department of the Treasury.
TTB officer. An officer or employee of TTB authorized to perform any function relating to the administration or enforcement of the provisions of this part.
Unfinished spirits. Spirits in the production system prior to production gauge.
U.S.C. The United States Code.
Warehouseman. A proprietor of a distilled spirits plant qualified under this part to store bulk distilled spirits.
We. TTB and TTB officers.
Wine gallon. The liquid measure equivalent to the volume of 231 cubic inches.
Wine spirits. Spirits authorized for use in wine production by 26 U.S.C. 5373.
§ 19.2   Territorial extent of these regulations.
This part applies to all States of the United States and the District of Columbia.
§ 19.3   Related regulations.
Other regulations relating to distilled spirits and distilled spirits plants are listed below:
§ 19.4   Recovery and reuse of denatured spirits in manufacturing processes.
Certain activities involving distilled spirits are not covered by this part. Instead, manufacturers who engage in any of the activities listed below are required to comply with the regulations in part 20 of this chapter relating to the use and recovery of spirits or denatured spirits. Those activities are:
(a) Use of denatured spirits, or articles or substances containing denatured spirits, in a process wherein any part or all of the spirits, including denatured spirits, are recovered;
(b) Use of denatured spirits in the production of chemicals which do not contain spirits but which are used on the permit premises in the manufacture of other chemicals resulting in spirits as a byproduct; or
(c) Use of chemicals or substances which do not contain spirits or denatured spirits (but which were manufactured with specially denatured spirits) in a process resulting in spirits as a byproduct.
§ 19.5   Manufacturing products unfit for beverage use.
(a) General. Except as provided in paragraph (b) of this section, apothecaries, pharmacists, or manufacturers who manufacture or compound any of the following products using tax paid or tax determined distilled spirits are not required to register and qualify as a distilled spirits plant (processor):
(1) Medicines, medicinal preparations, food products, flavors, flavoring extracts, and perfume, conforming to the standards for approval of nonbeverage drawback products found in §§ 17.131 through 17.137 of this chapter, whether or not drawback is actually claimed on those products. Except as provided in paragraph (c) of this section, a formula does not need to be submitted if drawback is not desired;
(2) Patented and proprietary medicines that are unfit for use for beverage purposes;
(3) Toilet, medicinal, and antiseptic preparations and solutions that are unfit for use for beverage purposes;
(4) Laboratory reagents, stains, and dyes that are unfit for use for beverage purposes; and
(5) Flavoring extracts, syrups, and concentrates that are unfit for use for beverage purposes.
(b) Exception for beverage products. Products identified in part 17 of this chapter as being fit for beverage use are alcoholic beverages. Bitters, patent medicines, and similar alcoholic preparations that are fit for beverage purposes, although held out as having certain medicinal properties, are also alcoholic beverages. These products are subject to the provisions of this part and must be manufactured on the bonded premises of a distilled spirits plant.
(c) Submission of formulas and samples. When requested by the appropriate TTB officer or when the manufacturer wishes to ascertain whether a product is unfit for beverage use, the manufacturer will submit the formula and a sample of the product to the appropriate TTB officer for examination. TTB will determine whether the product is unfit for beverage use and whether manufacture of the product is exempt from qualification requirements.
(d) Change of formula. If TTB finds that a product manufactured under paragraph (a) of this section is being used for beverage purposes, or for mixing with beverage spirits other than by a processor, TTB will notify the manufacturer to stop manufacturing the product until the formula is changed to make the product unfit for beverage use and the change is approved by the appropriate TTB officer. However, the provisions of this paragraph will not prohibit products which are unfit for beverage use from use in small quantities for flavoring drinks at the time of serving for immediate consumption.
§ 19.11   Right of entry and examination.
A TTB officer may enter any distilled spirits plant, any other premises where distilled spirits operations are carried on, or any structure or place used in connection with distilled spirits operations, at any time of day or night. A TTB officer may examine materials, equipment, and facilities, and make any gauges and inventories. Whenever a TTB officer states his or her name and office and demands admittance but is not admitted into the premises or place, the TTB officer is authorized to use all necessary force to gain entry.
§ 19.12   Furnishing facilities and assistance.
The proprietor is required to provide TTB officers with the necessary facilities and assistance in order to gauge spirits in any container, or to examine any apparatus, equipment, containers, or materials, at the distilled spirits plant. Also, when requested by a TTB officer, the proprietor must:
(a) Open any doors and open for examination any containers on the plant premises; and
(b) Provide the exact locations (including the number of containers at each location) of all packages and similar portable approved containers within a given lot and the locations (that is, buildings, rooms, or areas) where spirits in cases are stored.
§ 19.13   Assignment of officers and supervision of operations.
(a) General. TTB may assign TTB officers to a distilled spirits plant and utilize controls, such as Government locks and seals, if TTB decides that those measures are necessary to effectively supervise the operations. If TTB decides that such supervision is necessary:
(1) The proprietor must obtain approval of the plant's hours of operations from the appropriate TTB officer;
(2) TTB may require the proprietor to submit a schedule of operations to a TTB officer; and
(3) TTB may require the proprietor to delay any distilled spirits operation until the proprietor can conduct it in the presence of a TTB officer.
(b) Notification of supervision. If TTB determines that supervision of plant operations is necessary, TTB will notify the proprietor of the extent to which TTB intends to supervise those operations. If TTB determines later that TTB supervision is no longer necessary, the appropriate TTB officer will notify the proprietor of that fact.
§ 19.14   Delegation of the Administrator's authorities to the appropriate TTB officer.
Most of the regulatory authorities of the Administrator contained in this part are delegated to appropriate TTB officers. These TTB officers are specified in TTB Order 1135.19, Delegation of the Administrator's Authorities in 27 CFR Part 19, Distilled Spirits Plants. Interested persons may obtain a copy of this order by accessing the TTB Web site ( https://www.ttb.gov ) or by mailing a request to the Alcohol and Tobacco Tax and Trade Bureau, National Revenue Center, 550 Main Street, Room 8970, Cincinnati, OH 45202.
§ 19.15   Forms prescribed.
(a) TTB prescribes and makes available all forms required by this part. Persons completing forms must furnish all of the information required by each form, as indicated by the headings and instructions on the form or as required by these regulations. Each form must be filed in accordance with this part and the instructions for the form.
(b) Persons may obtain TTB forms by accessing the TTB Web site ( https://www.ttb.gov ) or by mailing a request to the TTB National Revenue Center, 550 Main Street, Suite 8002, Cincinnati, Ohio 45202.
§ 19.16   Modified forms.
If a proprietor wishes to modify a form prescribed by these regulations, the proprietor must submit an application for approval of an alternate method or procedure (see §§ 19.26 and 19.27) to the appropriate TTB officer. The proprietor may not use a modified form until TTB approves the application. The application to modify a form must be accompanied by:
(a) A copy of each proposed form with typical entries; and
(b) A statement explaining the need to use a modified form.
§ 19.17   Detention of containers.
(a) General. A TTB officer may detain any container containing, or supposed to contain, spirits when the appropriate TTB officer believes that the required tax on those spirits has not been paid or determined or that the removal of the container is in violation of law or the provisions of this part. The appropriate TTB officer will hold the container at a safe place until it is determined whether the detained property is subject to forfeiture.
(b) Limitation. A detention under paragraph (a) of this section may not exceed 72 hours without process of law or intervention of the appropriate TTB officer. However, the detained container may be kept on the premises beyond the 72-hour period without process of law or intervention if the person possessing the container immediately before its detention executes a waiver of this 72-hour limitation on detention of the container.
§ 19.18   Samples for the United States.
TTB officers are authorized to take samples of spirits, denatured spirits, articles, wines, or other materials from a distilled spirits plant for analysis, testing, or to determine whether the product complies with the law and regulations. When TTB removes a sample from a plant, TTB will give the proprietor a receipt for the sample.
§ 19.19   Discontinuance of storage facilities.
If TTB determines that a proprietor's bonded storage facility for spirits is unsafe or unfit for use, or causes excessive waste or loss of spirits, TTB can require that the proprietor discontinue using the facility. Further, TTB can require the transfer of the spirits stored in the facility to another storage facility. The transfer will take place at such time and under such supervision as TTB may require, and will be at the expense of the owner or warehouseman of the spirits. If the owner or warehouseman fails to transfer the spirits within the prescribed time or to pay the expense of the transfer, as ascertained and determined by the appropriate TTB officer, the spirits may be seized and sold. TTB will first apply the proceeds of such sale to the payment of the taxes due on the spirits and then to the cost and expense of the sale and removal, and the remaining balance, if any, will be paid over to the owner or warehouseman.
§ 19.20   Installation of meters, tanks, and other apparatus.
The appropriate TTB officer may require the proprietor to install meters, tanks, pipes, or any other apparatus at the proprietor's plant if that officer decides that the equipment is necessary for the protection of the revenue. If the proprietor refuses or fails to install any such apparatus when instructed to do so, the proprietor will not be permitted to conduct business as a distilled spirits plant.
§ 19.26   Alternate methods or procedures.
(a) General. The appropriate TTB officer may approve the use of an alternate method or procedure that varies from the regulatory requirements in this part if the proprietor shows good cause for its use and the alternate method or procedure:
(1) Is not contrary to law;
(2) Will not have the effect of waiving an existing regulatory requirement;
(3) Is consistent with the purpose and effect of the method or procedure prescribed in this part;
(4) Provides equal security to the revenue; and
(5) Will not cause an increase in cost to the Government and will not hinder TTB's administration of this part.
(b) Exceptions. TTB will not authorize the use of an alternate method or procedure relating to the giving of any bond, or to the assessment, payment, or collection of tax.
(c) Prior approvals. Alternate methods or procedures in effect prior to April 18, 2011, which are not contrary to the regulations in this part, are preserved until renewed unless revoked by operation of law due to the enactment of law that is contrary to the alternate method or procedure.
§ 19.27   Application for and use of alternate method or procedure.
(a) Application. If a proprietor wishes to use an alternate method or procedure as described in § 19.26, the proprietor must submit a written letterhead application to the appropriate TTB officer for approval. The application must identify the method or procedure specified in the regulation, must describe the proposed alternate method or procedure in detail, and must explain why the alternate method or procedure is needed.
(b) Approval and use. The proprietor may not use an alternate method or procedure until the appropriate TTB officer has in writing approved the proprietor's application. During the period that the proprietor is authorized to use the alternate method or procedure, the proprietor must comply with any conditions imposed on its use by TTB. TTB may withdraw the approval to use the alternate method or procedure if TTB finds that the revenue is jeopardized, that the alternate method or procedure hinders effective administration of the laws or regulations, that the proprietor has violated any of the conditions imposed by TTB, or that the circumstances that gave rise to the need for the alternate method or procedure no longer exist.
(c) Retention. The proprietor must retain each alternate method or procedure approval as part of the proprietor's records and must make the approval available for examination by TTB officers upon request.
§ 19.28   Emergency variations from requirements.
(a) Application. A proprietor may request emergency approval of the use of a method or procedure relating to construction, equipment, and methods of operation that represents a variance from the requirements of this part. When a proprietor wishes to use an emergency method or procedure, the proprietor must submit a written letterhead application to the appropriate TTB officer for approval; the proprietor may send the application via regular mail, email, or facsimile transmission. The application must describe the proposed emergency method or procedure and the emergency situation it will address. For purposes of this section, an emergency is considered to exist only if it results from a weather or other natural event or from an accident or other event not involving an intentional act on the part of the proprietor.
(b) Approval. The appropriate TTB officer may approve in writing the use of an emergency method or procedure if the proprietor demonstrates that an emergency exists and the proposed method or procedure:
(1) Is not contrary to law;
(2) Is necessary to address the emergency situation;
(3) Will afford the same security and protection to the revenue as intended by the regulations; and
(4) Will not hinder the effective administration of this subpart.
(c) Terms of emergency method or procedure approval and use. (1) The proprietor may not use an emergency method or procedure until the application has been approved by TTB except when the emergency method or procedure requires immediate implementation to correct a situation that threatens life or property. In a situation involving a threat to life or property, the proprietor may implement the corrective action while concurrently notifying the appropriate TTB officer by telephone of the action and filing the required written application. Use of the emergency method or procedure must conform to any conditions specified in the approval.
(2) The proprietor must retain the emergency method or procedure approval as part of the proprietor's records and must make the approval available for examination by TTB officers upon request.
(3) The emergency method or procedure will automatically terminate when the situation that created the emergency no longer exists. TTB may withdraw the approval to use the emergency method or procedure if TTB finds that the revenue is jeopardized, that the emergency method or procedure hinders effective administration of the laws or regulations, or that the proprietor has failed to follow any of the conditions specified in the approval. When use of the emergency method or procedure terminates, the proprietor must revert to full compliance with all applicable regulations.
§ 19.29   Exemptions for national defense and disasters.
Whenever TTB finds it is necessary to meet the requirements of national defense or necessary or desirable by reason of disaster, TTB may temporarily exempt the proprietor from any provisions of the internal revenue laws and the provisions of this part relating to distilled spirits, except those requiring the payment of tax.
§ 19.31   Pilot operations.
Except for the filing of any bond or the payment of any tax provided for in 26 U.S.C. chapter 51, TTB may waive any regulatory provision in this part for temporary pilot or experimental operations for the purpose of facilitating the development and testing of improved methods of governmental supervision (necessary for the protection of the revenue) over plants. For this purpose, the appropriate TTB officer may, with the approval of the proprietor thereof, designate any plant for such operations. Any waiver granted under this section must be in writing and signed by the appropriate TTB officer. The waiver will identify the provisions of law and/or regulations waived and the period of time during which the waiver will be effective. The appropriate TTB officer may terminate the waiver if he or she determines that the waiver jeopardizes the revenue.
§ 19.32   Experimental distilled spirits plants.
(a) General. The appropriate TTB officer may authorize the establishment and operation of experimental plants for specific and limited periods of time solely for experimentation in, or development of:
(1) Sources of materials from which spirits may be produced;
(2) Processes by which spirits may be produced or refined; or
(3) Industrial uses of spirits.
(b) Waiver. The appropriate TTB officer may waive any provision of 26 U.S.C. chapter 51 (other than 26 U.S.C. 5312) and of this part (other than § 19.33) to the extent necessary to effectuate the purposes of 26 U.S.C. 5312(b) as outlined in paragraph (a) of this section. However, TTB will not waive the payment of any tax on spirits removed from an experimental plant.
§ 19.33   Application to establish experimental plants.
(a) Application requirements. Any person who wishes to establish an experimental plant for the purposes specified in § 19.32 must submit a written application to the appropriate TTB officer and obtain approval of the proposed experimental plant. The application must:
(1) State the nature, extent, and purpose of the operations to be conducted;
(2) Describe the operations and equipment;
(3) Describe the location of the plant (including the proximity to other premises or operations subject to the provisions of 26 U.S.C. chapter 51); and
(4) Describe the security measures to be provided.
(b) Bond. The applicant must file a bond with the application in such form and penal sum as required by the appropriate TTB officer.
(c) Approval of application. Before approving the application, the appropriate TTB officer may require that the applicant submit additional information if necessary. TTB will not approve the application and permit operations until the plant conforms to the specifications stated in the application and the applicant complies with provisions of 26 U.S.C. chapter 51 and with any provisions in this part that are not specifically waived.
§ 19.34   Experimental or research operations by scientific institutions and colleges of learning.
(a) General. The appropriate TTB officer may authorize any scientific university, college of learning, or institution of scientific research to produce, receive, blend, treat, test, and store spirits, without payment of tax, for experimental or research use but not for consumption (other than in organoleptic tests) or sale, in quantities as may be reasonably necessary for those purposes.
(b) Waiver. For purposes of this section, the appropriate TTB officer may waive any provision of 26 U.S.C. chapter 51 (other than 26 U.S.C. 5312) or this part (other than this section and § 19.35) to the extent necessary to effect the purposes of 26 U.S.C. 5312(a). However, TTB will not waive the payment of any tax on distilled spirits removed from any university, college, or institution.
§ 19.35   Application by scientific institutions and colleges of learning for experimental or research operations.
(a) Application requirements. A university, college, or scientific institution that wants to conduct any of the experimental or research operations mentioned in § 19.34, must submit a written application to the appropriate TTB officer and obtain approval for the proposed operations. The application may be submitted on letterhead. The application must:
(1) State the nature, extent, and purpose of the operations to be conducted;
(2) Describe the operations and equipment;
(3) Describe the location where the operations will be conducted (including identification of the building or buildings, or the portions thereof to be used); and
(4) Describe the security measures to be provided.
(b) Bond. The applicant must file a bond with the application in such form and amount as required by the appropriate TTB officer.
(c) Approval of application. Before approving the application, the appropriate TTB officer may require that the applicant submit additional information. The applicant may not commence operations until authorized by the appropriate TTB officer.
(d) Records and reports. Any university, college, or institution authorized to conduct experimental or research operations must maintain records of the quantities of spirits produced, received, and used each day and must make these records available for inspection by TTB officers. Universities, colleges, or institutions authorized to conduct experimental or research operations are not required to submit reports of operations to TTB unless specifically required by the appropriate TTB officer.
(e) Discontinuance of operations. When operations authorized under this section are discontinued, the university, college, or institution must destroy all remaining spirits and notify the appropriate TTB officer that operations are discontinued.
§ 19.36   Spirits produced in industrial processes.
(a) General. Except as otherwise provided in paragraph (b) of this section, any person who produces distilled spirits in an industrial process, including spirits produced as a byproduct in connection with chemical or other processes, is considered to be a distiller and therefore is required to qualify such operations as a distilled spirits plant and is subject to the registration requirements under the provisions of 26 U.S.C. chapter 51 and this part.
(b) Waiver. TTB may waive application of any provision of 26 U.S.C. chapter 51, or of this part, involving the production of nonpotable chemical mixtures containing spirits, including any provision relating to qualification (except the dealer registration requirement) if the mixture is produced:
(1) For transfer to the bonded premises of a distilled spirits plant for completion of distilling; or
(2) As a byproduct which would require expensive and complex equipment for the recovery of spirits, and the mixture:
(i) Would be destroyed on the premises where produced; or
(ii) Would contain a minimum quantity of spirits, taking into account the procedure employed, would not be subjected to further operations solely for the purification or recovery of spirits, and would be found by TTB to be as nonpotable and as difficult to recover as completely denatured alcohol.
§ 19.37   Application for industrial processes waiver.
(a) Application for waiver. If the producer of a nonpotable chemical mixture containing spirits, as described in § 19.36, wishes to obtain a waiver from the provisions of 26 U.S.C. chapter 51, or of this part, the producer must submit a written waiver application to the appropriate TTB officer. The application must include the following information, as applicable:
(1) The name and address of the producer;
(2) Chemical composition and source of the nonpotable mixture;
(3) Approximate percentages of chemicals and spirits in the mixture;
(4) Method of operation proposed;
(5) Bonded premises where the mixture will be distilled; and
(6) Any other pertinent information required by the appropriate TTB officer.
(b) Approval of waiver. The appropriate TTB officer may approve the waiver if it will not jeopardize the revenue and will not hinder supervision of the operations. Approval of the application may be subject to such terms and conditions, and to the furnishing of any bond, that the appropriate TTB officer determines is necessary.
§ 19.38   Approval of required documents.
Except as otherwise provided in this part, the appropriate TTB officer is authorized to approve all documents, bonds, and consents of surety required by this part.
§ 19.45   Execution under penalties of perjury.
(a) Declaration. When TTB requires under this part that a document be executed under penalties of perjury, the document must contain the following declaration:
I declare under the penalties of perjury that this [insert type of document, such as report, or claim], including supporting documents, has been examined by me and, to the best of my knowledge and belief, is true, correct, and complete.
(b) Signing. The declaration in paragraph (a) of this section must bear the signature and title of the proprietor or a duly authorized representative.
§ 19.51   Home production of distilled spirits prohibited.
A person may not produce distilled spirits at home for personal use. Except as otherwise provided by law, distilled spirits may only be produced by a distilled spirits plant registered with TTB under the provisions of 26 U.S.C. 5171. All distilled spirits produced in the United States are subject to the tax imposed by 26 U.S.C. 5001.
§ 19.52   Restrictions on location of plants.
A person who intends to establish a distilled spirits plant may not locate it in any of the following places:
(a) In any residence, shed, yard, or enclosure connected to a residence;
(b) On any vessel or boat;
(c) Where beer or wine is produced;
(d) Where liquors are sold at retail; or
(e) Where any other business is conducted except as provided in § 19.54.
§ 19.53   Continuity of plant premises.
As a general rule, the premises of a distilled spirits plant must be continuous except for separations by public waterways, roads, or carrier rights-of-way. However, the appropriate TTB officer may approve the registration of the plant where there are separations of the plant premises and all parts of the plant are in the same general location if:
(a) There is no jeopardy to revenue caused by the separation of premises; and
(b) The separation of premises does not create administrative problems for TTB.
§ 19.54   Use of distilled spirits plant premises.
(a) General. A person may not conduct any business or operation on the premises of a distilled spirits plant unless the business or operation is authorized by the notice of registration on file with TTB or authorized under § 19.55.
(b) Bonded premises. The proprietor must use the bonded premises of a distilled spirits plant exclusively for distilled spirits operations. The proprietor must store packaged spirits, cases of spirits, or portable containers of spirits in a room or building on bonded premises. TTB may approve another method of storage as an alternate method or procedure. However, the proprietor must apply for, and receive approval for another method of storage from the appropriate TTB officer in accordance with § 19.27 before using that method.
(c) General premises. General premises are any portion of the distilled spirits plant described in the notice of registration other than bonded premises. A person may not use the general premises of a distilled spirits plant for any operation required under the provisions of this part to be conducted on bonded premises.
§ 19.55   Other businesses.
(a) The appropriate TTB officer may authorize the conduct of a business other than that of a distiller, warehouseman, or processor on the premises of a distilled spirits plant if:
(1) The business is not prohibited by 26 U.S.C. 5601(a)(6);
(2) The business will not jeopardize the revenue;
(3) The business will not hinder TTB's effective administration of this part; and
(4) The business will not be contrary to law.
(b) A person who wishes to conduct another business at a distilled spirits plant must apply for such authorization in accordance with § 19.73(b) or § 19.120(b) and receive approval from the appropriate TTB officer before operating the other business. The approval will specify whether the other business may be conducted on the bonded premises or on the general premises.
§ 19.56   Bonded warehouses not on premises qualified for production of spirits.
(a) Criteria for establishment. As a general rule, if a person intends to establish a bonded warehouse, other than one established on the bonded premises of a distilled spirits plant qualified for the production of spirits or contiguous to such premises, the proposed warehouse must have a minimum capacity of 250,000 wine gallons of bulk spirits and the need for such a warehouse must be clearly shown. TTB may consider an application to establish a bonded warehouse with less capacity provided a need is clearly shown.
(b) Application. The applicant must submit a separate written request along with the application for registration explaining the need for the bonded warehouse. TTB may approve the application for registration if:
(1) The proposed location for the warehouse will not jeopardize the revenue; and
(2) The applicant provides evidence showing sufficient need for establishing such a warehouse.
(c) Special conditions. Based on the application and request, TTB may limit the type of operations that may be conducted at the bonded warehouse. The proprietor of a warehouse approved for a limited type of operation may not expand or change the operation to include any other type of operation without application to and approval of the appropriate TTB officer.
§ 19.58   Taxpaid spirits or wines on bonded premises.
The proprietor may move tax paid or tax determined spirits or wines across bonded premises. However, tax paid or tax determined spirits or wines may not be stored or allowed to remain on the bonded premises. The proprietor must keep tax paid or tax determined spirits or wines separate from spirits or wines on which tax has not been paid or determined. Spirits returned to bonded premises under the provisions of 26 U.S.C. 5215 may remain on bonded premises.
§ 19.59   Conveyance of untaxpaid spirits or wines within a distilled spirits plant.
(a) The proprietor may move untaxpaid spirits or wines:
(1) Between different portions of the bonded premises at the same distilled spirits plant or across any other premises of that plant;
(2) Over any public thoroughfare by uninterrupted transportation; or
(3) Over a private roadway by uninterrupted transportation. The owner or lessee of the private roadway must agree in writing to allow TTB officers access to the roadway to perform their duties.
(b) The conveyance of untaxpaid spirits or wines under paragraph (a) of this section is subject to the following conditions. The proprietor:
(1) May not store or allow the untaxpaid spirits or wines to remain on any premises other than the bonded premises;
(2) Must keep the untaxpaid spirits or wines separate from spirits on which the tax has been paid or determined;
(3) Must submit to the appropriate TTB officer a description of the means, route of the conveyance, and the areas of the distilled spirits plant, public thoroughfare or roadways across which spirits or wines will be conveyed, and a copy of any agreement with the owner or lessee of a private roadway. The appropriate TTB officer must approve the proposed means and route of conveyance and any agreement; and
(4) Must provide a consent of surety on the operations or unit bond (TTB Form 5000.18) extending the terms of the bond to cover the conveyance of the spirits or wines.
§ 19.60   Spirits in customs custody.
A proprietor may move distilled spirits that are in customs custody across distilled spirits plant premises if the proprietor:
(a) Submits to the appropriate TTB officer a description of the means and route of the conveyance and the areas of the distilled spirits plant across which spirits will be conveyed and receives approval from the appropriate TTB officer for the method of movement;
(b) Does not store or allow the spirits to remain on the premises of the distilled spirits plant;
(c) Moves the spirits expeditiously, and keeps the spirits separate and apart from other spirits on the premises; and
(d) Provides a consent of surety on the operations or unit bond (TTB Form 5000.18) extending the terms of the bond to cover the conveyance of the spirits.
§ 19.71   Registration and permits in general.
Except as otherwise provided in this part, a person may only conduct operations as a distiller, warehouseman, or processor of distilled spirits on the bonded premises of a distilled spirits plant. In order to establish a distilled spirits plant, a person must register the plant with TTB and obtain an operating permit and/or a basic permit. This subpart covers the requirements for registering a plant and obtaining an operating permit under the IRC. Part 1 of this chapter covers the requirements for obtaining a basic permit under the Federal Alcohol Administration Act.
§ 19.72   General requirements for registration.
(a) Establishment. A person who wishes to establish a distilled spirits plant must intend to conduct operations as a distiller, as a warehouseman, or both. A person cannot establish a distilled spirits plant solely for the processing of spirits.
(b) Registration. Before beginning operations as a distilled spirits plant, a person must submit an application for registration and receive approval from TTB. The following rules apply to an application for registration:
(1) The applicant must apply for registration on form TTB F 5110.41, Registration of Distilled Spirits Plant, and submit the application to the appropriate TTB officer;
(2) TTB will consider all written statements, affidavits, and other documents supporting the application as part of the application;
(3) If the appropriate TTB officer determines that the original application for registration cannot be approved because it contains incomplete or incorrect information, TTB may require that the applicant file an additional TTB F 5110.41, or submit other documentation to complete or correct the original application; and
(4) The applicant must file any additional forms or submit any other documentation within 60 days of the appropriate TTB officer's request.
§ 19.73   Information required in application for registration.
(a) General. The application for registration on form TTB F 5110.41, Registration of Distilled Spirits Plant, must include the following information:
(1) The serial number;
(2) The name, principal business address, and location of the distilled spirits plant if different from the applicant's business address;
(3) The operations that will be conducted;
(4) The purpose for filing the application;
(5) A statement describing the type of business organization and the persons involved in the business in accordance with § 19.93. However, if any of this information is already on file with the appropriate TTB officer, the applicant may advise TTB that the information on file is part of the application for registration;
(6) A list of any operating permits, basic permits, operations bonds, withdrawal bonds, and/or unit bonds, including the amount of any bond(s) and the name of the surety on the bond;
(7) In the case of a corporation, a list of the offices and officers authorized by the articles of incorporation or the board of directors to sign or act on behalf of the corporation;
(8) A description of the plant in accordance with § 19.74;
(9) A list of major equipment in accordance with § 19.75;
(10) A statement of the maximum number of proof gallons that will be produced in the distillery during a period of 15 days, stored on the bonded premises, and in transit to the bonded premises. This statement is not required if the operations or unit bond is in the maximum amount;
(11) A statement that accounting records will be maintained in accordance with generally accepted accounting principles;
(12) A statement of plant security measures in accordance with § 19.76;
(13) The following information if the applicant intends to operate as a distiller:
(i) Total proof gallons of spirits that can be produced daily;
(ii) A statement of production procedures in accordance with § 19.77; and
(iii) A statement as to whether spirits will be redistilled;
(14) The following information if the applicant intends to operate as a warehouseman:
(i) A description of the storage system; and
(ii) Total amount of bulk wine gallons that can be stored;
(15) The following information if the applicant intends to operate as a processor:
(i) A statement whether spirits will or will not be bottled, denatured, redistilled, and whether articles will be manufactured; and
(ii) A description of the storage system for spirits bottled and cased or otherwise packaged and placed in approved containers for removal from bonded premises; and
(16) A statement whether the applicant is required to furnish a bond under § 19.151.
(b) Other business. If the applicant intends to conduct any other business on the distilled spirits plant premises as authorized under § 19.55, the following information must be submitted with the application:
(1) A description of the business;
(2) A list of buildings and equipment that will be used; and
(3) A statement of the relationship of the business to the distilled spirits operations at the plant.
(c) Additional information. The applicant must furnish any additional information needed by TTB to determine if the application for registration should be approved.
§ 19.74   Description of the plant.
As required by § 19.73(a)(8), the application for registration must include a description of the distilled spirits plant. This information must:
(a) Describe each tract of land covered by distilled spirits plant;
(b) Clearly distinguish between the bonded premises and any general premises;
(c) Provide directions and distances in enough detail to enable the appropriate TTB officer to readily determine the boundaries of the plant;
(d) Describe each building and outside tank that will be used for production, storage, and processing of spirits and for denaturing spirits, articles, or wines. The description must include the location, size, construction, and arrangement with reference to each by a designated number or letter; and
(e) Specify when only a room or floor of a building will be used for plant operations and provide the location and description of the building, floor, and room.
§ 19.75   Major equipment.
As required by § 19.73(a)(9), the application for registration must include a list of the major plant equipment. If the equipment is set up and used for the production, storage, or processing of distilled spirits, wine, denatured spirits, or articles, the list must provide the following information:
(a) The serial number and capacity of each tank in the plant. The list does not need to include any bulk containers having a capacity of less than 101 wine gallons on the plant premises if those containers do not meet the criteria of a tank under § 19.182 (perks, small totes, etc.);
(b) The serial number, kind, capacity, and intended use of each still in the plant. The capacity is the estimated maximum proof gallons of spirits capable of being produced every 24 hours, or for column stills a statement of the diameter of the base and number of plates; and
(c) The serial number of each condenser.
§ 19.76   Statement of plant security.
As required by § 19.73(a)(12), the application for registration must include a statement of plant security. This statement must include the following information:
(a) A general description of plant security, including methods used to secure buildings or plant operations located within a portion of a building and outdoor tanks;
(b) A statement regarding the use of guard personnel;
(c) A statement regarding the use of any electronic or mechanical alarm system;
(d) A statement certifying that locks used will meet the requirements of § 19.192(f); and
(e) A list of persons, by their position and title, who have the responsibility for the custody and access to keys for the locks.
§ 19.77   Statement of production procedure.
(a) As required by § 19.73(a)(13)(ii), the application for registration must include a statement of the step-by-step production procedure used to produce spirits from an original source. The statement must begin with the treating, mashing, or fermenting of the raw materials or substances and continue through each step of the distilling, purifying, and refining procedure to the production gauge. The statement must include the kind and approximate quantity of each material or substance used in producing, purifying, or refining each type of spirits that will be produced.
(b) If the applicant intends to redistill spirits in the production account, the applicant must submit and receive approval for such redistillation on form TTB F 5110.38, Formula for Distilled Spirits under the Federal Alcohol Administration Act.
§ 19.78   Power of attorney.
An applicant or proprietor of a distilled spirits plant must execute and submit to the appropriate TTB officer form TTB F 5000.8, Power of Attorney, for each person authorized to sign or to act on behalf of the applicant or proprietor unless the authority has been granted in the application for registration.
§ 19.79   Registry of stills.
Section 29.55 of this chapter requires that every person having possession, custody, or control of a still or distilling apparatus must register the still or distilling apparatus. When a person lists a still or distilling apparatus with the application for registration as required by § 19.75(b) and receives approval of the registration, that person has fulfilled the requirement to register the still or distilling apparatus. See § 29.55 of this chapter for additional provisions regarding stills and distilling apparatus.
§ 19.80   Approved notice of registration.
A person may not operate a distilled spirits plant unless a notice of registration has been approved by TTB authorizing the businesses and operations to be conducted at such plant. When approved by the appropriate TTB officer, the application for registration constitutes the notice of registration of the distilled spirits plant. A distilled spirits plant will not be registered or reregistered under this subpart until the applicant has complied with all requirements of law and regulations relating to the qualification of the business or operations in which the applicant intends to engage. In any instance where a person is required to have a bond or permit and the bond or permit becomes invalid, then the notice of registration also becomes invalid. Another application for registration must be filed and a new notice of registration approved by TTB before the business or operation at such plant may be resumed. Reregistration of a plant is not required when a new bond or a strengthening bond is filed in accordance with § 19.167 or § 19.168.
§ 19.81   Maintenance of registration file.
The proprietor must maintain the registration documents on the plant premises in a loose-leaf file that is current, complete, and readily available for inspection by the appropriate TTB officer.
§ 19.91   Operating permit.
(a) Except as provided in paragraph (b) of this section, a person must obtain an operating permit under the IRC in order to:
(1) Distill for industrial use;
(2) Warehouse spirits for industrial use;
(3) Denature spirits;
(4) Warehouse spirits (without bottling) for nonindustrial use;
(5) Bottle or package spirits for industrial use;
(6) Manufacture articles; or
(7) Engage in any other distilling, warehousing, or processing operation not required to be covered by a basic permit under the Federal Alcohol Administration Act (49 Stat. 978; 27 U.S.C. 203, 204).
(b) Exception. The requirement to obtain an operating permit does not apply to an agency of a State, or political subdivision of a State, or an officer or employee of, and acting for, such an agency.
§ 19.92   Information required in application for operating permit.
(a) In order to obtain an operating permit, a person must complete an application on form TTB F 5110.25, Application for Operating Permit Under 26 U.S.C. 5171(d). TTB will consider all written statements, affidavits and other documents submitted in support of the application as part of the application.
(b) The application on TTB F 5110.25 must include the following information:
(1) The name and principal address of the business;
(2) The address of the plant if different from the business address;
(3) A description of the operation(s) to be conducted;
(4) A statement of the business organization and the persons involved in the business as required under § 19.93; and
(5) A list of trade names as required under § 19.94.
(c) A TTB officer may request that any person listed under § 19.93(a)(1)(ii), (a)(3)(iii), (b)(1), or (b)(2) submit to TTB a statement as to whether that person has ever:
(1) Been convicted of a felony or misdemeanor under Federal or State law, other than a misdemeanor conviction for a traffic violation;
(2) Been arrested or charged with any violation of State or Federal law, other than an arrest or charge for a misdemeanor traffic violation; or
(3) Applied for, held, or been connected with a permit issued under Federal law to manufacture, distribute, sell or use spirits or products containing spirits, or held any financial interest in any business covered by any such permit, and if so, give the permit number, classification, period of operation and details regarding any denial, suspension, revocation or other termination.
(d) If any of the information required in paragraphs (b)(4) or (c)(3) of this section is on file with the appropriate TTB officer, the applicant may, by incorporation by reference, state that the information is made a part of the application for an operating permit.
(e) The applicant must provide any additional information that the appropriate TTB officer may request in order to determine whether the application should be approved.
§ 19.93   Applicant organization documents.
(a) Supporting information. Sections 19.73(a)(5) and 19.92(a)(4) require that the application for registration and the application for an operating permit include information about the business organization of the applicant. The applicant must provide the following information as applicable:
(1) If the applicant is a corporation—
(i) The corporate charter or other documentation that provides proof of corporate existence or incorporation;
(ii) Names and addresses of directors and officers;
(iii) Certified minutes, or extracts of board of directors meetings, that authorize specific individuals to sign for the corporation; and
(iv) A statement showing the number of shares of each class of stock or other evidence of ownership, authorized and outstanding, and the voting rights of the respective owners or holders.
(2) If the applicant is a partnership, a copy of the articles of partnership or association, or certificate of partnership or association if required to be filed by any State, county, or municipality.
(3) If the applicant is a limited liability company or limited liability partnership—
(i) A copy of the articles of organization;
(ii) A copy of the operating agreement; and
(iii) The names and addresses of all members and managers.
(b) Statement of interest —(1) Sole proprietorships and general partnerships. In the case of an individual owner or a general partnership, the applicant must provide the name and address of each person having an interest in the business and a statement indicating whether the interest appears in the name of the interested person or in the name of another person.
(2) Limited liability entities. In the case of a corporation, limited liability partnership, limited liability company, or other legal entity in which some or all of the owners have limited personal liability for the activities of the entity, the applicant must provide the following information about persons having an interest in the business:
(i) The names and addresses of the 10 persons that have the largest ownership or other interest in each of the classes of ownership of the applicant and the nature and amount of ownership or other interest of each person.
(ii) The name of the person in whose name the interest appears. If the corporation is wholly owned or controlled by another corporation, the appropriate TTB officer may request the same information regarding ownership for the parent corporation.
§ 19.94   Trade names.
(a) Operating permits. The applicant must include a list of any trade names used in the operation of the plant with form TTB F 5110.25, Application for Operating Permit Under 26 U.S.C. 5171(d). The applicant must show the operations for which the trade name will be used and identify the offices where the trade name is registered. The applicant must also submit copies of any certificate or other document filed or issued for each trade name.
(b) Basic permits. If the applicant is required to have a basic permit under the Federal Alcohol Administration Act (49 Stat. 978; 27 U.S.C. 203, 204) for distilling, warehousing, or processing operations, then the applicant must follow the regulations under that Act for the approval and use of trade names.
§ 19.95   Issuance of operating permits.
TTB will issue only one operating permit for a distilled spirits plant. The permit will designate the operations that are authorized at the plant. The proprietor must post the permit at the distilled spirits plant and have it available for inspection by appropriate TTB officers.
§ 19.96   Denial of permit.
TTB will conduct proceedings for the denial of an application for an operating permit in accordance with the procedures set forth in part 71 of this chapter if the appropriate TTB officer has reason to believe that:
(a) The applicant (including, in the case of a corporation, any officer, director, or principal stockholder, and, in the case of a partnership, a partner) is, by reason of business experience, financial standing, or trade connections, not likely to maintain operations in compliance with 26 U.S.C. chapter 51, or the regulations issued thereunder;
(b) The applicant failed to disclose any material information required, or has made a false statement as to any material fact in connection with the application; or
(c) The premises where the applicant proposes to conduct the operations are not adequate to protect the revenue.
§ 19.97   Correction of permit.
If requested by the appropriate TTB officer, a proprietor must immediately return for correction any operating permit that contains an error.
§ 19.98   Duration of permit.
The proprietor may conduct the operations authorized by the operating permit on a continuing basis unless:
(a) The proprietor voluntarily surrenders the permit;
(b) TTB suspends or revokes the permit pursuant to § 19.99; or
(c) The permit is automatically terminated under its own terms or in accordance with § 19.127.
§ 19.99   Suspension or revocation of permit.
TTB will conduct proceedings to revoke or suspend an operating permit in accordance with the procedures set forth in part 71 of this chapter if the appropriate TTB officer has a reason to believe that the proprietor or any person associated with the operating permit:
(a) Has not complied in good faith with the provisions of 26 U.S.C. chapter 51 or the regulations issued thereunder;
(b) Has violated the conditions of the permit;
(c) Has made a false statement as to any material fact in the application for the permit;
(d) Has failed to disclose any required material information;
(e) Has violated or conspired to violate any law of the United States relating to intoxicating liquor;
(f) Has been convicted of any offense under title 26 U.S.C. punishable as a felony or of any conspiracy to commit such an offense; or
(g) Has not engaged in any of the operations authorized by the permit for a period of more than 2 years.
§ 19.111   Scope.
This subpart explains the requirements for amending a distilled spirits plant registration and, if applicable, an operating permit. For information regarding amendments to a basic permit issued under the Federal Alcohol Administration Act, see part 1 of this chapter.
§ 19.112   General rules for amending a registration.
If there is a change in any of the information in the proprietor's current, approved notice of registration, the proprietor must amend the registration within 30 days of the change unless another time period is specified in this subpart. To amend a registration the proprietor must submit in writing to the appropriate TTB officer any information necessary to make the registration file current and accurate.
(a) TTB F 5110.41. Except when a letterhead application or letterhead notice procedure is allowed under this subpart, the proprietor must submit an amended form TTB F 5110.41, Registration of Distilled Spirits Plant, for changes that affect the registration. If the changes affect only parts or pages of the registration the proprietor only needs to submit the necessary pages or information that will make the registration file current.
(b) Letterhead applications. For certain changes specified in this subpart the proprietor may submit a letterhead application for a change instead of an amended TTB F 5110.41. The letterhead application must identify the distilled spirits plant to which the change applies and clearly identify the change. Any change is subject to TTB approval. The appropriate TTB officer may, at any time, require that the proprietor submit an amended application on TTB F 5110.41 if administrative difficulties occur as a result of the letterhead application.
(c) Letterhead notices. For certain changes specified in this subpart only a letterhead notice is required. The letterhead notice must identify the distilled spirits plant to which the change applies and clearly identify the change. A letterhead notice does not require approval by TTB. The appropriate TTB officer may, at any time, require that the proprietor submit an amended application on TTB F 5110.41 if administrative difficulties occur as a result of the letterhead notice.
§ 19.113   Change in name of proprietor.
If the name of the of the proprietor changes, the proprietor may not conduct operations under the new name before TTB approves the amended registration. The proprietor must file either an amended form TTB F 5110.41, Registration of Distilled Spirits Plant, or a letterhead application to reflect the change. However, the proprietor does not have to file a new bond or consent of surety.
§ 19.114   Changes in stockholders or persons with interest.
The proprietor must notify TTB of any changes in the list of stockholders or persons with interest that was filed with TTB as required by § 19.93. If the change results in a change of control, the proprietor must file form TTB F 5110.41, Registration of Distilled Spirits Plant, within 30 days of the change. If the change does not cause a change of control, the proprietor:
(a) May file a letterhead notice to amend the registration;
(b) May file the amended notice on May 1 of each year rather than within 30 days of the change, or on any other date that the appropriate TTB Officer may approve; and
(c) Must incorporate all changes submitted by letterhead notice in the next TTB F 5110.41 filed.
§ 19.115   Change in officers, directors, members, or managers
(a) General. If there is a change in the list of officers, directors, members or managers that the proprietor filed as required by § 19.93 the following rules apply:
(1) The proprietor must file an amended form TTB F 5110.41, Registration of Distilled Spirits Plant, or a letterhead notice to reflect the change;
(2) The proprietor must provide the name and address of each new officer, director, member or manager; and
(3) The proprietor must incorporate all changes submitted by letterhead notice in the next TTB F 5110.41 filed.
(b) Waiver. The appropriate TTB officer may waive the requirement to amend the registration if the change only relates to corporate officers listed on the original or current registration who are no longer connected with the operations covered by the registration.
§ 19.116   Change in proprietorship.
(a) General. If there is a change in proprietorship at a distilled spirits plant, the following requirements apply to the outgoing proprietor and to the incoming (successor) proprietor.
(1) Outgoing proprietor. An outgoing proprietor must comply with the requirements of § 19.147. An outgoing proprietor may transfer spirits to its successor in accordance with § 19.141.
(2) Incoming proprietor. A successor to the proprietorship of a plant that holds a registration:
(i) Must file form TTB F 5110.41, Registration of Distilled Spirits Plant, and receive from TTB an approved notice of registration of the plant;
(ii) Must file the required bonds, subject to the exemption provided in § 19.151(d); and
(iii) May adopt the approved formulas of its predecessor in accordance with §§ 5.194 and 20.63 of this chapter.
(b) Fiduciary. If the successor to the proprietorship of a plant is an administrator, executor, receiver, trustee, assignee or other fiduciary, the successor must comply with the provisions of paragraph (a)(2) of this section. The following rules also apply in this case:
(1) The fiduciary may furnish a consent of surety to extend the terms of the predecessor's bond instead of filing a new bond;
(2) The fiduciary may incorporate by reference in the application for registration on TTB F 5110.41 any information contained in the predecessor's application for registration that is still current;
(3) The successor must furnish a certified copy of the order of the court or other pertinent document showing the successor's qualification as fiduciary; and
(4) The effective date of the qualifying documents that the fiduciary files will be the date of the court order, the date specified in the order whereby the fiduciary assumes control, or if there is no court order, the date that the fiduciary assumed control.
§ 19.117   Partnerships.
(a) If there is a death or insolvency of a partner in the business registered under this part, the surviving partner or partners may continue to operate under the notice of registration if:
(1) The partnership is not terminated under the laws of the particular State but continues until the winding up of the partnership affairs is complete;
(2) The surviving partner or partners have exclusive right to the control and possession of the partnership assets for purposes of liquidation and settlement; and
(3) A consent of surety is filed where the surety and the surviving partner or partners agree to remain liable on the operations or unit bond.
(b) If the surviving partner or partners acquire the business upon settlement of the partnership, the surviving partner or partners must file as an incoming proprietor and receive an approved notice of registration of the plant in accordance with § 19.116(a).
§ 19.118   Change in location.
(a) If the location of the plant changes, the proprietor must:
(1) File form TTB F 5110.41, Registration of Distilled Spirits Plant, to amend the registration;
(2) File a new bond or a consent of surety on form TTB F 5000.18, subject to the exemption provided in § 19.151(d); and
(3) Not begin operations at the new location prior to approval of the amended registration.
(b) If there is a temporary change of delivery address within a plant with no change in plant location, the proprietor may file a letterhead notice to temporarily amend the registration.
§ 19.119   Change in premises.
If the proprietor intends to extend or curtail any part of the plant premises, except under alternate operations that are covered by §§ 19.142 and 19.143, the proprietor must file form TTB F 5110.41, Registration of Distilled Spirits Plant, to amend the registration. The proprietor must not extend or curtail any premises or equipment before the amended registration is approved.
§ 19.120   Change in operations.
(a) If the proprietor wishes to conduct additional operations involving spirits, other than those approved on the current registration, the proprietor must:
(1) File form TTB F 5110.41, Registration of Distilled Spirits Plant, to amend the registration; and
(2) Not engage in the additional operations prior to approval of the amended registration.
(b) If the proprietor wishes to engage in another business that is authorized under § 19.55 the proprietor must:
(1) File TTB F 5110.41 to amend the registration;
(2) Include the information required under § 19.73(b); and
(3) Not engage in the other business until approval of the amended registration is received.
§ 19.121   Change in production procedure.
If the proprietor plans to produce a new product or make a change to the production procedure that will affect the designation of the product or substantially affect the character of the product, the proprietor must:
(a) File form TTB F 5110.41, Registration of Distilled Spirits Plant, to amend the registration;
(b) Provide a new statement of production procedure as described in § 19.77; and
(c) Receive approval of the amended registration before implementing the change in the production procedure.
§ 19.122   Change in construction or use of buildings and equipment.
(a) The proprietor must submit a letterhead notice before making any material change in the construction or use of buildings or equipment at the plant other than changes covered by § 19.119, § 19.142 or § 19.143. The proprietor must:
(1) Describe the proposed change in detail;
(2) Keep a copy of the letterhead notice on file with the current notice of registration; and
(3) Incorporate the change in the next amendment to the registration submitted on form TTB F 5110.41, Registration of Distilled Spirits Plant, unless the appropriate TTB officer requires immediate submission of an amended TTB F 5110.41.
(b) The proprietor may make emergency changes in construction or use of buildings and equipment without prior letterhead notice. However, the proprietor must promptly report any emergency change to the appropriate TTB officer.
§ 19.123   Statement of plant security.
If the proprietor makes changes to the personnel listed, or procedures contained in, the statement of plant security filed under § 19.76, the proprietor must:
(a) File a form TTB F 5110.41, Registration of Distilled Spirits Plant, or a letterhead application to amend the registration, in the case of any change in the description of plant security, employment of guard personnel, use of electronic or mechanical alarm system, or certification of required locks required under § 19.76(a) through (d);
(b) File a letterhead notice for any change in personnel who have custody and access to keys for the required locks as provided under § 19.76(e); and
(c) Incorporate any changes filed by letterhead notice in the next amendment to the registration on TTB F 5110.41 submitted, unless the appropriate TTB officer requires an immediate submission of TTB F 5110.41.
§ 19.126   General rules for amending an operating permit.
(a) When and how to amend. If there is a change in any of the information that the proprietor provided as part of the current approved application for an operating permit, the proprietor must amend the operating permit by submitting written documentation in accordance with this section to the appropriate TTB officer in writing within 30 days of the change unless another time period is specified in this subpart.
(1) TTB F 5110.25. Except when a letterhead application or letterhead notice procedure is allowed under this subpart, the proprietor must amend the operating permit by submitting an amended form TTB F 5110.25, Application for Operating Permit Under 26 U.S.C. 5171(d). If the changes only affect parts or pages of the application for an operating permit the proprietor only needs to submit the necessary pages or information that will make the permit file current.
(2) Letterhead applications. For certain changes specified in this subpart, the proprietor may submit a letterhead application instead of an amended TTB F 5110.25. The letterhead application must identify the distilled spirits plant for which the application applies. The letterhead application change is subject to TTB approval. The appropriate TTB officer may, at any time, require that the proprietor submit an amended application on TTB F 5110.25 if administrative difficulties occur as a result of the letterhead application.
(3) Letterhead notices. For certain changes noted in this subpart only a letterhead notice is required. A letterhead notice does not require approval by TTB. The appropriate TTB officer may, at any time, require that the proprietor submit amended application on TTB F 5110.25 if administrative difficulties occur as a result of the letterhead notice.
(b) FAA Act permits. If there are changes that affect a basic permit issued under the Federal Alcohol Administration Act, the proprietor must amend the basic permit in accordance with the procedures set forth in part 1 of this chapter.
§ 19.127   Automatic termination of permits.
(a) Operating permits. An operating permit is not transferable. The proprietor's operating permit will automatically terminate in the following circumstances:
(1) If the operations that are authorized by the permit are leased, sold or transferred;
(2) If the company is dissolved on a certain date by an event specified in the laws of the State where the company operates; or
(3) In the case of a corporation, if actual or legal control of the corporation changes, directly or indirectly, whether by reason of change in stock ownership or control, by operation of law, or in any other manner, the permit will terminate 30 days after the change in control. However, if an application for a new permit covering the operations is made within this 30 day period, then the operating permit may remain in effect until TTB takes final action upon the new application. TTB's final action on the new application will automatically terminate the outstanding permit.
(b) Basic permits. For provisions related to the automatic termination of an FAA Act basic permit, see part 1 of this chapter.
§ 19.128   Change in name of proprietor.
If the name of the proprietor changes, the proprietor must file a letterhead application to amend the operating permit. The proprietor may not conduct operations under the new name before TTB approves the amended operating permit. However, the proprietor does not have to file a new bond or consent of surety.
§ 19.129   Change in trade name.
If the proprietor intends to change or add a trade name that will be used in the operation of the plant, the proprietor must file a letterhead application to amend the operating permit. The proprietor may not conduct operations under the new trade name before TTB approves the amended operating permit. However, the proprietor will not be required to file a new bond or consent of surety.
§ 19.130   Changes in stockholders or persons with interest.
The proprietor must notify TTB of any changes in the list of stockholders or persons with interest that was filed with TTB as required by § 19.93(b). If the change results in a change of control, the proprietor must file form TTB F 5110.25, Application for Operating Permit Under 26 U.S.C. 5171(d), within 30 days of the change. If the change does not cause a change in control the proprietor:
(a) May file a letterhead notice to amend the operating permit;
(b) May file the amended notice the May 1st following the change in control year rather than within 30 days of the change, or on any other date that the appropriate TTB officer may approve; and
(c) Must incorporate all changes submitted by letterhead notice in the next TTB F 5110.25 filed.
§ 19.131   Changes in officers, directors, members, or managers.
(a) General. If there is a change in the list of officers, directors, members or managers that the proprietor filed as required by § 19.93, the proprietor must:
(1) File form TTB F 5110.25 Application for Operating Permit Under 26 U.S.C. 5171(d) or a letterhead notice to amend the operating permit;
(2) Provide the name and address for each new officer, director, member or manager; and
(3) Incorporate all changes submitted by letterhead notice in the next TTB F 5110.25 filed.
(b) Waiver. The appropriate TTB officer may waive the requirement to amend the operating permit if the changes relate to corporate officers listed on the original or current permit who are no longer connected with the operations covered by the permit.
§ 19.132   Change in proprietorship.
(a) General. If there is a change in proprietorship at a distilled spirits plant that holds an operating permit, the following requirements apply to the outgoing proprietor and to the incoming (successor) proprietor.
(1) Outgoing proprietor. An outgoing proprietor must comply with the requirements of § 19.147. An outgoing proprietor may transfer spirits to its successor an accordance with § 19.141.
(2) Successor proprietor. A successor to the proprietorship of a plant that holds an operating permit:
(i) Must file form TTB F 5110.25 Application for Operating Permit Under 26 U.S.C. 5171(d) and obtain an operating permit;
(ii) Must file the required bonds, subject to the exemption provided in § 19.151(d); and
(iii) May adopt the approved formulas of its predecessor in accordance with §§ 5.194 and 20.63 of this chapter.
(b) Fiduciary. If the successor to the proprietorship of a plant is an administrator, executor, receiver, trustee, assignee, or other fiduciary, the successor must comply with the provisions of paragraph (a)(2) of this section. The following rules also apply in this case:
(1) The fiduciary may furnish a consent of surety to extend the terms of the predecessor's bond instead of filing a new bond;
(2) On TTB F 5110.25, Application for Operating Permit Under 26 U.S.C. 5171(d), the fiduciary may incorporate by reference any information contained in the predecessor's application that is still current;
(3) The successor must furnish a certified copy of the order of the court or other pertinent document showing the successor's qualification as fiduciary; and
(4) The effective date of the qualifying documents that the fiduciary files will be the date of the court order, the date specified in the order whereby the fiduciary assumes control, or if there is no court order, the date that the fiduciary assumed control.
§ 19.133   Partnerships.
(a) If there is a death or insolvency of a partner in a company that holds an operating permit under this part, the surviving partner or partners may continue to operate under the operating permit if:
(1) The partnership is not terminated under the laws of the particular State but continues until the winding up of the partnership affairs is complete;
(2) The surviving partner or partners have exclusive right to the control and possession of the partnership assets for purposes of liquidation and settlement; and
(3) A consent of surety is filed where the surety and the surviving partner or partners agree to remain liable on the operations or unit bond.
(b) If the surviving partner or partners acquire the business upon settlement of the partnership, the surviving partner or partners must file as an incoming proprietor and receive approval of the operating permit as required under § 19.132(a)(2).
§ 19.134   Change in location.
If the location of the plant changes, the proprietor must:
(a) File form TTB F 5110.25, Application for Operating Permit Under 26 U.S.C. 5171(d), to amend the operating permit;
(b) File a new bond or a consent of surety on form TTB F 5000.18, subject to the exemption provided in § 19.151(d); and
(c) Not begin operations at the new location prior to approval of the amended operating permit.
§ 19.135   Change in operations.
If the proprietor wishes to conduct additional operations involving spirits, other than those already approved on the current operating permit, the proprietor must:
(a) File form TTB F 5110.25 Application for Operating Permit Under 26 U.S.C. 5171(d) to amend the permit; and
(b) Not engage in the additional operation prior to approval of the amended permit.
§ 19.136   Change in bond status.
A proprietor must file TTB F 5110.41, Registration of Distilled Spirits Plant, to amend the registration relating to the proprietor's bond status if either of the following occurs:
(a) A proprietor who has not furnished any bond becomes required to furnish a bond as provided under § 19.168(b); or
(b) A proprietor who has furnished a bond becomes exempt from bond requirements under § 19.151(d) and chooses to terminate all bond coverage as provided under § 19.170(e).
§ 19.141   Procedures for alternation of proprietors.
(a) General. A proprietor may alternate use of a distilled spirits plant or part of the plant with one or more other proprietors. In order to do so, each proprietor must separately file and receive approval of the necessary registration, applications and bonds that are required by subparts D and E of this part. Each proprietor must also conduct operations and keep records in accordance with the regulations in this part. Where operations by alternating proprietors will be limited to parts of the plant, each proprietor must include the following in the notice of registration:
(1) A description of the areas, rooms or buildings, or combination of rooms or buildings that will alternate between proprietors;
(2) The method that the proprietor will use to separate the alternated premises from any premises that will not be alternated; and
(3) Diagrams of the parts of the plant that will be alternated.
(b) Letterhead notice. After a proprietor receives approval to alternate use of the premises with another proprietor, the alternating proprietors must separately file letterhead notices each time they intend to alternate use of the premises. The proprietors may file a single notice if the notice is signed by each proprietor or an authorized representative of each proprietor. The proprietors must submit the letterhead notice to the appropriate TTB officer prior to the first day that alternation is to take place. Proprietors must include the following with the notice:
(1) The plant number and the name of the proprietor filing the notice;
(2) Identification of the outgoing proprietor and incoming proprietor (by name and plant number);
(3) The effective date and hour of the alternation;
(4) Identification of any applicable diagrams provided with the registration of each proprietor filed under paragraph (a) of this section, showing the portions of the premises involved in the alternation;
(5) The purpose of the alternation;
(6) If distilling materials, unfinished or finished spirits, denatured spirits, or wine will be transferred to the incoming proprietor, a statement to that effect; and
(7) If denatured spirits or articles will be retained in the processing account in locked tanks during the period of alternate proprietorship, a statement to that effect.
(c) Alternation of production operations. In the case of an outgoing proprietor who intends to alternate production operations with another proprietor, the outgoing proprietor must:
(1) Completely process all distilling materials and unfinished spirits in any bonded areas, rooms, or buildings that will alternate unless the outgoing proprietor transfers them to the incoming proprietor; and
(2) Mark and remove all finished spirits in the name in which they were produced before a production gauge is made by the incoming proprietor.
(d) Alternation of storage operations. In the case of an outgoing proprietor who intends to alternate storage operations with another proprietor, the outgoing proprietor must:
(1) Transfer in bond any spirits or wines in any bonded areas, rooms, or buildings that will be alternated; and
(2) Except where no bond is required under § 19.151(d), execute a form TTB F 5000.18, Change of Bond (Consent of Surety), to continue in effect the operations or unit bond whenever operations of the areas, rooms, or buildings will be resumed by the outgoing proprietor following suspension of operations by the other proprietor.
(e) Alternation of processing operations. In the case of an outgoing proprietor who intends to alternate processing operations with another proprietor, the outgoing proprietor:
(1) Before the effective date and time of the alternation, must process to completion and remove from the affected area all spirits, denatured spirits, wines, or articles located in any rooms, areas, or buildings that will alternate, or must transfer these spirits, wines, and articles in bond to the incoming proprietor;
(2) Except where no bond is required under § 19.151(d), must execute a TTB F 5000.18, Change of Bond (Consent of Surety), to continue in effect the operations or unit bond whenever operations of the areas, rooms, or buildings will be resumed by the outgoing proprietor following suspension of operations by the other proprietor; and
(3) May retain denatured spirits and articles in tanks locked with approved locks if the outgoing proprietor maintains custody and control of the locks and keys for the tanks. In this case, the outgoing proprietor must obtain a consent of surety on TTB F 5000.18 to continue liability on the operations or unit bond for the tax on the denatured spirits or articles that retained in the locked tanks.
(f) Records. Each alternating proprietor must maintain its own records and submit its own reports. Records kept by an outgoing proprietor for spirits, wines, and alcoholic flavoring materials may be used by the incoming proprietor. All transfers of distilling materials, unfinished spirits, spirits, denatured spirits, and wines must be reflected in the records of each proprietor.
§ 19.142   Alternate use of premises and equipment for customs purposes.
(a) General. The proprietor may extend or curtail the distilled spirits plant premises or a part of those premises for temporary use by U.S. Customs and Border Protection officers for customs purposes. If the proprietor wishes to alternate the use of the premises for customs purposes, that use must be approved by the port director of customs and must be conducted in accordance with applicable customs laws and regulations.
(b) Qualification. Before alternating the plant premises for customs purposes, the proprietor must file and receive approval of the necessary registration, application and bonds as required by this part. The proprietor's application for registration must include the following:
(1) A description of the areas, rooms or buildings, or combination of rooms or buildings that will be alternated;
(2) A diagram of the parts of the plant that the proprietor will use for the alternation; and
(3) The method that the proprietor will use to separate the alternated premises from any premises not subject to alternation.
(c) Letterhead notice. After the proprietor receives approval to alternate premises for customs purposes, the proprietor must file a letterhead notice with the appropriate TTB officer each time the premises will be alternated. The notice must include the following information:
(1) The name and plant number of the proprietor filing the notice;
(2) The date and hour the alternation will take place;
(3) Identification of any applicable diagrams provided with the registration filed under paragraph (b) of this section, showing the portions of the premises involved in the alternation;
(4) The purpose of the alternation;
(5) If the alternation is for gauging or processing distilled spirits, a statement to that effect; and
(6) An indication of the class of temporary customs warehouse, if applicable.
(d) Proprietor responsibilities. Prior to the start of alternation for customs purposes, the proprietor must remove all spirits from the premises or equipment that will be involved in the alternation. However, upon release by customs, spirits in the process of being transferred to bonded premises under 26 U.S.C. 5232 may remain on the premises to be reincluded in the bonded premises.
(e) Exceptions. The qualification requirements in paragraph (b) of this section and the notice requirements in paragraph (c) of this section will not apply where the proprietor solely intends to gauge bulk distilled spirits for transfer from customs custody to bonded premises.
(f) Conveyance of spirits in customs custody. If the proprietor intends to convey spirits in customs custody across the distilled spirits plant premises the proprietor must comply with § 19.60.
§ 19.143   Alternation for other purposes.
(a) General. The proprietor may temporarily extend or curtail the distilled spirits plant premises to allow for several other types of alternate uses. Premises may be alternately curtailed or extended to allow bonded premises to be used temporarily as general premises, or to allow general premises to be used as bonded premises. A curtailment or extension of distilled spirits plant premises may also allow for the use of the premises as:
(1) An adjacent bonded wine cellar;
(2) An adjacent taxpaid wine bottling house;
(3) An adjacent brewery; or
(4) Facilities for the manufacturer of eligible flavors.
(b) Qualifying documents. Before alternating the premises for a purpose listed in paragraph (a) of this section, the proprietor must file and receive approval of the necessary registration, application forms and attachments that relate to the proposed alternate use. Depending on the type of alternation involved, the proprietor must file one or more of the following qualification documents:
(1) Registration. For all alternate uses of the distilled spirits plant described in paragraph (a) of this section the proprietor must file a form TTB F 5110.41, Registration of a Distilled Spirits Plant, to cover the proposed alternation of premises.
(2) Diagram. For all alternate uses, the proprietor must provide a special diagram, in duplicate, delineating the premises as they will exist, both during extension and curtailment and clearly depicting all buildings, floors, rooms, areas, equipment that are to be subject to alternation, in their relative operating sequence.
(3) Bond. For all alternate uses, the proprietor must provide evidence of an existing bond, consent of surety, or a new bond to cover the proposed alternation of premises. This requirement does not apply if no bond is required under this chapter to cover the proposed alternation.
(4) Bonded wine cellar or taxpaid wine bottling house. If the proprietor intends to alternate the premises or part of the premises as a bonded wine cellar or taxpaid wine bottling house the proprietor must also file form TTB F 5120.25, Application to Establish and Operate Wine Premises.
(5) Brewery. If the proprietor intends to alternate the premises or part of the premises for a brewery operation the proprietor must file form TTB F 5130.10, Brewer's Notice.
(c) Separation of premises. The proprietor must separate the distilled spirits plant premises from the alternate use premises in accordance with the approved plan of alternation described in the qualifying documents.
(d) Segregation of products. When the proprietor alternates premises, the proprietor must segregate products as follows:
(1) Wine operations. (i) Prior to alternation from distilled spirits plant premises to wine premises, the proprietor must remove all distilled spirits, denatured spirits, articles, and wine from the distilled spirits plant premises that will be alternated. However, the proprietor may keep spirits on the premises if they are being withdrawn for use in wine production under § 19.419, or for use in the production of nonbeverage wine or wine products under § 19.421. Further, the proprietor may keep wine on the premises if it is to be transferred in bond under § 19.402(b)(2).
(ii) Prior to alternation from wine premises to distilled spirits plant premises, the proprietor must remove all wine and spirits from the wine premises that will be alternated. However, the proprietor may keep wine on the premises if it is being transferred in bond under § 19.402(b)(1). Further, the proprietor may keep spirits on the premises if they are being returned from bonded wine cellar premises to distilled spirits plant bonded premises under § 19.454.
(2) Brewery. Prior to alternation from distilled spirits plant premises to operation of a brewery the proprietor must remove all spirits, denatured spirits, articles and wine from the premises to be alternated to brewery premises. Prior to alternation of brewery premises to distilled spirits plant premises, the proprietor must remove all beer from the premises except beer that is being received for production of distilled spirits as provided in § 19.296.
(3) General premises. Prior to alternation between bonded and general premises, the proprietor must remove all spirits, denatured spirits, articles and wine from the premises to be alternated. However, the proprietor may keep bonded spirits on portions of bonded premises to be alternated to general premises if the spirits are taxpaid concurrently with the alternation. Also, the proprietor may keep taxpaid spirits on general premises that will be alternated to bonded premises if the spirits are to be immediately dumped and returned to bond under the provisions of subpart Q of this part.
(4) Manufacture of nonbeverage products. Prior to alternation of the distilled spirits plant premises for use in the manufacture of eligible flavors, the proprietor must remove all spirits, denatured spirits, articles and wine from the premises to be alternated. However, the proprietor may keep spirits on portions of the premises to be curtailed if the proprietor pays the tax concurrent with the alternation. Further, the proprietor may keep taxpaid spirits that have not been used in the manufacture of a nonbeverage product on parts of the premises to be included in the extension of the bonded premises if the spirits are to be immediately dumped and returned to bond under the provisions of subpart Q of this part.
(e) Records. The proprietor must prepare the record of alternating premises prescribed by § 19.627 each time that the proprietor alternates premises.
§ 19.144   Alternation of distilled spirits plant and volatile fruit-flavor concentrate plant premises.
The proprietor may temporarily extend or curtail the distilled spirits plant premises for alternate use with the premises of a contiguous volatile fruit-flavor concentrate plant. If a proprietor wishes to use all or a portion of the premises alternately as a volatile fruit-flavor concentrate plant or vice versa, the proprietor must comply with the requirements of §§ 18.39 and 18.41 through 18.43 of this chapter.
§ 19.147   Notice of discontinuance of operations.
If the proprietor plans to permanently discontinue one or more of the operations listed on the notice of registration filed under subpart D of this part, the proprietor must notify the appropriate TTB officer by filing form TTB F 5110.41, Registration of Distilled Spirits Plant, to show discontinuance of operations. The proprietor must submit the following with TTB F 5110.41:
(a) The permit covering each discontinued operation;
(b) A written request for cancellation of the permit(s);
(c) A written statement indicating whether or not—
(1) The proprietor has lawfully disposed of all spirits, denatured spirits, articles, wines, liquor bottles, and other pertinent items;
(2) There are any spirits, denatured spirits, wines, or liquor bottles in transit to the premises; and
(3) The proprietor has secured and returned to the appropriate TTB officer for cancellation all approved applications for transfer of spirits and denatured spirits to the premises; and
(d) A final monthly operations report, as provided for under § 19.632, for each discontinued operation, with each report marked “Final Report.”
§ 19.151   General.
(a) Bond required. Except as provided in paragraph (d) of this section, any person who plans to establish and operate a distilled spirits plant must provide TTB with one or more bonds on form TTB F 5110.56, Distilled Spirits Bond. TTB will not approve a registration or allow a person to operate a distilled spirits plant until the applicant has provided the necessary bonds. If a proprietor fails to pay any liability covered by a bond, TTB may seek payment from the proprietor, from the surety (see § 19.153) or from both the proprietor and the surety. The types and penal sums of bonds required will depend upon the type and size of the operations that the proprietor will conduct.
(b) Bond terms and conditions. The terms and conditions of a distilled spirits bond require that the proprietor comply with all provisions of law and regulations relating to activities covered by the bond, and to pay all taxes imposed by 26 U.S.C. chapter 51, including taxes on unexplained shortages of bottled distilled spirits. The bond will further specify that the proprietor will pay all penalties incurred, or fines imposed, for violations of law and regulations relating to activities covered by the bond. The specific terms of the required bond(s) are stated on TTB F 5110.56.
(c) Corporations and controlled subsidiaries. For purposes of this subpart, the term “corporation” includes a Limited Liability Company (LLC) or Limited Liability Partnership (LLP) in any jurisdiction where the law authorizes such a business organization to operate. Whenever used in this subpart, the term “controlled subsidiary” means a corporation (or LLC or LLP) in which more than 50 percent of the voting power is controlled by a parent corporation.
(d) Bonds covering distilled spirits for nonindustrial use and industrial use —(1) Nonindustrial use. A proprietor who pays tax on a deferred basis under § 19.235 is not required to provide a bond or bonds to cover operations and withdrawals of distilled spirits for nonindustrial use during any portion of a calendar year for which the proprietor is eligible to use an annual or quarterly return period under § 19.235(b) or (c). For purposes of the preceding sentence, a proprietor is considered to be paying tax on a deferred basis even if the proprietor does not pay tax during every return period as long as the proprietor intends to pay tax in a future period. See §§ 19.73 and 19.136 for rules governing applying for this bond exemption. See § 19.168(b) for rules governing when an existing proprietor who has not provided a bond under this paragraph must obtain bond coverage.
(2) Industrial use. A proprietor is required to provide one or more bonds to cover operations and withdrawals of distilled spirits for industrial use even if the proprietor pays tax on a deferred basis under § 19.235 and is eligible to use an annual or quarterly return period under § 19.235(b) or (c). In the case of a proprietor whose operations involve distilled spirits for both nonindustrial and industrial use, distilled spirits are considered to be for industrial use for purposes of this paragraph unless the proprietor designates the spirits as being solely for nonindustrial use either upon taking the production gauge (see § 19.304) or upon receiving the spirits and, in either case, does not thereafter mix the spirits with any spirits for industrial use.
(3) Nonindustrial use and industrial use defined. See § 19.472 for the provisions defining the nonindustrial and industrial uses of distilled spirits.
§ 19.152   Types of bonds.
(a) Basic Bonds. There are two basic types of bonds: the operations bond, and the withdrawal bond.
(1) Operations bond. An operations bond covers the tax liability for a variety of operations at a distilled spirits plant, along with any penalties incurred and fines imposed for violation of the law and regulations relating to activities covered by the bond.
(2) Withdrawal bond. A withdrawal bond covers the tax liability for tax determined distilled spirits withdrawn from the bonded premises on a tax deferred basis.
(b) Other bonds. In addition to the basic operations and withdrawal bonds, several variations of these bonds are available:
(1) An adjacent wine cellar bond covers operations at a distilled spirits plant and an adjacent bonded wine cellar;
(2) An area bond covers operations at two or more distilled spirits plant and any adjacent bonded wine cellars; and
(3) A unit bond covers both operations and withdrawals at one or more distilled spirits plants and operations at any adjacent bonded wine cellars.
§ 19.153   Bond guaranteed by a corporate surety.
(a) Corporate surety. A company that issues bonds is called a “corporate surety.” Proprietors must obtain the surety bonds required by this subpart from a corporate surety approved by the Secretary of the Treasury.
(b) How to find an approved surety. The Department of the Treasury publishes a list of approved corporate surety companies in Treasury Department Circular 570, Companies Holding Certificates of Authority as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring Companies. Treasury Department Circular 570 is published in the Federal Register annually on the first business day in July, and supplemental changes are published periodically thereafter (see https://www.federalregister.gov ). The most recent circular and any supplemental changes to it may be viewed on the Bureau of the Fiscal Service website (see https://fiscal.treasury.gov ).
§ 19.154   Bond guaranteed by deposit of securities or cash (including cash equivalents).
(a) Bond guaranteed by deposit of securities —(1) General. As an alternative to the corporate surety bond under § 19.153, a person can file a bond that guarantees payment of the liability by pledging one or more acceptable negotiable securities. These securities must have a par value (face amount) equal to or greater than the penal sums of the required bonds. The pledged securities are held in the Federal Reserve Bank in a safekeeping account with TTB as the pledgee. Should the proprietor fail to pay one or more of the guaranteed liabilities, TTB can take action to sell the deposited securities to satisfy the debt. Pledged securities will be released if there are no outstanding liabilities when the bond is terminated. (See § 19.170.)
(2) Acceptable securities. Only public debt obligations of the United States, the principal and interest of which are unconditionally guaranteed by the United States Government, are acceptable for the purpose described in paragraph (a)(1) of this section. The Department of the Treasury and certain other United States Government agencies issue debt instruments that are acceptable as collateral, such as Treasury notes and Treasury bills. Savings bonds, certificates of deposit and letters of credit are not acceptable. A list of securities acceptable as collateral in lieu of surety bonds is available from the Bureau of the Fiscal Service. Current information and guidance from the Bureau of the Fiscal Service Web site may be found at https://www.fiscal.treasury.gov.
(b) Bond guaranteed by deposit of cash or cash equivalent. As an alternative to the corporate surety bond under § 19.153, a person can file a bond that guarantees payment of the liability by submitting cash or its equivalent (including a money order, cashier's check, or personal check). Cash or its equivalent must be no less than the penal sums of the required bond. Cash equivalents must be payable to the Alcohol and Tobacco Tax and Trade Bureau. A bond described in this paragraph will be released if there are no outstanding liabilities when the bond is terminated. (See § 19.170.)
§ 19.155   Change of surety bond terms—consent of surety.
In order to change the terms of an approved bond, both the principal and the surety company that guaranteed the bond must agree to the change. TTB must also approve the change. All changes to the terms of a bond must be executed on form TTB F 5000.18, Change of Bond (Consent of Surety) by both the principal and the surety with the same formality and proof of authority as required for the original bond. The completed, executed TTB F 5000.18 must be submitted to the National Revenue Center.
§ 19.156   Power of attorney for surety.
(a) Requirement for power of attorney. Every bond and every consent of surety filed with TTB in which an agent or officer executed the bond or consent on behalf of the surety must be supported by a power of attorney authorizing the agent or officer to execute the bond or consent of surety. The power of attorney assures TTB that the person who signed the bond on behalf of the surety has the legal authority to obligate the surety.
(b) Form of power of attorney and endorsement. A power of attorney will be prepared on the surety's own form, and must be executed under the surety's corporate seal. If the power of attorney submitted is other than a manually signed original, it must be accompanied by a certification from the surety that the power of attorney is valid.
(c) Additional documentation. The appropriate TTB officer authorized to approve and accept the bond may require additional evidence of the authenticity of signatures and the authority of persons signing on behalf of the surety to execute the bond or consent.
§ 19.157   Disapproval of bonds and consents of surety.
(a) Grounds for disapproval. The appropriate TTB officer may disapprove any bond or consent of surety required by this part if the principal or any person having ownership, control or responsibility for actively managing the business of the surety has been previously convicted, in a court of competent jurisdiction of:
(1) Any fraudulent noncompliance with any provision of any law of the United States relating to internal revenue or customs taxation of spirits, wines, or beer, or if the offense was compromised by payment of penalties or otherwise, or
(2) Any felony under a law of any State or the District of Columbia, or the United States, prohibiting the manufacture, sale, importation, or transportation of spirits, wine, beer, or other intoxicating liquor.
(b) Appeal. If the appropriate TTB officer disapproves a bond or consent of surety, the person giving the bond may appeal the disapproval to the Administrator, who will hear the appeal. The decision of the Administrator will be final.
§ 19.161   Operations bond.
(a) General. Except as provided in § 19.151(d), any person who intends to establish a distilled spirits plant must furnish an operations bond (or a unit bond, see § 19.165) covering distilled spirits operations at such plant on TTB F 5110.56 with the original application to register the distilled spirits plant.
(b) Approval of bond. The appropriate TTB officer may require a statement, executed under the penalty of perjury, as to whether the principal, or any person owning, controlling, or managing the business of the applicant has been convicted of, or has compromised any offense listed in § 19.157(a)(1), or has been convicted of any offense listed in § 19.157(a)(2). If the above statement contains an affirmative answer, the applicant must provide an additional detailed statement describing the circumstances surrounding each conviction or compromise. The appropriate TTB officer will decide whether to approve or disapprove the bond.
§ 19.162   Operations bond for distilled spirits plant and adjacent bonded wine cellar.
(a) One bond satisfying two requirements. A proprietor who operates a bonded wine cellar that is adjacent to the proprietor's distilled spirits plant may file a single operations bond to cover the operations of the distilled spirits plant and the bonded wine cellar. A proprietor who files this type of bond satisfies the requirement in 26 U.S.C. 5173 for an operations bond covering the distilled spirits plant and the requirement in 26 U.S.C. 5354 for a bond covering wine and spirits possessed at, and in transit to, the bonded wine cellar. (The proprietor may still have to obtain a supplemental bond for the wine cellar to cover liabilities resulting from deferred payment of tax. See the second sentence of 26 U.S.C. 5354.)
(b) One bond combining terms and coverage of separate bonds. An operations bond filed under paragraph (a) of this section must contain the same terms and conditions that would be in separate bonds for the distilled spirits plant and for the bonded wine cellar. The proprietor may not allocate or divide the penal sum between the distilled spirits plant and the bonded wine cellar. The total amount of the bond must be available to satisfy any liability incurred under the terms of the bond at either facility.
(c) Persons qualified for a single bond. A proprietor may choose to file a single operations bond for a distilled spirits plant and adjacent bonded wine cellar only if:
(1) Such distilled spirits plant is qualified under subpart D of this part for the production of distilled spirits; and
(2) Such wine cellar and distilled spirits plant are operated by the same person (or in the case of a corporation, by such corporation and its controlled subsidiaries).
§ 19.163   Area operations bond.
(a) Area operations bond covering multiple locations. A person who operates more than one distilled spirits plant within the geographical area serviced by the National Revenue Center may submit to TTB an area operations bond covering the operations of any two or more such plants and any bonded wine cellars that are adjacent to such plants and which otherwise could be covered by an operations bond. Area operations bonds filed under this section will be in lieu of the operations bond requirements for single distilled spirits plants under §§ 19.161 and 19.166 and must contain the same terms and conditions as those contained in separate bonds filed for single distilled spirits plants. Any person who files an area operations bond may not allocate or divide the penal sum of the area operations bond between the separate locations and the total penal sum of the bond must be available to satisfy liability incurred at any of the covered locations.
(b) Area operations bonds filed by corporations. An area operations bond may only cover distilled spirits plants and adjacent bonded wine cellars that are operated by the same person. For purposes of this section, a corporation and its controlled subsidiaries are considered to be one person. Further, a controlled subsidiary is a corporation in which more than 50 percent of the voting power is controlled by the parent corporation. Consequently, an area operations bond may cover distilled spirits plants and adjacent bonded wine cellars operated by a parent corporation and one or more of its controlled subsidiaries. The name of each corporation that operates a covered facility must appear on the bond as a principal, whether the operating corporation is the parent or a subsidiary. The bond must bear an authorized signature for each operating corporation appearing on the bond.
§ 19.164   Withdrawal bond.
(a) Requirement for a withdrawal bond. Except as provided in § 19.151(d), a person must provide TTB with a withdrawal bond for a distilled spirits plant if the person intends to withdraw spirits from the distilled spirits plant upon determination of the taxes due on the spirits but before payment of the tax. The withdrawal bond must guarantee payment of any taxes due on distilled spirits withdrawn from bonded premises up to the amount of the bond. Such bond will be in addition to the operations bond, and if the distilled spirits are withdrawn under the withdrawal bond, the operations bond will no longer cover liability for payment of the tax on the spirits withdrawn. For purposes of this section, a person includes a corporation, together with all of its controlled subsidiaries, and a controlled subsidiary has the same meaning as in § 19.163(b).
(b) One bond covering multiple plants. A person who operates more than one distilled spirits plant within the geographical area serviced by the National Revenue Center may submit to TTB a single withdrawal bond that covers withdrawals from all such distilled spirits plants within that geographic area.
(c) Penal sum of bonds —(1) Penal sum of a bond covering a single plant. A person who files a withdrawal bond for a single plant must compute the penal sum of such bond in accordance with § 19.166. If the penal sum of such bond is less than the maximum amount, withdrawals from the plant may not exceed the penal sum.
(2) Penal sum of bond covering multiple plants. A person who files one withdrawal bond to cover two or more distilled spirits plants must compute the required penal sum for each plant individually in accordance with § 19.166. The penal sum of the withdrawal bond must be equal to, or greater than, the total of the minimum amounts required for the individual plants. The bond must show the amount of coverage allocated to each individual plant as well as the total penal sum for all plants. If the portion of the penal sum allocated to a particular plant is less than the maximum amount prescribed in § 19.166 for a single plant, withdrawals from that plant must not exceed the amount of the penal sum allocated to that plant. The allocation of the penal sum notwithstanding, the entire penal sum of the bond must be available to satisfy all liability for tax on withdrawals from any and all of the covered plants.
§ 19.165   Unit bonds.
(a) Unit bond covering operations and withdrawals. If a person is otherwise required to file bonds for both operations at one or more distilled spirits plants and withdrawals from one or more distilled spirits plants, the person may instead submit a single unit bond that provides all of the guarantees that would otherwise be provided by separate operations and withdrawal bonds. The unit bond may also provide coverage for operations at adjacent bonded wine cellars. For purposes of this section, a person includes a corporation, together with all of its controlled subsidiaries, and a controlled subsidiary has the same meaning as in § 19.163(b).
(b) Required penal sum —(1) General. A person must determine the penal sum for the unit bond by separately calculating in accordance with § 19.166, and then totaling, the amounts needed to cover operations and withdrawals at each individual plant covered by the bond. The penal sum for the unit bond must not be less than the sum of the minimum penal sums that would be required if each of the plants had its own bond.
(2) Allocation between operations and withdrawals. A unit bond must show separately the amount of coverage provided for operations (including operations at each adjacent bonded wine cellar if applicable) and for withdrawals at each distilled spirits plant covered by the bond.
(3) Tax liability must not exceed allocated penal sum. If the amount of the penal sum allocated to operations at, or withdrawals from, a particular plant is less than the maximum amount prescribed in § 19.166 for a single plant, the tax liability for operations at, or withdrawals from, that plant must not exceed that allocated amount.
(4) Total penal sum available for each plant. Even when the penal sum of a unit bond is allocated among multiple plants, the bond must provide that the total penal amount of the bond will be available to satisfy any liability incurred under the terms and conditions of the bond at any plant covered by the bond.
§ 19.166   Required penal sums.
A person must determine the penal sums for the various bonds required by this subpart according to the following table:
§ 19.167   Increase of bond coverage.
(a) When required. If the penal sum of a bond is less than the maximum amount specified by § 19.166, and liabilities increase to the point where they exceed the bond coverage, the proprietor must increase the amount of the bond to cover the increased liability. The proprietor must increase the bond coverage either by replacing the existing bond with a new, larger bond that covers the entire liability, or by supplementing the existing bond with a separate strengthening bond in accordance with paragraph (b) of this section.
(b) Strengthening bonds. A strengthening bond is a second bond with the same surety as on the original bond which covers the increased liability. A strengthening bond must show both its execution date and its effective date. TTB will not accept a strengthening bond if it contains any term or condition that is a release, or could be interpreted as a release, from liability under any former bond, or that limits the liability of any bond to less than its full penal sum.
§ 19.168   Superseding bonds and new bonds for existing proprietors.
(a) Superseding bonds. A new bond that replaces another bond is called a superseding bond. The proprietor must replace an existing bond with a superseding bond in any of the following circumstances:
(1) Surety company no longer acceptable. The proprietor must file a superseding bond if the surety on the proprietor's current bond becomes insolvent or if the surety is removed from the list of approved sureties in Treasury Department Circular 570 (see § 19.153). TTB may also require the filing of a superseding bond if any other contingency affecting the validity or efficiency of the bond arises.
(2) Change of control. An executor, administrator, assignee, receiver, trustee, or other person acting in a fiduciary capacity, continuing or liquidating the business of the principal on a bond, must either provide TTB with a superseding bond, or obtain consent from the surety on each existing bond when assuming control of the business.
(3) Termination of bond by surety. If the surety applies to terminate a bond under § 19.171, and the proprietor wishes to continue the activity covered by the bond, the proprietor must file a superseding bond that becomes effective on or before the termination date of the existing bond. The superseding bond must show both its execution date and its effective date.
(b) New bonds for existing proprietors —(1) General. Subject to paragraph (b)(2) of this section, if an existing proprietor has not furnished a bond or bonds covering operations and withdrawals of distilled spirits for nonindustrial use because the proprietor was exempt from bond requirements under § 19.151(d), the proprietor must furnish a bond or bonds as provided in this subpart beginning in any portion of a calendar year following the first date on which the aggregate amount of tax due from the proprietor during the calendar year exceeds $50,000. When furnishing the bond or bonds, the proprietor must also file an amendment to TTB F 5110.41, Registration of Distilled Spirits Plant, as provided in § 19.136 to change the proprietor's bond status.
(2) Grace period for bonds covering operations. An existing proprietor who must furnish an operations bond as provided in paragraph (b)(1) of this section will be treated as having furnished the required bond if the proprietor submits the bond on TTB F 5110.56 no later than 30 days following the first date on which the aggregate amount of tax due from the proprietor during the relevant calendar year exceeds $50,000. The proprietor will be treated as having furnished the required operations bond for purposes of this paragraph until TTB approves or disapproves the bond.
(3) Bonds covering withdrawals. Paragraph (b)(2) of this section does not apply to withdrawal bonds. If an existing proprietor must furnish a withdrawal bond as provided in paragraph (b)(1) of this section, the proprietor may not withdraw distilled spirits from the bonded premises on a tax deferred basis until TTB approves the withdrawal bond.
§ 19.169   Effect of failure to furnish a superseding bond or a new bond.
(a) Operations bond. Except as provided in § 19.151(d), a person may not operate a distilled spirits plant without an operations bond. A person who does not submit an acceptable superseding operations bond when required to do so under § 19.168(a) must immediately discontinue the activities to which the lapsed bond coverage relates upon lapse of the existing bond coverage. If a proprietor must furnish an operations bond under § 19.168(b)(1) and does not submit an operations bond within the time prescribed in § 19.168(b)(2), the proprietor must immediately discontinue the activities required to be covered by the operations bond.
(b) Withdrawal bond. Except as provided in § 19.151(d), a person may not defer payment of taxes on spirits withdrawn from a distilled spirits plant upon determination of tax without a withdrawal bond. If a person is required to submit a new or superseding withdrawal bond under § 19.168, the person must submit the bond in accordance with that section. A person who does not submit and receive approval of an acceptable withdrawal bond when required to do so under § 19.168 may not withdraw distilled spirits from the bonded premises on a deferred basis. Upon lapse of the existing bond coverage, or upon the date a new bond is required under § 19.168(b), the person must pay the tax at the time of withdrawal, except in the case of distilled spirits withdrawn free of tax or withdrawn without payment of tax under 26 U.S.C. 5214 or withdrawn exempt from tax under 26 U.S.C. 7510.
(c) Unit bond. A person who does not provide an acceptable superseding unit bond when required to do so under § 19.168 must immediately discontinue the business or distilled spirits operations to which the lapsed bond coverage relates. Upon lapse of the existing bond coverage the person must also pay the tax at the time of withdrawal, except in the case of distilled spirits withdrawn free of tax or withdrawn without payment of tax under 26 U.S.C. 5214 or withdrawn exempt from tax under 26 U.S.C. 7510.
§ 19.170   Termination of bonds.
Liability under operations bonds, withdrawal bonds, and unit bonds may be terminated for future withdrawals, future production, or future deposits as set forth below:
(a) On application by the surety. A surety may terminate a bond by filing a notice as provided in § 19.171;
(b) By replacement of the bond. A principal may terminate an existing bond by replacing it with a superseding bond approved by TTB;
(c) By discontinuing withdrawals. A principal may terminate a withdrawal bond by notifying TTB that the principal has stopped making withdrawals covered by the bond, if the bond was filed solely as a withdrawal bond;
(d) By discontinuing the business. A principal may terminate a bond by notifying TTB that the principal has discontinued business; and
(e) On application by an existing proprietor who becomes exempt from bond requirements. If a proprietor has held a bond or bonds covering operations or withdrawals of distilled spirits for nonindustrial use and becomes exempt from those bond requirements as provided under § 19.151(d), the proprietor may apply to TTB to terminate the bond or bonds covering such operations or withdrawals. To apply, the proprietor must file an amendment to TTB F 5110.41, Registration of Distilled Spirits Plant, as provided in § 19.136. The proprietor must accurately state in the submission that the proprietor:
(1) Will withdraw distilled spirits for deferred payment of tax as provided in § 19.235;
(2) Reasonably expects to be liable for not more than $50,000 in taxes with respect to distilled spirits imposed by 26 U.S.C. 5001 and 7652 for the current calendar year (see definition of “Reasonably expects” in § 19.235(e)); and
(3) Was liable for not more than $50,000 in such taxes in the preceding calendar year.
§ 19.171   Surety notice of relief from bond liability.
(a) Notice to principal. A surety on a bond may, at any time, notify the principal in writing that the surety desires to be relieved of liability under the bond.
(b) Notice to TTB. A surety on a bond may, at any time, notify the appropriate TTB officer in writing that the surety desires to be relieved of liability under the bond. The notice must specify the date after which the surety desires to be relieved of liability. In the case of a withdrawal bond, the date specified in the notice must be at least ten days after the notice is received by the appropriate TTB officer. In the case of an operations bond or unit bond, the date specified in the notice must be at least 90 days after the notice is received by the appropriate TTB officer. When a surety files a termination notice with TTB, the surety must include either an acknowledgement from the principal that the principal is aware that the surety is terminating the bond or proof that the surety has served the principal with notice of its intent to terminate the bond.
(c) Effect of notice. The bond coverage will end as of close of business on the date specified in the notice, provided the surety timely filed a proper and complete termination notice, and the surety does not withdraw its termination notice in writing prior to the termination date. The surety will be released from future liability under the bond to the extent set forth in § 19.172.
§ 19.172   Relief of surety from bond liability.
A surety that has provided proper notice under § 19.171 will be relieved from liability under the bond in question as set forth below:
(a) Operations or unit bond. When a superseding bond is submitted, the surety will be relieved of future liability related to production and deposits that take place after the effective date of the superseding bond. However, the surety remains liable for the tax on all distilled spirits or wines produced, or for other liabilities incurred, during the term of the bond. Further, if a superseding bond is not submitted, the surety will remain liable under the bond for all spirits or wines that are on hand or in transit to the bonded premises or bonded wine cellar on the date specified in the notice. The liability of the surety will continue until all such spirits or wines have been lawfully disposed of, or until a new bond has been submitted by the principal covering the spirits or wine.
(b) Withdrawal or unit bonds. The surety will be relieved from liability for withdrawals made after the date specified in the notice, or upon the effective date of a new bond if one is given.
§ 19.173   Release of pledged securities.
Securities that are pledged and deposited with TTB under § 19.154 will only be released by TTB in accordance with the provisions of 31 CFR Part 225, Acceptance of Bonds Secured by Government Obligations in Lieu of Bonds with Sureties. The appropriate TTB officer will not release pledged securities prior to termination of the liability under the bond for which they were pledged. When the appropriate TTB officer is satisfied that the pledged securities may be released, the official will set a date or dates on which a part or all of the securities may be released. At any time prior to the release of the securities, the appropriate TTB officer may extend the date of release for any additional length of time deemed necessary.
§ 19.181   General.
The proprietor of a distilled spirits plant must apply certain construction, equipment, and security standards at the plant. These standards are intended to ensure the protection of untaxed spirits at the plant and to ensure proper measurement and accountability for products on bonded premises. This subpart prescribes those standards.
§ 19.182   Tanks—general requirements.
The proprietor of a distilled spirits plant must ensure that all tanks on the premises used to hold spirits, denatured spirits, or wines are:
(a) Used for the purpose listed on the application and plant registration;
(b) Equipped with accurate means for measuring their contents. If the means for measurement is not a permanent fixture on the tank, the proprietor must equip the tank with a fixed device for measuring the contents. However, tanks having a capacity of less than 101 gallons are not required to have permanent gauge devices;
(c) Accurately calibrated if used for any of the gauges described in this part. Further, if tanks or their gauging devices are moved in any manner subsequent to original calibration, the tanks shall not be used until recalibrated;
(d) Accessible through walkways, landings, and stairs that permit access to all parts of the tank;
(e) Equipped or situated so that they may be locked or secured; and
(f) Constructed to prevent access to the spirits or wines through vents, flame arresters or other safety devices.
§ 19.183   Scale tanks.
(a) Except as otherwise provided in paragraph (b) of this section, if the proprietor uses a tank to determine the distilled spirits tax imposed by 26 U.S.C. 5001, the tank must be mounted on scales and the contents of the tank must be determined by weight. The scale tank also must be equipped with a suitable device so that the volume of the contents can be quickly and accurately determined.
(b) The requirement to mount tanks on scales does not apply to tanks having a capacity of 55 gallons or less. Such tanks may be moved onto an accurately calibrated scale when a tax determination gauge needs to be made.
§ 19.184   Scale tank minimum graduations.
(a) The beams or dials on scale tanks used for tax determination must have minimum graduations not greater than the following:
(b) For scales having a capacity greater than 2,000 pounds, the minimum quantity which may be entered onto the weighing tank scale for gauging for tax determination will be the greater of:
(1) 1,000 times the minimum graduation of the scale, or
(2) 5 percent of the total capacity of the weighing tank scale.
(c) The weighing of lesser quantities for determination of tax may be authorized by the appropriate TTB officer where the beam of the scale is calibrated in 1/2 pound or 1 pound graduations and it is found by actual test that the scales are accurate at each graduation.
(d) Lots of spirits weighing 1,000 pounds or less shall be weighed on scales having 1/2 pound graduations.
§ 19.185   Testing scale tanks for accuracy.
(a) A proprietor who uses a scale tank for tax determination must ensure the accuracy of the scale through periodic testing. Testing of the scale must be conducted at least every 6 months and whenever the scale is adjusted or repaired.
(b) A proprietor also must test, at least once a month, the gallonage represented to be in a scale tank against the gallonage indicated by volumetric determination of the contents of the tank. However, if the scale is not used during a month, it is only necessary to verify against the volumetric determination when the scale is next used. The proprietor must make the volumetric determination in accordance part 30 of this chapter. If the variation exceeds 0.5 percent of the quantity shown in the tank, the proprietor must take appropriate action to verify the accuracy of the scale.
(c) If the appropriate TTB officer determines that a scale may be inaccurate, the proprietor must test the accuracy of the scale.
§ 19.186   Package scales.
Proprietors must ensure that scales used to weigh packages are tested at least every 6 months and whenever they are adjusted or repaired. However, if a scale is not used during a 6-month period, it is only necessary to test the scale prior to its next use. Scales used to weigh packages that hold 10 wine gallons or less must indicate weight in ounces or hundredths of a pound.
§ 19.187   Pipelines.
All pipelines, including flexible hoses, that are used to transfer spirits, denatured spirits, articles, and wines must be constructed, arranged, and secured so as to ensure protection of the revenue and permit ready examination. The appropriate TTB officer may approve pipelines that cannot be readily examined if they pose no jeopardy to the revenue.
§ 19.188   Measuring devices and proofing instruments.
(a) General. A proprietor of a distilled spirits plant must have accurate instruments and equipment at the plant for determining the proof and volume of spirits.
(b) Instruments. The hydrometers and thermometers that a proprietor uses to gauge spirits must show subdivisions or graduations of proof and temperature as specified in part 30 of this chapter. Proprietors must frequently test their hydrometers and thermometers to ensure their accuracy. If an instrument appears to be in error, the proprietor may not use the instrument until it is tested and certified as accurate by the manufacturer or another qualified person.
(c) Meters. A proprietor may use an accurate mass flow meter to measure the volume of bulk spirits. A mass flow meter used for tax determination of bulk spirits must be certified by the manufacturer or other qualified person as accurate within a tolerance of plus or minus 0.1 percent. A mass flow meter used for all other required gauges of bulk spirits must be certified by the manufacturer or other qualified person as accurate within a tolerance of plus or minus 0.5 percent. The proprietor must make corrections for the temperature of the spirits being measured in conjunction with the volumetric measurement of spirits by mass flow meter. The proprietor must also test mass flow meters at least every 6 months to ensure that they are accurate within the required tolerances.
§ 19.189   Identification of structures, areas, apparatus, and equipment.
(a) Buildings. The proprietor must mark each building at a distilled spirits plant where spirits, denatured spirits, articles, wine, or distilling or fermenting materials are kept with a distinguishing number or letter.
(b) Tanks. The proprietor must mark each tank or receptacle for spirits, denatured spirits, or wine to show a unique serial number and capacity.
(c) Stills. The proprietor must number and mark to show the use of each still, fermenter, cooker, and yeast tank.
(d) Other major equipment. The proprietor must identify the use of all other major equipment used for processing or containing spirits, denatured spirits, wine, distilling or fermenting material, and all other tanks, unless the intended purpose is readily apparent.
§ 19.190   Office facilities for TTB use.
(a) When required by the appropriate TTB officer, the proprietor must provide a secure cabinet equipped for locking for use by TTB.
(b) If one or more TTB officers are assigned to a distilled spirits plant to supervise operations on a continuing basis, the proprietor must provide a suitable office at the plant for the exclusive use of the TTB officers in performing their duties. The appropriate TTB officer will determine if the office facilities are suitable.
§ 19.191   Signs.
The proprietor must place and keep a conspicuous sign on the outside of the place of business showing the name of the proprietor and the business, or businesses, in which engaged.
§ 19.192   Security.
(a) General. The proprietor of a distilled spirits plant must provide adequate security measures at the plant in order to protect the revenue.
(b) Buildings. The buildings, rooms, and partitions must be constructed of substantial materials. Doors, windows, or any other openings to the building must be secured or fastened during times when distilled spirits plant operations are not being conducted.
(c) Outdoor tanks. Outdoor tanks containing spirits, denatured spirits, or wine must be individually locked or locked within an enclosure when they are not in use.
(d) Indoor tanks. Indoor tanks containing spirits, denatured spirits, or wines, or the rooms or buildings in which such tanks are housed, must be equipped so that they may be secured.
(e) Approved locks. Locks meeting the specifications prescribed in paragraph (f) of this section must be used to secure:
(1) Outdoor tanks used to store spirits, or an enclosure around such tanks;
(2) Indoor tanks used to store spirits, or the door from which access may be gained from the outside to the rooms or buildings in which such tanks are housed; and
(3) Any doors from which access may be gained from the outside to rooms or buildings containing spirits stored in portable bulk containers.
(f) Specifications for locks. Locks meeting the specifications in this section or other locks that have been approved for use by the appropriate TTB officer are approved locks for the purpose of 26 U.S.C. 5682.
(1) General. The following are the specifications for approved locks:
(i) A corresponding serial number on the lock and on the key, except for master key locking systems;
(ii) A case hardened shackle at least one-fourth inch in diameter, with heel and toe locking;
(iii) A body width of at least 2 inches;
(iv) A captured key feature (the key may not be removed while the shackle is unlocked);
(v) A tumbler with at least 5 pins; and
(vi) A lock and key containing no bitting data.
(2) Other approved locks. If the proprietor wishes to use locks of an unusual design, which do not meet the specifications in paragraph (f)(1) of this section, the proprietor must submit an example or prototype of the lock to the appropriate TTB officer, with a request that the lock be approved for use. The appropriate TTB officer will evaluate the lock and determine whether the lock should be approved for use.
(3) Master key systems. Master key locking systems using approved locks may be used at the option of the proprietor.
(g) Additional security. Whenever the appropriate TTB officer finds that construction, arrangement, equipment, or protection is inadequate, additional security (such as fences, flood lights, alarm systems, and guard services) must be provided or changes in construction, arrangement, or equipment must be made to the extent necessary to protect the revenue.
§ 19.193   Breaking Government locks.
TTB may assign TTB officers to a distilled spirits plant and utilize controls, such as Government locks, if TTB determines that such measures are necessary to effectively supervise operations at the plant. The proprietor may not remove such Government locks without the authorization of the appropriate TTB officer, except when a person or property is in imminent danger from a disaster or other emergency. If the proprietor must remove Government locks under such circumstances, the proprietor must ensure that security measures are taken to prevent illegal removal of spirits. In addition, the proprietor must notify the appropriate TTB officer as soon as possible of the action taken and within 5 days of removing the locks submit a written report describing the emergency and the action taken.
§ 19.201   Definitions.
For purposes of this subpart, the following terms have the meanings indicated:
Dealer. A person that sells, or offers for sale, any alcohol product (distilled spirits, wines, and/or beer) fit for beverage use.
Retail dealer in liquors. A dealer that sells, or offers for sale, distilled spirits, wines, or beer to any person other than a dealer.
Wholesale dealer in liquors. A dealer that sells, or offers for sale, distilled spirits, wines, or beer to another dealer.
§ 19.202   Dealer registration.
Every proprietor that sells or offers for sale any alcoholic product (distilled spirits, wines, or beer) fit for beverage use must register as a dealer under part 31 of this chapter. However, the proprietor's application for registration of a distilled spirits plant filed under subpart D of this part, and approval of that application by the appropriate TTB officer, will constitute the proprietor's registration as a dealer at the distilled spirits plant. Every proprietor registered as a dealer under this subpart will be classified as a wholesale dealer in liquors (see § 31.32 of this chapter) and as such may also operate as a retail dealer in liquors without additional registration. Registration covers all sales from the same location, including sales of wine, beer, or other proprietors' spirits. A proprietor who conducts business as a dealer at a location other than the distilled spirits plant must register and keep records in accordance with part 31 of this chapter.
§ 19.203   Amending the dealer registration.
Every proprietor registered as a dealer under this subpart must maintain a current and accurate distilled spirits plant registration. Whenever there is a change to any of the information provided in the proprietor's approved notice of registration, the proprietor must amend the registration within the time period specified in subpart E of this part. An amendment of the proprietor's distilled spirits plant registration will also serve as an amendment of the proprietor's dealer registration under this subpart. The proprietor's dealer registration will also terminate when distilled spirits plant operations under the notice of registration terminate.
§ 19.204   Dealer records.
Every dealer is required to maintain records of transactions. Distilled spirits transactions that appear in the records required by subpart V of this part will meet the proprietor's recordkeeping requirements as a dealer. For other transactions not covered in the distilled spirits plant records, such as retail sales of wine or beer in a restaurant at the distilled spirits plant, or operations as a wholesale dealer in wine or beer, the proprietor must keep the records specified for dealers in part 31 of this chapter.
§ 19.221   Scope.
This subpart covers the taxation of distilled spirits and the procedures for payment of taxes by proprietors of distilled spirits plants. Issues covered in this subpart include tax rates, liability for tax, tax determination, return periods, filing of tax returns, forms of payment, electronic fund transfers, and credits under 26 U.S.C. 5010.
§ 19.222   Basic tax law provisions.
(a) Distilled spirits tax. 26 U.S.C. 5001 and 7652 impose a tax on all distilled spirits produced in, or imported into or brought into, the United States at the rate prescribed in section 5001 on each proof gallon and a proportionate tax at a like rate on all fractional parts of a proof gallon. For the current rate of tax see 26 U.S.C. 5001.
(b) Products containing distilled spirits. All products of distillation, by whatever name known, which contain distilled spirits, on which the tax imposed by law has not been paid, and any alcoholic ingredient added to such products, are considered and taxed as distilled spirits.
(c) Wines with high alcohol content. Wines containing more than 24 percent of alcohol by volume are taxed as distilled spirits.
(d) Attachment of the tax. Under 26 U.S.C. 5001(b), the tax attaches to distilled spirits as soon as the substance comes into existence as such, whether it be subsequently separated as pure or impure spirits, or be immediately, or at any subsequent time, transferred into any other substance, either in the process of original production, or by any subsequent process.
(e) Alcohol tax is a lien on spirits. Under 26 U.S.C. 5004, the tax becomes a first lien on the distilled spirits from the time the spirits come into existence as such. The conditions under which the first lien terminates are described in 26 U.S.C. 5004.
(f) Tax credit for eligible wines and eligible flavors. Under 26 U.S.C. 5010, a credit against the tax imposed on distilled spirits by 26 U.S.C. 5001 or 7652 on each proof gallon of alcohol derived from eligible wine, or from eligible flavors which do not exceed 2.5 percent of the finished product on a proof gallon basis is allowed at the time the tax is payable as if it constituted a reduction in the rate of tax.
(g) Effective tax rates. Where credit against the tax is desired, the proprietor liable for the tax must establish an effective tax rate in accordance with § 19.246. The effective tax rate established will be applied to each withdrawal or other taxable disposition of the distilled spirits.
§ 19.223   Persons liable for tax.
(a) Distilling. Under 26 U.S.C. 5005, the distiller of spirits is liable for the tax and each proprietor or possessor of, and person in any manner interested in the use of, any still, distilling apparatus, or distillery, shall be jointly and severally liable for the tax on distilled spirits produced. However, a person, not an officer or director of a corporate proprietor, owning or having the right of control of not more than 10 percent of any class of stock of that proprietor, is not liable by reason of the stock ownership or control. Persons transferring spirits in bond are relieved of tax liability if:
(1) The proprietors of transferring and receiving distilled spirits plant premises are independent of each other and neither has a proprietary interest, directly or indirectly, in the business of the other, and
(2) No person liable for the tax on transferred spirits retains any interest in the spirits.
(b) Storage on bonded premises. Under 26 U.S.C. 5005(c) each person operating bonded premises will be liable for the tax on all spirits while the spirits are stored on the premises, and on all spirits that are in transit to the premises from the time of removal from the transferor's bonded premises, pursuant to an approved application. Liability for the tax continues until the spirits are transferred or withdrawn from bonded premises as authorized by law, or until the liability for tax is relieved under the provisions of 26 U.S.C. 5008(a). Claims for relief from liability for spirits lost are covered in subpart J of this part. Voluntary destruction of spirits in bond is covered in subpart Q of this part.
(c) Withdrawals without payment of tax. Under 26 U.S.C. 5005(e), any person who withdraws spirits from the bonded premises of a plant without payment of tax, as provided in 26 U.S.C. 5214, will be liable for the tax on the spirits from the time of withdrawal. The person will be relieved of any liability at the time the spirits are exported, deposited in a foreign trade zone, used in production of wine, deposited in a customs bonded warehouse, laden as supplies upon or used in the maintenance or repair of certain vessels or aircraft, or used for certain research, development or testing, as provided by law.
(d) Withdrawals free of tax. Persons liable for tax under paragraph (a) of this section, are relieved of the liability on spirits withdrawn from bonded premises free of tax under this part, at the time the spirits are withdrawn.
(e) Withdrawn from customs custody without payment of tax. Under 26 U.S.C. 5232(a) when imported distilled spirits in bulk containers are withdrawn from customs custody and transferred to the bonded premises of a distilled spirits plant without payment of the tax imposed on imported distilled spirits by 26 U.S.C. 5001, the person operating the bonded premises of the distilled spirits plant to which spirits are transferred will become liable for the tax on the spirits upon their release from customs custody, and the importer will thereupon be relieved of liability for the tax.
§ 19.225   Requirement to gauge and tax determine spirits.
Before withdrawing distilled spirits from bond, the proprietor must gauge the spirits and determine the tax that is due on the spirits. This requirement applies to all spirits on which the tax will be either prepaid or deferred.
§ 19.226   Gauges for tax determination.
There are several acceptable methods that a proprietor may use when gauging spirits for tax determination.
(a) Cases. If spirits are withdrawn from the bonded premises in cases, the proprietor must gauge the spirits based on the contents of the cases. The proprietor will determine the number of proof gallons of spirits in cases as provided in part 30 of this chapter. The proprietor must convert metric units of measure to U.S. units according to § 19.579.
(b) Packages. If spirits are withdrawn from the bonded premises in packages on the basis of an individual package gauge, each package must be gauged unless the tax is to be determined on the production or filling gauge. When gauging the packages, the proprietor must prepare a package gauge record as specified in § 19.619 and attach it to the record of tax determination that is required by § 19.611.
(c) Tanks. The proprietor must use weight, or an accurate mass flow meter and proof as prescribed in §§ 19.284 and 19.285, to gauge bulk spirits in tanks that are to be withdrawn on determination of tax. The proprietor must record the elements of the gauge on the record of tax determination. As an alternative, the proprietor may record gauge elements on a separate gauge record, and attach the gauge record to the record of tax determination.
§ 19.227   Determination of the tax.
After gauging, the proprietor must determine the tax on the spirits to be removed from the bonded premises. The proprietor must use the tax rate prescribed in 26 U.S.C. 5001 to calculate the tax, unless the product is eligible for a reduced effective tax rate as provided in 26 U.S.C. 5010. If the product is eligible for a reduced effective tax rate, the proprietor may use that rate to determine the tax. The proprietor must record the results of each tax determination in a record of tax determination as required by § 19.611.
§ 19.229   Deferred payment and prepayment of taxes.
There are two basic methods of paying the tax on distilled spirits withdrawn from bonded premises: Deferred payment and prepayment.
(a) Deferred payment. Under the deferred payment system, the proprietor may withdraw spirits from bond after tax determination but before payment of tax. The excise tax paid is based on the amount of spirits removed from bond during each return period. In order to pay taxes under the deferral system, the proprietor must file a withdrawal bond or unit bond unless the proprietor is exempt from furnishing such bond under § 19.151(d). For detailed information regarding return periods and filing requirements under the deferred system, see §§ 19.234, 19.235 and 19.236.
(b) Prepayment. Under the prepayment system, the proprietor must pay the distilled spirits tax after tax determination but before withdrawal of the spirits from bonded premises. See § 19.230 for conditions that require prepayment of taxes.
§ 19.230   Conditions requiring prepayment of taxes.
Under certain conditions, the proprietor must prepay the distilled spirits tax required, using TTB F 5000.24, Excise Tax Return, before removing spirits from the bonded premises. Those conditions are:
(a) When the proprietor has not given TTB a withdrawal bond or a unit bond and the proprietor is not exempt from furnishing such bond under § 19.151(d);
(b) When the proprietor has posted a withdrawal or a unit bond, but has defaulted on any payment of tax under this section, and the tax payment remains in default. The proprietor must continue to prepay the tax until the appropriate TTB officer decides that allowing the proprietor to make deferred tax payments again will not jeopardize the revenue;
(c) When the proprietor receives a notice from the appropriate TTB officer that the tax must be prepaid. Such notice may be issued to the proprietor if—
(1) The proprietor fails to maintain records required by this part to substantiate the correctness of its tax returns; or
(2) The proprietor fails to comply with any other provision of this part; or
(d) When the proprietor's withdrawal bond, or the withdrawal coverage under its unit bond, is for less than the maximum penal sum. This condition does not apply to a proprietor who is exempt from furnishing a bond under § 19.151(d). The proprietor must prepay the tax to the extent that a withdrawal would cause the outstanding tax liability to exceed the limits of coverage under the bond. 

 See also § 19.231 if the bond is for less than the maximum penal sum.
§ 19.231   Accounting for bond coverage.
In cases where a proprietor must furnish a withdrawal bond or a unit bond to cover the tax on spirits withdrawn on determination of tax, and such bond is in less than the maximum penal sum, the proprietor must maintain an account for the bond to ensure that outstanding tax liabilities do not exceed the penal sum of the bond. The account must charge the bond for the amount of liability incurred on each withdrawal on determination of tax and, credit the bond for each payment of tax made with a return and for authorized credits taken on a return. If the balance of the bond account reaches zero, the proprietor may no longer defer tax payments for taxable withdrawals. Where the bond is for less than the maximum penal sum and has been allocated among two or more plants, the proprietor must maintain an account at each plant for that part of the penal sum allocated to each plant.
§ 19.233   Filing prepayment returns.
When the proprietor is required to prepay the tax prior to withdrawal of spirits from the bonded premises, the proprietor must prepay the tax with a return on form TTB F 5000.24, Excise Tax Return, and include the remittance with the return. The proprietor may prepay tax for one or more withdrawals with a single prepayment return on TTB F 5000.24. The proprietor will note the serial number of the TTB F 5000.24, and the date and time of the prepayment on the individual record of tax determination. The proprietor may not remove spirits from the bonded premises until the tax has been paid.
§ 19.234   Filing deferred payment returns.
A proprietor must pay the tax on spirits withdrawn from bond for deferred payment of tax by filing a return on form TTB F 5000.24, Excise Tax Return. The proprietor must execute and file TTB F 5000.24 for each return period, even when no tax is due for a particular return period. The proprietor of each bonded premises must pay the full amount of distilled spirits tax determined for all spirits released for withdrawal from the bonded premises on determination of tax during the period covered by the return (except spirits on which tax has been prepaid).
§ 19.235   Deferred payment return periods—annual, quarterly, and semimonthly.
(a) Three types of return periods. The IRC provides for three different return periods for those taxpayers who pay their taxes on a deferred basis: Annual, quarterly, and semimonthly. Taxpayers who meet certain criteria are eligible to use annual or quarterly return periods and pay their taxes on an annual or quarterly basis as provided in paragraphs (b) and (c) of this section, respectively. Other taxpayers must use semimonthly return periods and pay their taxes on a semimonthly basis as provided in paragraph (e) of this section.
(b) Annual return period. Subject to paragraph (d) of this section, a taxpayer who reasonably expects to be liable for not more than $1,000 in taxes with respect to distilled spirits imposed by 26 U.S.C. 5001 and 7652 for the current calendar year, and that was liable for not more than $1,000 in such taxes in the preceding calendar year, may choose to use an annual return period. However, the taxpayer may not use the annual return period procedure for any portion of the calendar year following the first date on which the aggregate amount of tax due from the taxpayer during the calendar year exceeds $1,000, and any tax which has not been paid on that date will be due on the 14th day after the last day of the quarterly or semimonthly period in which that date occurs. A taxpayer may choose to use either quarterly or semimonthly return periods as authorized under paragraph (c) or (e) of this section.
(c) Quarterly return period. Except as provided in paragraph (b) of this section and subject to paragraph (d) of this section, a taxpayer who reasonably expects to be liable for not more than $50,000 in taxes with respect to distilled spirits imposed by 26 U.S.C. 5001 and 7652 for the current calendar year, and that was liable for not more than $50,000 in such taxes in the preceding calendar year, may choose to use a quarterly return period. However, the taxpayer may not use the quarterly return period procedure for any portion of the calendar year following the first date on which the aggregate amount of tax due from the taxpayer during the calendar year exceeds $50,000, and any tax which has not been paid on that date will be due on the 14th day after the last day of the semimonthly period in which that date occurs.
(d) Additional rules for annual and quarterly return periods. The following additional rules apply to the annual and quarterly return period procedures under paragraphs (b) and (c) of this section:
(1) A taxpayer with multiple locations must combine the distilled spirits tax liability for all locations to determine eligibility for the return procedures;
(2) A taxpayer who has both domestic operations and import transactions must combine the distilled spirits tax liability on the domestic operations and the imports to determine eligibility for the return procedures;
(3) The controlled group rules of 26 U.S.C. 5061(e), which concern treatment of controlled groups as one taxpayer, do not apply for purposes of determining eligibility for the return procedures. However, a taxpayer who is eligible for the return procedures, and that is a member of a controlled group that owes $5 million or more in distilled spirits excise taxes per year, is required to pay taxes by electronic fund transfer (EFT). Quarterly payments via EFT must be transmitted in accordance with section 5061(e);
(4) A new taxpayer is eligible to use the return procedures the first year of business simply if the taxpayer reasonably expects to be liable for not more than $1,000, in the case of the annual return procedure, or $50,000, in the case of the quarterly return procedure, in distilled spirits taxes during that calendar year; and
(5) If a taxpayer becomes ineligible to use a return procedure described in paragraph (b) or (c) of this section because the taxpayer's liability exceeds $1,000 or $50,000, respectively, during a taxable year, that taxpayer may resume using that return procedure only after a full calendar year has passed during which the taxpayer's liability did not exceed $1,000 or $50,000 as the case may be. A taxpayer may not use an annual or quarterly return procedure during any calendar year in which the taxpayer reasonably expects to be liable for more than $1,000, in the case of the annual return procedure, or $50,000, in the case of the quarterly return procedure, in distilled spirits taxes.
(e) Semimonthly return period. Except in the case of a taxpayer who qualifies for, and chooses to use, annual or quarterly return periods as provided in paragraphs (b) or (c) of this section, all other taxpayers must use semimonthly return periods for deferred payment of tax. The semimonthly return periods will run from the 1st day through the 15th day of each month, and from the 16th day through the last day of each month, except as otherwise provided in § 19.237.
(f) Definitions. For purposes of this section, the following terms have the meanings indicated:
Reasonably expects. When used with reference to a taxpayer, reasonably expects means that there is no existing or anticipated circumstances known to the taxpayer (such as an increase in production capacity) that would cause the taxpayer's tax liability to exceed the prescribed limit.
Taxpayer. A taxpayer is an individual, corporation, partnership, or other entity that is assigned a single Employer Identification Number (EIN) as defined in 26 CFR 301.7701-12.
§ 19.236   Due dates for returns.
(a) Semimonthly returns. Except when payment is pursuant to an annual or quarterly return as provided in paragraph (b) or (c) of this section, where the proprietor of bonded premises has withdrawn spirits from such premises on determination and before payment of tax, the proprietor must file a semimonthly tax return covering such spirits on form TTB F 5000.24, Excise Tax Return, and remittance, as required by § 19.238, § 19.239 or § 19.240, not later than the 14th day after the last day of the return period, except for returns filed for September as provided in § 19.237. If the due date falls on a Saturday, Sunday, or legal holiday, the return and payment are due on the immediately preceding day that is not a Saturday, Sunday, or legal holiday, except as provided in § 19.237(c).
(b) Quarterly returns. Where the proprietor of bonded premises has withdrawn spirits from such premises on determination and before payment of tax, and the proprietor uses quarterly return periods as provided in § 19.235(c), the proprietor must file a quarterly return covering such spirits on TTB F 5000.24, and remittance, as required by § 19.238, § 19.239, or § 19.240, not later than the 14th day after the last day of the quarterly return period. If the due date falls on a Saturday, Sunday, or legal holiday, the return and remittance will be due on the immediately preceding day which is not a Saturday, Sunday, or legal holiday.
(c) Annual returns. Where the proprietor of bonded premises has withdrawn spirits from such premises on determination and before payment of tax, and the proprietor uses annual return periods as provided in § 19.235(b), the proprietor must file an annual return covering such spirits on TTB F 5000.24, and remittance, as required by § 19.238, § 19.239, or § 19.240, not later than the 14th day after the last day of the annual return period. If the due date falls on a Saturday, Sunday, or legal holiday, the return and remittance will be due on the immediately preceding day which is not a Saturday, Sunday, or legal holiday.
§ 19.237   Special rule for semimonthly filers for the month of September.
(a) Returns required for September. If the proprietor is required to file semimonthly returns as provided in § 19.235(c), there are three return periods during the month of September. The first semimonthly return period is from the 1st day through the 15th day of the month and the return with remittance is due by the 29th of September. The second semimonthly return period for the month of September is divided into two payment periods. The exact dates of these periods depend upon whether the proprietor remits tax payments by EFT.
(1) Taxpayments by EFT. If the proprietor remits tax payments by EFT, the two payment periods for the second half of September are from the 16th through the 26th, and from the 27th through the 30th. The return on form TTB F 5000.24 and remittance for the period September 16-26 is due on or before September 29. The return on TTB F 5000.24 and remittance for the period September 27-30 is due no later than October 14.
(2) Taxpayment other than by EFT. If the proprietor is not required to pay the distilled spirits tax by EFT, the two payment periods for the second half of September are from the 16th through the 25th and from the 26th through the 30th. The return on TTB F 5000.24 and remittance for the period September 16-25 is due on or before September 28. The return on TTB F5000.24 and remittance for the period September 26-30 is due no later than October 14.
(b) Amount of payment: Safe harbor rule. — (1) EFT Taxpayers. The proprietor satisfies the requirements of paragraph (a)(1) of this section if by September 29 the amount paid is at least eleven-fifteenths (73.3 percent) of the tax liability incurred in the semimonthly return period for September 1-15, and the proprietor also pays any underpayment of tax resulting from the use of the safe harbor rule on or before October 14.
(2) Other than EFT taxpayers. The proprietor satisfies the requirements of paragraph (a)(2) of this section if the amount paid by September 28 is at least two-thirds (66.7 percent) of the tax liability incurred in the semimonthly return period for September 1-15, and the proprietor also pays any underpayment of tax resulting from the use of the safe harbor rule on or before October 14.
(c) Weekends and holidays. If the required tax payment due date for the return period September 16-25 (non-EFT taxpayers) or September 16-26 (EFT taxpayers), falls on a Saturday or legal holiday, the proprietor's return and remittance are due on the immediately preceding day. If the required tax payment due date falls on a Sunday, the proprietor's return and payment are due on the immediately following day.
(d)
(1) Facts. X, a proprietor required to pay taxes by electronic fund transfer, incurred tax liability in the amount of $30,000 for the first semimonthly period of September. For the period September 16-26, X incurred tax liability in the amount of $45,000, and for the period September 27-30, X incurred tax liability in the amount of $2,000.
(2) Payment requirement. X's payment of tax in the amount of $30,000 for the first semimonthly period of September is due no later than September 29. X's payment of tax for the period September 16-26 is also due no later than September 29. X may use the safe harbor rule to determine the amount of payment due for the period of September 16-26. Under the safe harbor rule, X's payment of tax must equal $22,000.00, eleven-fifteenths of the tax liability incurred during the first semimonthly period of September. Additionally, X's payment of tax in the amount of $2,000 for the period September 27-30 must be paid no later than October 14. X must also pay the underpayment of tax, $23,000.00, for the period September 16-26, no later than October 14.
§ 19.238   Payment by mail or courier.
(a) Payment by mail. The proprietor must file each return on form TTBF 5000.24 in accordance with the instructions printed on the form. If the proprietor submits the return by U.S. mail, the official postmark of the U.S. Postal Service stamped on the cover in which the return is mailed will be considered to be the date of delivery of the return and also the remittance, if included. If the postmark on the cover is illegible, the proprietor will bear the burden of proving when the postmark was made. If the proprietor sends the return with or without remittance by registered mail or certified mail, the date of registry, or the date of the postmark on the sender's postal receipt for certified mail, will be treated as the date of delivery of the return and also of the remittance, if included.
(b) Payment by courier or other private delivery service. A proprietor may send a return, with or without remittance, by courier or other private delivery service. If the proprietor sends the return with or without remittance with a courier or private delivery service that is available to the general public and that is at least as timely and reliable as the U.S. mail, and the delivery service has tracking and tracing procedures for its deliveries, TTB will consider the date of tender to the delivery service as recorded in the tracking and tracing record for the parcel as the date of delivery. If the proprietor sends the return, with or without remittance, by courier or other private delivery service that does not meet the above requirements, the actual date of delivery to TTB will be treated as the date of delivery of the return and also of the remittance, if included.
§ 19.239   Form of payment.
(a) General. The proprietor must pay the tax due on spirits when filing a return on form TTB F 5000.24, Excise Tax Return. The remittance for the tax must accompany the return and may be in any form that is authorized by § 70.61 of this chapter and acceptable to the appropriate TTB officer. Exception: This does not apply to payments that must be made by EFT. For EFT payments see § 19.240.
(b) Consequences of default. If a check or money order tendered in payment of taxes is not paid on presentment, or if the taxpayer is otherwise in default in payment, then any remittance made during the period of default must be either in cash or by an acceptable certified instrument. The proprietor must continue to pay in cash or by certified instrument as long as the proprietor remains in default, and until the appropriate TTB officer finds that accepting a check will not jeopardize the revenue.
(c) Certified instruments. Acceptable certified instruments include certified checks, cashier's checks or treasurer's checks drawn on any bank or trust company incorporated under the laws of the United States, or under the laws of any State, Territory or possession of the United States, or a money order, as provided in § 70.61 of this chapter.
(d) Payment of taxes. The proprietor must make checks or money orders payable to “Alcohol and Tobacco Tax and Trade Bureau”.
§ 19.240   Payment of tax by electronic fund transfer.
(a) General. —(1) Criteria requiring EFT payment. Under certain conditions, a proprietor may not make payments by cash, check, or money order. Instead, the proprietor must use the services of a commercial bank to pay tax on distilled spirits tax by EFT. Payments must be made by EFT in the current calendar year if the proprietor, as a taxpayer, was liable for $5 million or more in taxes on distilled spirits during the prior calendar year. For the purpose of determining whether the proprietor is subject to this requirement, the proprietor must use the total amount of tax liability on distilled spirits incurred under this part and parts 26 and 27 of this chapter (gross tax liability). Gross tax liability includes the distilled spirits tax on all taxable withdrawals of spirits and taxable importations of spirits, as well as tax on spirits brought into the United States from Puerto Rico and the Virgin Islands during the calendar year. This figure includes taxes incurred at any and all premises at which the proprietor conducts regulated activities. The proprietor may not net out or adjust for any drawback, credits or refunds of tax that are allowed. Overpayments made in excess of actual tax liability will not be included in the gross tax liability figure.
(2) Controlled group. If the taxpayer is a member of a controlled group, the controlled group is treated as a single taxpayer when calculating liability of $5 million or more in distilled spirits taxes during the prior calendar year. A controlled group is a related group of taxpayers and is defined in subpart D of part 70 of this chapter.
(3) Separate return and payment for each DSP. When the proprietor makes payments by EFT, the proprietor must file a separate return on form TTB F 5000.24 and make a separate EFT payment for each DSP from which spirits are withdrawn upon determination of tax.
(b) Requirements —(1) Notice to TTB. If the proprietor's gross distilled spirits tax liability is $5 million or more in one calendar year, the proprietor must notify the appropriate TTB officer of this fact not later than January 10 of the following year. The proprietor must use the total amount of tax liability incurred under this part and parts 26 and 27 of this chapter to determine whether it must make this notification. Exception: this notice requirement does not apply if the proprietor already pays tax on distilled spirits by EFT. The notice shall be an agreement to make payments by EFT.
(2) Separate EFT for each return. For each return filed in accordance with this part, the proprietor will direct the bank to make an EFT to the Treasury Account for the amount of the tax reported due on the return. The proprietor must give instructions to the bank early enough for the EFT to be made to the Treasury Account by no later than close of business on the last day for filing the return as prescribed in §§ 19.236 or 19.237, as appropriate.
(3) Discontinuing EFT payments. If the proprietor pays tax by EFT and has a gross tax liability of less than $5 million in distilled spirits taxes during a calendar year, combining tax liabilities incurred under this part and parts 26 and 27 of this chapter, payment by EFT will be optional in the following year. The proprietor may continue to remit tax payment by EFT as provided in this section, or the proprietor may remit taxpayment using any acceptable method as set forth in § 19.239. If the proprietor decides to stop paying tax by EFT, the proprietor must give the appropriate TTB officer written notice of that decision. The proprietor must attach a written notice to the first return on form TTB F 5000.24 filed using a method of payment other than EFT. Such notice must state that tax is not due by EFT because the proprietor's tax liability during the preceding calendar year was less than $5 million. The proprietor must further state that future tax payments will be filed with the returns on TTB F 5000.24.
(c) Remittance —(1) Identifying EFT payments. When the proprietor completes the return on TTB F 5000.24, the proprietor must indicate on the form that the tax was paid by EFT. The proprietor must file the completed TTB F 5000.24 with TTB as directed by the instructions on the form.
(2) Credit for payment. TTB will credit the proprietor as having made a tax payment when the Treasury Account receives the EFT. TTB considers the EFT to be received by the Treasury Account when the EFT is paid to a Federal Reserve Bank.
(3) Record of payment. When a proprietor directs a bank to make an EFT as required by paragraph (b)(2) of this section, any transfer data record furnished to the proprietor as part of normal banking procedures will serve as the record of payment. The proprietor will retain this document as part of the required records.
(d) Failure to make a tax payment by EFT. The proprietor will be subject to a penalty imposed by 26 U.S.C. 5684, 6651, or 6656 for failure to make a required EFT tax payment before close of business on the last day for filing.
(e) Procedure. Upon receipt of a notice filed pursuant to paragraph (b)(1) of this section, the appropriate TTB officer will provide the proprietor with a copy of the TTB Procedure entitled “Payment of Tax by Electronic Fund Transfer”. This publication outlines the procedure that the proprietor must follow when preparing returns and payments by EFT as required by this part. The proprietor must follow instructions provided by U.S. Customs and Border Protection (CBP) for submitting the EFT payments that must be made to CBP.
§ 19.242   Employer identification number.
The proprietor must enter the employer identification number (EIN) assigned to it by the Internal Revenue Service on each form TTB F 5000.24, Excise Tax Return, filed with TTB. Failure to enter the assigned EIN on TTB F 5000.24, may result in a $50.00 penalty for each occurrence as specified in § 70.113 of this chapter.
§ 19.243   Application for employer identification number.
(a) Use Form SS-4. The proprietor must obtain an employer identification number (EIN) by filing an application with the Internal Revenue Service (IRS) on Form SS-4. Form SS-4 is available from Internal Revenue Service Centers, from IRS District Directors, the IRS Web site at https://www.irs.gov, or from TTB's National Revenue Center. The proprietor may file this form with IRS by mail, telephone, or fax by following the instructions on the form.
(b) Time limit. If the proprietor has not already received, or applied for, an EIN at the time that the first return on form TTB F 5000.24, Excise Tax Return, is filed, the proprietor must file such application for an EIN not later than seven days from the date of filing the TTB F 5000.24.
(c) One EIN only. Each proprietor must obtain and use only one EIN, regardless of the number of places of business for which the proprietor is required to file a tax return under this subpart.
§ 19.245   Tax credits under 26 U.S.C. 5010.
(a) The distilled spirits tax. Sections 5001 and 7652 of the IRC impose a tax on all distilled spirits produced in, or imported into, or brought into the United States at the rate prescribed in section 5001 of the IRC.
(b) Tax credits. Section 5010 of the IRC provides a credit for the wine and flavors content in distilled spirits products. These credits effectively reduce the rate of excise tax paid on distilled spirits products that contain eligible wines and eligible flavors. As a result, the alcohol derived from eligible wine is taxed at the rates specified for wine in 26 U.S.C. 5041, and the alcohol derived from eligible flavors is not taxed to the extent that it does not exceed 2.5 percent of the alcohol in the product. This results in an effective tax rate on the distilled spirits product that is lower than the rate prescribed in 26 U.S.C. 5001.
(c) Eligible wine and eligible flavor. The credit for the wine and flavor content of a distilled spirits product is allowable only if the wine or flavor contained in the product is an “eligible wine” or an “eligible flavor”. To determine whether a wine or flavor is eligible, refer to the definitions in § 19.1 and 26 U.S.C. 5010.
(d) Application of effective tax rates. Section 19.246 describes how the proprietor should compute the effective tax rate for each distilled spirits product containing eligible wine or eligible flavor. Sections 19.247 through 19.250 set forth several different methods that the proprietor may use in applying the effective tax rates to taxable removals of products from the proprietor's bonded premises.
§ 19.246   Computing the effective tax rate for a product.
(a) How to compute effective tax rates. In order to determine the effective tax rate for a distilled spirits product containing eligible wine or eligible flavor, the proprietor must first determine the total excise taxes due on the product from all sources including distilled spirits, eligible wine, and alcohol from eligible flavors in excess of 2.5 percent of the total proof gallons in the product. Then, the proprietor must determine the total number of proof gallons of alcohol in the product regardless of the source. By dividing the total tax (numerator) by the total number of proof gallons (denominator) the proprietor will arrive at the effective tax rate for the product in dollars per proof gallon. The proprietor will compute the effective tax rate according to the following formula:
(1) Numerator. The numerator will be the sum of:
(i) The proof gallons of all distilled spirits used in the product (exclusive of distilled spirits derived from eligible flavors), multiplied by the tax rate prescribed by 26 U.S.C. 5001;
(ii) The wine gallons of each eligible wine used in the product, multiplied by the tax rate prescribed by 26 U.S.C. 5041(b)(1), (2), or (3), that would be imposed on the wine but for its removal to bonded premises. Three different tax classes of wine are eligible for the tax credit. The proprietor will have to repeat this step for each different tax class of eligible wine used; and
(iii) The proof gallons of all distilled spirits derived from eligible flavors used in the product, multiplied by the tax rate prescribed by 26 U.S.C. 5001, but only to the extent that such distilled spirits exceed 2.5 percent of the denominator prescribed in paragraph (a)(2) of this section.
(2) Denominator. The denominator will be the sum of:
(i) The proof gallons of all distilled spirits used in the product, including distilled spirits derived from eligible flavors; and
(ii) The wine gallons of each eligible wine used in the product, multiplied by twice the percentage of alcohol by volume of each, divided by 100.
(b) Rounding numbers —(1) Proof gallons. When determining the effective tax rate, the proprietor must express quantities of distilled spirits, eligible wine, and eligible flavors to the nearest tenth of a proof gallon.
(2) Tax rates. The proprietor may round the effective tax rate to as many decimal places as the proprietor deems appropriate, provided that the rate is expressed no less exactly than the rate rounded to the nearest whole cent. The proprietor must be consistent and round the effective tax rates for all products to the same number of decimal places. When rounding, if the number to the right of the last decimal place to be kept is less than five, it will be dropped, if it is five or over, a unit will be added.
(c) Example. The following is an example of the use of the formula.
1 Proof gallons by which distilled spirits derived from eligible flavors exceed 2.5% of the total proof gallons in the batch (100.9 − (2.5% × 3,371.8) = 16.6).
Batch Record
§ 19.247   Use of effective (actual) tax rates.
(a) Select method of applying tax rate. The proprietor may choose to apply an effective tax rate to taxable removals of distilled spirits products in accordance with § 19.248, § 19.249, or § 19.250. Any proprietor who does not elect one of these options must establish an effective tax rate for each batch of distilled spirits product on which a claim for tax credit for alcohol derived from eligible wine or eligible flavor will be made. The proprietor must compute the effective tax rates for these products in accordance with the instructions in § 19.246.
(b) Record tax rates used. The proprietor must record the effective tax rate used on the dump or batch records for the products as required by § 19.598. The proprietor must record the serial numbers of cases of product removed at each rate on the record of tax determination or other related record. The proprietor must keep these records available for inspection by TTB officers.
§ 19.248   Standard effective tax rate.
(a) Establishing a standard effective tax rate for a product. The proprietor may establish a permanent standard effective tax rate for any eligible distilled spirits product, rather than calculate a separate effective tax rate for each batch of product made. If the proprietor elects to use this option, the proprietor must determine the permanent standard effective tax rate based on the least quantity and the lowest alcohol content of eligible wine or eligible flavors used to manufacture the product. Thus, the permanent standard effective tax rate is the highest tax rate that would apply to the product because it is based on a batch with the least amount of alcohol from eligible wine and flavors that qualify for the credit under 26 U.S.C. 5010. By using this method the proprietor forgoes the possible use of a lower tax rate in exchange for the convenience of using a permanent standard effective tax rate that does not have to be recomputed for each batch of product made. The proprietor must keep a permanent record of the standard effective tax rates established for each product, in accordance with § 19.615.
(b) Batches subject to a higher tax rate. Whenever the proprietor manufactures a batch of the product with a lesser quantity or lower alcohol content of eligible wine or eligible flavor, this will result in a higher tax rate on the product since the product will have less alcohol qualifying for the credit under 26 U.S.C. 5010 and a higher percentage of alcohol taxable at the rate published in 26 U.S.C. 5001. In such instances, the proprietor must keep the cased goods segregated from other completed cases of the same product subject to the permanent standard effective tax rate for that product. The proprietor must determine the tax rate for the nonstandard batch in accordance with § 19.247.
(c) TTB review of standard tax rates. If the appropriate TTB officer finds that the use of this procedure jeopardizes the revenue, or causes administrative difficulty, the proprietor upon notification from TTB must discontinue use of this procedure.
§ 19.249   Average effective tax rate.
(a) Establishing an average tax rate. The proprietor may establish an average effective tax rate for any eligible distilled spirits product based on the total proof gallons in all batches of the same composition which have been produced during the preceding 6-month period and which have been or will be bottled or packaged, in whole or in part, for domestic consumption. At the beginning of each month, the proprietor must recompute the average effective tax rate so as to include only the immediately preceding 6-month period. The proprietor must show the average tax rate established for a product in the record of average effective tax rates as prescribed in § 19.613.
(b) TTB review of average effective tax rates. If the appropriate TTB officer finds that the use of this procedure jeopardizes the revenue, or causes administrative difficulty, the proprietor upon notification from TTB must discontinue use of this procedure.
§ 19.250   Inventory reserve account.
(a) The proprietor may establish an inventory reserve account for any eligible distilled spirits product by maintaining an inventory reserve record as prescribed by § 19.614. The effective tax rate applied to each removal or other disposition will be the effective tax rate recorded on the inventory reserve record from which the removal or other disposition is depleted. With an inventory reserve account, the proprietor will tax pay removals on a first-in first-out basis regardless of which lot of product is actually removed.
(b) If the appropriate TTB officer finds that the use of this procedure jeopardizes the revenue, or causes administrative difficulty, the proprietor upon notification from TTB must discontinue use of this procedure.
§ 19.253   Assessment of tax on spirits not accounted for or reported.
The proprietor is required by law to properly account for and report all spirits that it produces. TTB will assess the proprietor for the tax on the difference between the quantity reported and the quantity actually produced.
§ 19.254   Assessment of tax for losses or unauthorized removals.
(a) Lost or destroyed in bond. TTB will assess the proprietor for the tax on spirits, denatured spirits, or wines in bond that are lost or destroyed if:
(1) The proprietor is liable for the tax on spirits, denatured spirits, or wines in bond, and the proprietor fails to file a claim for remission of the tax on spirits, denatured spirits, or wines that are lost or destroyed in bond as provided in § 19.263(a), or
(2) The proprietor files a claim for such loss or destruction but the claim is denied. Exception: The provisions of this section do not apply to spirits, denatured spirits, or wines on which the tax is not collectible due to the provisions of 26 U.S.C. 5008(a) or (d), or 26 U.S.C. 5370, as applicable.
(b) Unauthorized removal from bond. (1) TTB will assess the proprietor for the tax on any spirits, denatured spirits, or wines in bond that are removed from bonded premises other than as authorized by law.
(2) TTB will assess the proprietor for tax on spirits or denatured spirits lost from casks or other packages as described in 26 U.S.C. 5006(b) if the proprietor does not pay the tax upon demand by the appropriate TTB officer.
§ 19.256   Tax on wine.
(a) Imposition of tax. All wine (including imitation, substandard, or artificial wine, and compounds sold as wine) produced in or imported into or brought into the United States is subject to tax pursuant to 26 U.S.C. 5041 or 7652. The proprietor may be liable for wine taxes under 26 U.S.C. 5362(b)(3) for wine that is transferred in bond to the proprietor's distilled spirits plant. The proprietor may not remove wine from the bonded premises of a distilled spirits plant for consumption or sale as wine. ( See 26 U.S.C. 5362.)
(b) Liability for tax. Except as otherwise provided by law, the proprietor is liable for the tax on wine transferred in bond to the proprietor's distilled spirits plant from a bonded wine cellar or from another distilled spirits plant until the proprietor uses the wine in the manufacture of a distilled spirits product or properly disposes of the wine as provided elsewhere in this part.
§ 19.257   Imported spirits.
The proprietor will incur a tax liability greater than the internal revenue tax imposed by 26 U.S.C. 5001(a)(1), if spirits originally imported for nonbeverage purposes are transferred from customs custody to TTB bonded premises pursuant to 26 U.S.C. 5232, and the proprietor subsequently decides to withdraw the spirits for beverage purposes. If the spirits would have been subject to a higher duty had they been imported for beverage purpose, the proprietor must pay a tax equal to the difference between the higher duty and the duty actually paid. Proprietors will refer to this additional tax as “additional tax—less duty” and pay it at the same time and in the same manner as the distilled spirits excise tax. Proprietors must compute the amount of “additional tax—less duty” owed by applying this rate to the total quantity of proof gallons withdrawn. The proprietor must make a separate entry on the tax return labeled “additional tax—less duty” and show the amount of tax due.
§ 19.258   Additional tax on nonbeverage spirits.
The additional tax imposed by 26 U.S.C. 5001(a)(8), on imported spirits withdrawn from customs custody without payment of tax and later withdrawn from bonded premises for beverage purposes, and the related provisions of § 19.257, are not applicable to Puerto Rican or Virgin Islands spirits brought into the United States and transferred to bonded premises under the provisions of this part.
§ 19.261   Scope.
This subpart covers the various types of claims that a proprietor may file and includes provisions regarding the following:
(a) General requirements for filing claims;
(b) Specific requirements for filing certain types of claims; and
(c) Remission, abatement, credit and refund of tax.
§ 19.262   General requirements for filing claims.
(a) A proprietor must file all claims for abatement, remission, credit, or refund under this part on form TTB F 5620.8, Claim—Alcohol and Tobacco Tax and Trade Bureau Taxes. The claim must:
(1) Be filed with TTB's National Revenue Center;
(2) Show the name, address, and capacity of the claimant;
(3) Be signed by the claimant or by the claimant's duly authorized agent under penalties of perjury as provided in § 19.45; and
(4) Include any supporting documents required by this part. The supporting documents will be considered a part of the claim.
(b) The appropriate TTB officer may require that the claimant submit additional evidence or documentation to further support the legitimacy or accuracy of the claim.