THE JURISDICTION AND RESPONSIBILITIES 

OF THE ALCOHOL AND TOBACCO TAX 

AND TRADE BUREAU 

Scheduled for a Public Hearing 

Before the 

SUBCOMMITTEE ON OVERSIGHT 

of the 

HOUSE COMMITTEE ON WAYS AND MEANS 

on May 20, 2008 

Prepared by the Staff 

of the 

JOINT COMMITTEE ON TAXATION 

May 19, 2008 

JCX-43-08
i

CONTENTS 

Page

INTRODUCTION .......................................................................................................................... 1 

I. JURISDICTION AND RESPONSIBILITIES OF THE TAX AND TRADE BUREAU .. 2 

A. Bifurcation of the Bureau of Alcohol, Tobacco and Firearms and Establishment 

of the Alcohol and Tobacco Tax and Trade Bureau..................................................... 2 

B. Statutory Jurisdiction of the Alcohol and Tobacco Tax and Trade Bureau.................. 3 

C. Responsibilities of the Alcohol and Tobacco Tax and Trade Bureau .......................... 4 

II. EXCISE TAX COLLECTIONS AND BUDGET .............................................................. 6 

III. ALCOHOL LAWS ADMINISTERED BY TTB............................................................... 8 

A. Excise Taxes on Alcohol under Chapter 51 of the Code.............................................. 8 

B. Federal Alcohol Administration Act........................................................................... 11 

C. Alcoholic Beverage Labeling Act of 1988 ................................................................. 13 

D. Wilson Act and Webb-Kenyon Act ............................................................................ 14 

E. Selected Regulatory and Enforcement Issues............................................................. 15 

1. Proposed regulations regarding viticultural (location) labeling of wine .............. 15 

2. Final regulations relating to certification of winemaking practices...................... 15 

3. Proposed regulations on statement of alcohol content and serving facts panel.... 16 

4. Final rulemaking on flavored malt beverages....................................................... 16 

5. European Commission claim that U.S. small domestic producer wine credit 

is discriminatory.................................................................................................... 17 

6. Cooperation with the Food and Drug Administration (“FDA”) ........................... 17 

7. Cooperation with the United States Department of Agriculture (“USDA”)......... 17 

8. Federal Trade Commission (“FTC”) cross-jurisdiction........................................ 18 

9. Other State governmental organizations with which TTB works closely ............ 18 

IV. TOBACCO LAWS ADMINISTERED BY TTB............................................................. 20 

A. Excise Taxes on Tobacco Products and Cigarette Papers and Tubes Under 

Chapter 52 of the Code ............................................................................................... 20 

B. Selected Legislative, Regulatory, and Enforcement Issues ........................................ 23 

1. Smuggling and diversion of tobacco products...................................................... 23 

2. Rate of excise tax on large cigars ......................................................................... 23 

3. Treatment of small cigars for purposes of tax and the Master Settlement 

Agreement (“MSA”)............................................................................................. 23 

4. Rate and definitional changes under CHIP........................................................... 24 

5. Legislative enforcement proposals ....................................................................... 24 

6. Cooperation with State governmental organizations ............................................ 25
ii

V. FIREARMS AND AMMUNITION LAWS ADMINISTERED BY TTB....................... 26 

A. Excise Taxes on Firearms and Ammunition Under Sections 4181 and 4182 

of the Code.................................................................................................................. 26

B. Selected Regulatory and Enforcement Issues............................................................. 28 

VI. APPENDIX....................................................................................................................... 29 

A. Excise Tax Rates on Alcohol, Tobacco, and Firearms ............................................... 29 

B. Organizational Chart for the Alcohol and Tobacco Tax and Trade Bureau............... 33 

C. Current Regulatory Actions ........................................................................................ 34 

D. Summary of Certain Related Pending Legislation...................................................... 37 
1

INTRODUCTION 

The Subcommittee on Oversight of the House Ways and Means Committee has 

scheduled a public hearing for May 20, 2008, on the Department of Treasury’s Alcohol and 

Tobacco Tax and Trade Bureau. This document,1

 prepared by the staff of the Joint Committee 

on Taxation, provides general background on the jurisdiction, organization, and activities of the 

Alcohol and Tobacco Tax and Trade Bureau.2

 1

 This document may be cited as follows: Joint Committee on Taxation, The Jurisdiction and 

Responsibilities of the Alcohol and Tobacco Tax and Trade Bureau (JCX-43-08), May 19, 2008. Unless 

the context otherwise requires, references to sections or to the Internal Revenue Code refer to the Internal 

Revenue Code of 1986, as amended. 

2

 As established by the Homeland Security Act of 2002, Pub. L. No. 107-296, sec. 1111 (Nov. 

25, 2002), the organization is statutorily named the “Tax and Trade Bureau.” However, on January 21, 

2003, the Department of Treasury issued an order designating it as the “Alcohol and Tobacco Tax and 

Trade Bureau.” Treasury Order 120-01 (Revised), par. 2, 68 F.R. 3583 (Jan. 24, 2003). This pamphlet 

refers to the organization as the Alcohol and Tobacco Tax and Trade Bureau, or simply “TTB.” 
2 

I. JURISDICTION AND RESPONSIBILITIES OF THE TAX 

AND TRADE BUREAU 

A. Bifurcation of the Bureau of Alcohol, Tobacco and Firearms and Establishment 

of the Alcohol and Tobacco Tax and Trade Bureau 

The Alcohol and Tobacco Tax and Trade Bureau (“TTB”) was established by the 

Homeland Security Act of 2002.3

 That Act split the Bureau of Alcohol, Tobacco and Firearms, 

which at the time was in the Department of the Treasury, into two agencies, and the Bureau of 

Alcohol, Tobacco and Firearms was terminated. The Alcohol and Tobacco Tax and Trade 

Bureau, which remained in the Treasury Department, is, in general, responsible for the 

administration and enforcement of the tax laws relating to alcohol, tobacco, and firearms and 

certain non-tax laws relating to alcohol. The Bureau of Alcohol, Tobacco, Firearms and 

Explosives (“ATF”), which was established within the Department of Justice, is responsible for 

the enforcement of criminal laws and regulatory rules relating to the manufacture, use, and 

distribution of firearms and explosives, and, under certain conditions, alcohol and tobacco. 

ATF’s responsibilities include enforcement of Federal laws relating to arson, trafficking in 

contraband cigarettes (i.e., cigarettes for which relevant State taxes have not been paid),4

 and the 

National Firearms Act, codified in Chapter 53 of the Internal Revenue Code (the “Code”). ATF 

is also responsible for any functions formerly performed by its predecessor that were not 

transferred to TTB, as well as investigations of violent crime or domestic terrorism delegated to 

ATF by the Attorney General. The authorities, functions, personnel, and assets of the Bureau of 

Alcohol, Tobacco and Firearms were divided along the lines of the aforesaid responsibilities.5

 3

 Pub. L. No. 107-296, sec. 1111 (Nov. 25, 2002). 

4

 The law regarding contraband cigarettes is codified at 18 U.S.C. chapter 114. 

5

 The Homeland Security Act of 2002 became effective on January 24, 2003. Pub. L. No. 107-

296. sec. 4. 
3 

B. Statutory Jurisdiction of the Alcohol and Tobacco Tax and Trade Bureau 

TTB is responsible for administering the following laws: 

• Chapter 51 of the Code, relating to distilled spirits, wine, and beer; 

• Chapter 52 of the Code, relating to tobacco products and cigarette papers and tubes; 

• Sections 4181 and 4182 of the Code, relating to excise taxes on firearms and 

ammunition, and portions of chapter 32 relating to such taxes; 

• Subtitle F of the Code, relating to general rules of tax procedure, with respect to the 

three substantive items above, including related criminal provisions; 

• The Federal Alcohol Administration Act, 27 U.S.C. chapter 8, subchapter I, which 

covers basic permits, unfair trade practices, and labeling and advertising of alcohol 

beverages; 

• The Alcoholic Beverage Labeling Act of 1988, 27 U.S.C. chapter 8, subchapter II, 

which requires a specified “Government Warning” statement on alcohol beverage 

labels; 

• The Wilson Act, 27 U.S.C. section 121, relating to State authority over liquor in 

original packages; and 

• The Webb-Kenyon Act, 27 U.S.C. sections 122-122b, which prohibits the shipment 

of liquor into a State in violation of State law. 
4 

C. Responsibilities of the Alcohol and Tobacco Tax and Trade Bureau 

Administration activities in general

TTB administers the Federal excise taxes imposed on distilled spirits, wine, and beer, the 

Federal excise taxes imposed on tobacco products and cigarette papers and tubes, and the Federal 

excise taxes imposed on firearms and ammunition. These taxes (except for the taxes on firearms 

and ammunition) are imposed upon the domestic producer or manufacturer, or upon the 

importer, of these items and are collected on the basis of a return at the time of removal from the 

factory or from internal revenue bond, or in the case of importers, upon release from customs 

custody or bond. Accordingly, in the case of imports, U.S. Customs and Border Patrol (“CBP”) 

is delegated the responsibility for collecting these taxes at the border. The Federal taxes on 

firearms and ammunition are imposed on the manufacturer, producer, or importer at the time of 

sale. As in the case of any excise tax, the Code provides definitions and classifications of these 

products, exemptions, and applicable tax rates, as well as rules relating to product valuation, time 

of tax determination, collection, returns, refunds, and tax deposits. TTB has promulgated 

regulations that more specifically set forth the applicable substantive and procedural rules. 

In addition to its purely tax-collection activities, TTB has permitting, registration, and 

bonding authority over distilleries, wineries, breweries, industrial alcohol producers and users, 

tobacco product manufacturers, importers and exporters, as well as certain regulatory authority 

over the operations of persons engaged in these activities. TTB also regulates the production, 

packaging, bottling, labeling, and storage of alcohol and tobacco products, as applicable.

TTB also imposes and collects occupational taxes on manufacturers of tobacco products 

or cigarette papers or tubes, and proprietors of tobacco export warehouses.6

Tax enforcement

In the areas of alcohol, tobacco, and firearms excise taxes, TTB has civil law 

enforcement authority and resources. TTB also has the authority to enforce the criminal laws 

relating to these taxes, and may refer cases to United States Attorneys for prosecution, but does 

not have any special (i.e., armed) agents on staff. If TTB needs assistance requiring such 

personnel, such as the execution of a search warrant or forfeiture, it may request such assistance 

from ATF, the Internal Revenue Service (“IRS”), or in international matters, from U.S. 

Immigration and Customs Enforcement, or other agencies, as appropriate.7

 6

 Occupational taxes on producers and marketers of alcoholic beverages were suspended for a 

three-year period that began on July 1, 2005, under section 5148, as added by the American Jobs Creation 

Act of 2004, Pub. L. No. 108-357. Effective July 1, 2008, these taxes are repealed by the Safe, 

Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, Pub. L. No. 109-59, sec. 

11125(a)(1). 

7

 TTB personnel generally would accompany such special agents to the extent TTB’s specialized 

knowledge is needed to identify the property covered by the warrant or seizure. 
5 

TTB has executed a Memorandum of Understanding with ATF that generally permits 

information sharing, including return and return information, between these bureaus and satisfies 

the disclosure requirements and restrictions of the Code.8

TTB also shares certain importer licensure and information concerning alcohol label 

approvals with CBP and receives certain import and importer information from CBP.9

Information collected by TTB solely under statutory authority other than the Code (for 

example, information under the Federal Alcohol Administration Act) is not precluded from 

disclosure under section 6103 of the Code.10

Laboratory analysis

TTB has a Scientific Services Division that operates several laboratories that analyze 

beverage and non-beverage alcohol and related products and tobacco products for the purposes 

of tax compliance and identifying or confirming appropriate tax classifications; supporting trade 

analysis and enforcement programs; addressing consumer complaints; identifying harmful 

contaminants, adulterants, and limited and prohibited ingredients; supporting its investigations 

and audits; and providing technical support to State tax authorities and other Federal agencies.11

Support for the Office of the U.S. Trade Representative (“USTR”) 

TTB serves as technical advisor to the USTR on U.S. alcohol beverage- and tobaccorelated laws, regulations, and policy. TTB also provides assistance to the USTR with respect to 

alcohol beverage and tobacco matters arising within the World Trade Organization (“WTO”) 

Council on Trade-Related Aspects of Intellectual Property, its Technical Barriers to Trade 

Committee, and other WTO groups. TTB’s activities in this area are to assist the USTR in the 

worldwide expansion of market access for U.S. goods and services, participate in trade-related 

intellectual property protection issues, and assist in the negotiation of bilateral and multilateral 

free trade agreement issues related to distilled spirits, wine, and beer. 

 8

 See generally sec. 6103. Sec. 6103(o)(1) permits disclosure of alcohol and tobacco tax returns 

and return information to other Federal agencies in furtherance of official duties.

9

 TTB (along with several other Federal agencies) is also assisting CBP in the development of an 

integrated International Trade Data System, which will track commercial goods being shipped into U.S. 

ports. 

10 Sec. 6103(b). 

11 Although TTB has a laboratory located in ATF’s building, it is physically and functionally 

separate from ATF’s laboratories. 
6 

II. EXCISE TAX COLLECTIONS AND BUDGET 

In fiscal year 2007, TTB collected approximately $14.7 billion in excise taxes, including 

from imports. This may be compared to: 

• Fiscal-year 2007 Internal Revenue Service collections of corporate, individual, 

employment, state and gift, and excise taxes of approximately $2.396 trillion,12 and 

• Fiscal-year 2007 U.S. Customs and Border Patrol collections of duties and taxes of over 

$33 billion.13

Table 1 shows the Federal excise taxes collected by TTB from fiscal years 2003 through 

2007 by general type of revenue. A more detailed breakdown for 2007 appears in the Appendix. 

Table 1.–Federal Excise Tax Collection By Revenue 

Fiscal Year 2003 – Fiscal Year 2007 

Revenue Type FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 

Alcohol $6,910,631,000 $6,995,366,000 $7,074,076,000 $7,182,940,000 $7,232,138,000 

Tobacco $7,382,435,000 $7,434,211,000 $7,409,758,000 $7,350,842,000 $7,194,113,000 

Firearms 

Ammunition Mfg $193,414,000 $216,006,000 $225,818,000 $249,578,000 $287,835,000 

Special 

Occupational 

Taxes* 

$103,781,000 $100,562,000 $10,190,000 $2,895,000 $2,808,000 

TOTALS $14,590,261,000 $14,746,145,000 $14,719,842,000 $14,786,255,000 $14,716,894,000 

*Special Occupational Taxes (SOT) were suspended on most alcohol taxpayers, effective July 1, 2005, and repealed for all 

alcohol taxpayers effective July 1, 2008. 

Source: Alcohol and Tobacco Tax and Trade Bureau FY 2009 Congressional Budget Briefing. 

 12 Source: Internal Revenue Service Data Book 2007, Publication 55B, Washington, D.C., issued 

March 2008, “Table 1. Internal Revenue Collections and Refunds, by Type of Tax, Fiscal Years 2006 

and 2007,” available at http://www.irs.gov/pub/irs-soi/07db01co.xls. 

13 Source: U.S. Customs and Border Protection Performance and Accountability Report Fiscal 

Year 2007, at 3, available at 

http://www.cbp.gov/linkhandler/cgov/newsroom/publications/admin/fiscal_2007_pub.ctt/fiscal_2007.pdf. 
7 

Table 2 contains aggregate budget information for TTB for fiscal years 2003 through 

2009. 

Table 2.–Alcohol and Tobacco Tax and Trade Bureau Budget 

(in thousands) 

Fiscal Year 2003 (full year) $79,480 

Fiscal Year 2004 $79,528 

Fiscal Year 2005 $82,336 

Fiscal Year 2006 $90,215 

Fiscal Year 2007 $90,618 

Fiscal Year 2008 $93,515 

Fiscal Year 2009 (proposed) $96,900

Source: Alcohol and Tobacco Tax and Trade Bureau.
8 

III. ALCOHOL LAWS ADMINISTERED BY TTB 

A. Excise Taxes on Alcohol under Chapter 51 of the Code 

Return filing and payment

An excise tax is imposed on all distilled spirits, wine, and beer produced in, or imported 

into, the United States.14 The tax liability legally comes into existence the moment the alcohol is 

produced or imported but payment of the tax is not required until a subsequent withdrawal or 

removal from the distillery, winery, brewery, or, in the case of an imported product, from 

customs custody or bond.15 The excise tax is paid on the basis of a return16 and is paid at the 

time of removal unless the taxpayer has a withdrawal bond in place (most taxpayers have 

withdrawal bonds). In that case, the taxes are paid with semi-monthly returns, the periods for 

which run from the 1st to the 15th of the month and from the 16th to the last day of the month, 

with the returns and payments due not later than 14 days after the close of the respective return 

period.17 For example, payments of taxes with respect to removals occurring from the 1st to the 

15th of the month are due with the applicable return on the 29th. Taxpayers who expect to be 

liable for not more than $50,000 for the calendar year may pay quarterly.18 Taxpayers who were 

liable for a gross amount of taxes of $5,000,000 or more for the preceding calendar year must 

make deposits of tax for the current calendar year by electronic funds transfer.19

A listing of excise tax rates applicable to distilled spirits, wine, and beer is included in the 

Appendix. 

Transfer rules and removals without tax

Certain removals or transfers are exempt from tax. For example, distilled spirits, wine, 

and beer may be removed either free of tax or without immediate payment of tax for certain 

uses,20 such as for export or an industrial use. Bulk distilled spirits, as well as wine and beer, 

may be transferred without payment of the tax between bonded premises under certain 

 14 Secs. 5001, 5041, and 5051. 

15 Secs. 5006, 5043, and 5054. In general, proprietors of distilled spirit plants, proprietors of 

bonded wine cellars, brewers, and importers are liable for the tax. Secs. 5005, 5043, and 5054. CBP 

collects the excise tax on imported products. 

16 Sec. 5061. 

17 Under a special rule, September has three return periods. Sec. 5061. 

18 Sec. 5061. Under regulations, small wineries (with less than $1,000 in annual excise taxes) 

may file and pay on an annual basis. 27 C.F.R. sec. 24.273. 

19 Sec. 5061. 

20 Such uses are specified in sections 5053, 5214, 5362, and 5414. 
9 

conditions specified in the regulations;21 such bulk products, if imported, may be transferred 

without payment of the tax to domestic bonded premises under certain conditions.22 The tax 

liability accompanies such a product that is transferred in bond. 

Registration and bonding

Before commencing operations, a distiller must register, a winery must qualify, and a 

brewery must file a notice with TTB and receive approval to operate.23 A surety bond covering 

the operations must be filed and approved in a dollar amount set by the statute and regulations.24

Operational rules

In addition to the tax rules, chapter 51 also contains numerous provisions that govern the 

operations of distilleries, wineries, and breweries as well as certain related activities. For 

example, chapter 51 provides authority to regulate the labeling of containers of distilled spirits, 

wine, and beer.25 Chapter 51 also contains several provisions that govern the cellar treatment or 

practices used to produce domestic or imported wine, including provisions governing the 

fortification of wine with distilled spirits.26 Other rules address the redistillation or denaturing of 

distilled spirits. For example, imported distilled spirits may only be redistilled or denatured if 

imported at 185 proof or higher,27 and distilled spirits on which tax has been determined or paid 

may only be returned to a distillery for purposes designated by law.28 Tax-paid distilled spirits 

may also be used in the manufacture of medicines, food products, flavors, flavoring extracts, and 

perfumes which are unfit for beverages purposes. Manufacturers of such products may file a 

claim for drawback (return of taxes paid), under certain conditions, for virtually all of the tax 

previously paid on these distilled spirits.29 Chapter 51 also provides statutory authority for the 

 21 See, e.g., sec. 5212. Domestic bottled distilled spirits cannot be transferred in bond between 

distilleries. See 27 C.F.R. sec. 19.505. 

22 Secs. 5005, 5232, 5364, and 5418. Imported bottled distilled spirits, wine, and beer cannot be 

transferred in bond from customs custody to a distillery, winery, or brewery. See sec. 5061(d)(2)(B). 

23 Secs. 5171, 5351-53, and 5401; 27 C.F.R. sec. 25.61(a) (TTB approval of breweries). 

24 Secs. 5173, 5354, 5401, and 5551; 27 C.F.R. parts 19 (Distilled Spirits), 24 (Wine), and 

25 (Beer). 

25 Secs. 5201, 5301, 5388, 5412, and 5662. 

26 Secs. 5373-92. 

27 Sec. 5232. 

28 Sec. 5215. 

29 Sec. 5131. Such claims are generally filed and paid on a quarterly basis, except that a person 

may elect to file and be paid on a monthly basis upon posting a bond. The amount of the drawback 
10 

regulation of alcohol fuel plants,30 vinegar production using stills,31 and volatile fruit concentrate 

plants.32 Other provisions of chapter 51 address the tax consequences of certain occurrences, 

such as operational losses, casualty losses, and voluntary destruction of product.33

Miscellaneous rules, including industry reporting and recordkeeping requirements

Taxpayers are required to maintain records and file reports of operations as required by 

the regulations34 and are subject to inspection of their premises and records.35 Special 

occupational taxes had been imposed on alcohol industry members, including wholesale and 

retail dealers, but were effectively repealed for taxes due on or after July 1, 2005. However, 

these persons remain subject to registration and recordkeeping requirements that supplement the 

operational reporting rules. Distillers, winery proprietors, and brewers file monthly, quarterly, or 

annual reports of operations (the frequency depends upon the type of operation and its size), 

which do not include reports of inventory, although inventory records must be kept. Wholesalers 

and some retailers must keep records, including inventory, but need only register and need not 

file reports. Civil and criminal penalties, in addition to forfeiture provisions, may apply in the 

event of non-compliance with the laws and regulations.36

 

allowed per proof gallon is calculated at a rate equal to $1.00 less than the per-gallon tax paid. Secs. 

5131-34. 

30 Sec. 5181. 

31 Secs. 5501-05. 

32 Secs. 5511-12. 

33 Secs. 5008, 5053(h), 5064, and 5370. 

34 Secs. 5207, 5275, 5367, 5414, and 5555. 

35 Secs. 5366 and 5553. 

36 Secs. 5601-91. 
11 

B. Federal Alcohol Administration Act 

In general

The Federal Alcohol Administration Act (“FAA Act”)37 consists of two subchapters. 

Subchapter I, entitled “Federal Alcohol Administration,” was originally enacted in August 1935 

and covers basic permits, unfair trade practices, and labeling and advertising of alcohol 

beverages. Subchapter II, entitled “Alcoholic Beverage Labeling,” was enacted in 1988, and 

requires a specified “Government Warning” statement on alcohol beverage container labels. 

Federal Alcohol Administration

Immediately following the repeal of Prohibition in 1933, the alcohol beverage industry 

(like many other industries) was subject to Federal regulation primarily under the codes of fair 

competition authorized by the National Industrial Recovery Act. That Act was declared 

unconstitutional by the Supreme Court in May 1935. In order to provide for the orderly 

regulation of the alcohol beverage industry, Congress enacted the FAA Act in August 1935. 

Basic permits

The FAA Act requires producers of distilled spirits or wine, bottlers of distilled spirits, 

and importers or wholesalers of distilled spirits, wine, or malt beverages to obtain basic 

permits.38 A basic permit application may be denied if the applicant has certain criminal 

convictions or is determined to be not likely to operate in conformity with Federal laws in light 

of its past business experience, financial standing, or trade connections.39 The basic permit is 

conditioned on compliance with several provisions of the FAA Act, the twenty-first amendment, 

and other Federal laws relating to alcohol, including the internal revenue laws.40 The basic 

permit is subject to suspension or revocation for willful noncompliance with these conditions 

after affording the permit holder a formal hearing before a Department of the Treasury 

administrative law judge.41 The Department of the Treasury’s decisions on suspension or 

revocation are subject to review by the Federal Courts of Appeal.42 The basic permit terminates 

by operation of law when there is a change in the actual or legal control of the permitted 

business,43 subject to extension upon timely filing of an application for a new permit. 

 37 27 U.S.C. chapter 8. 

38 27 U.S.C. sec. 203. Brewers are not required to hold a basic permit. 

39 27 U.S.C. sec. 204(a). 

40 27 U.S.C. sec. 204(d). 

41 27 U.S.C. sec. 204(e). 

42 27 U.S.C. sec. 204(h). 

43 27 U.S.C. sec. 204(g). 
12 

Unfair trade practices

Unfair trade practices regulated under the FAA Act concern the use of exclusive retail 

outlets, tied-house arrangements, commercial bribery, and consignment sales.44 The first three 

provisions are designed to prevent producers, wholesalers, and importers from entering into 

agreements, transactions, or arrangements that threaten retailer independence. The provision on 

consignment sales is designed to prevent industry members from entering into consignment 

sales, conditional sales, sales with the privilege of return, or other than bona fide sales with 

retailers or wholesalers. 

Labeling and advertising

Labeling and advertising of alcohol beverages are regulated under a consumer protection 

mandate.45 Regulations issued by TTB require labels and advertisements to provide adequate 

information to consumers regarding the identity and quality of these products and to prohibit 

misleading statements or representations, including misleading health claims.46 The labeling 

provisions are enforced principally through the issuance of certificates of label approval which 

must be obtained by bottlers and importers.47 American viticultural areas (discussed, infra) are 

established under the labeling authority.48

Miscellaneous rules

The FAA Act includes provisions limiting bulk sales of distilled spirits (and warehouse 

receipts)49 and regulating interlocking directorates between distilled spirits companies.50 The 

FAA Act also includes investigative and enforcement provisions, including rules relating to 

criminal prosecutions, consent decrees, injunctions, and offers in compromise.51

 44 27 U.S.C. sec. 205(a)-(d). 

45 27 U.S.C. sec. 205(e)-(f). 

46 27 C.F.R. part 4 (Wine), part 5 (Distilled Spirits), and part 7 (Malt Beverages). 

47 27 C.F.R. part 13. 

48 27 C.F.R. part 9. 

49 27 U.S.C. sec. 206. 

50 27 U.S.C. sec. 208. 

51 27 U.S.C. secs. 202 and 207. 
13 

C. Alcoholic Beverage Labeling Act of 1988 

Subchapter II of the FAA Act requires a “Government Warning” statement on all 

containers of alcohol beverages that are manufactured, imported, or bottled for sale or 

distribution in the United States.52 The statement must be located in a conspicuous and 

prominent location on the container.53 The subchapter preempts any State law that requires a 

statement relating to alcoholic beverages and health,54 and provides for civil penalties,55 

injunctions, and offers in compromise.56

 52 27 U.S.C. sec. 215. The required warning is as follows: 

“GOVERNMENT WARNING: 

(1) According to the Surgeon General, women should not drink alcoholic beverages during 

pregnancy because of the risk of birth defects. 

(2) Consumption of alcoholic beverages impairs your ability to drive a car or operate machinery, 

and may cause health problems.” 

53 27 U.S.C. sec. 215; 27 C.F.R. part 16. 

54 27 U.S.C. sec. 216. 

55 27 U.S.C. sec. 218. 

56 27 U.S.C. sec. 219. 
14 

D. Wilson Act and Webb-Kenyon Act 

The Wilson Act57 provides that any liquors transported into any State or territory or 

remaining therein for use, consumption, sale, or storage shall be subject to the laws of such State 

or territory enacted in the exercise of its police powers, to the same extent and the same manner 

as though the liquors had been produced in such State or territory, regardless of whether the 

liquors were introduced into such State or territory in original packages or otherwise. 

The Webb-Kenyon Act was re-enacted as part of the Liquor Enforcement Act of 1935,58

in order to assist the States in enforcing the twenty-first amendment. The Webb-Kenyon Act 

prohibits the shipment or transportation of liquor of any kind into a State in violation of the laws 

of such State.59 Under TTB’s interpretation, the Webb-Kenyon Act is a Federal law relating to 

alcohol and, therefore, compliance with it is a condition of holding the basic permit. The law 

itself provides no penalties for its violation. However, State attorneys general are authorized to 

obtain injunctions from a Federal district court against persons shipping liquors into their State in 

violation of such State’s laws.60

 57 27 U.S.C. sec. 121. 

58 49 Stat. 877, c. 740, sec. 202(b), August 27, 1935. The Webb-Kenyon Act was originally 

enacted in 1913, in 37 Stat. 699, c. 90, sec. 1, March 1, 1913. 

59 27 U.S.C. sec. 122. 

60 27 U.S.C. sec. 122a. 
15 

E. Selected Regulatory and Enforcement Issues 

1. Proposed regulations regarding viticultural (location) labeling of wine 

A viticultural area is a delimited, grape-growing region distinguishable by geographical 

features, the boundaries of which have been delineated in Federal regulations.61 Only those 

American viticultural areas specified in the regulations are permitted to be used as an appellation 

of origin on a wine label or in wine advertisements. (Other appellations of origin include names 

of countries, States, or counties.) TTB establishes viticultural areas based on petitions that 

contain: evidence that the name of the viticultural area is locally and/or nationally known as 

referring to the area specified in the application and that the boundaries of the viticultural area 

are as specified in the application; evidence relating to the geographical features (climate, soil, 

elevation, physical features, etc.) which distinguish the viticultural features of the proposed area 

from surrounding areas; and the specific boundaries of the viticultural area, as marked on a U.S. 

Geological Survey map. Brand names that include viticultural area names must be used on 

wines eligible for that viticultural area unless the brand name is grandfathered under 27 C.F.R. 

section 4.39(i), relating to brand names that appear on certificates of label approval that were 

issued prior to July 7, 1986. 

There are approximately 180 established American viticultural areas. TTB proposed new 

rules in 2007 that modify the information required to be submitted in a petition and that would 

allow a brand name which includes a viticultural area name approved in the future to be used on 

labels and in advertisements if, in general, the name has been used on an approved label for five 

years, notwithstanding the approval of a new petition for a viticultural area that contains the 

same appellation of origin.62

2. Final regulations relating to certification of winemaking practices 

Section 5382 of the Code specifies proper winemaking practices. Prior to 2005, section 

5382(a) provided that “[p]roper cellar treatment of natural wine constitutes those practices and 

procedures in the United States and elsewhere, whether historical or newly developed, of using 

various methods and materials to correct or stabilize the wine, or the fruit juice from which it is 

made, so as to produce a finished product acceptable in good commercial practice.” The 

Miscellaneous Trade and Technical Corrections Act of 200463 modified Code section 5382(a) to 

authorize only those practices and procedures recognized in the United States and, in the case of 

imported wines, those practices and procedures acceptable to the United States under an 

international agreement or treaty. In the case of imported wines, the new provision generally 

requires certification by the government of the producing country that the wine is (1) produced in 

accordance with United States practices and procedures, or (2) covered by an international 

 61 27 C.F.R. sec. 9.11. 

62 Proposed Revision of American Viticultural Area Regulations, 72 F.R. 65261, RIN 1513-

AB39, Nov. 20, 2007. 

63 Pub. L. No. 108-429, sec. 2002, effective January 1, 2005. 
16 

agreement where the agreement requires a certification. On April 28, 2008, TTB issued final 

regulations regarding the content, validity, and use of such certifications relating to imported 

wine.64

3. Proposed regulations on statement of alcohol content and serving facts panel 

TTB has long required certain labeling, such as brand name, class and type, alcohol 

content (in the case of wines containing more than 14 percent alcohol by volume and distilled 

spirits), and net contents. In recent years, TTB has published updated standards for the use of 

carbohydrate and calorie claims. Because of petitions from interested groups to mandate 

additional information, including ingredient, alcohol, calorie, and carbohydrate content, and 

requests by some to use labels with at least some of that additional information on a voluntary 

basis, TTB proposed in 2007 to amend these regulations in certain respects. 

TTB’s proposed regulations require a statement of alcohol content, expressed as a 

percentage of alcohol by volume, on all alcohol beverage products. This statement may appear 

on any label affixed to the container. The proposed regulations also require a “serving facts” 

panel on alcohol beverage labels, which would include a statement of calories, carbohydrates, 

fat, and protein. Industry members may also choose to disclose on the serving facts panel the 

number of U.S. fluid ounces of alcohol per serving as part of a statement that includes alcohol 

content expressed as a percentage of alcohol by volume. The proposed regulations also specify 

new “reference serving” sizes for wine, distilled spirits, and malt beverages based on the amount 

of beverage customarily consumed as a single serving.65

The proposed regulations have attracted many comments from industry members as well 

as consumer groups. 

4. Final rulemaking on flavored malt beverages 

In 2005, TTB issued final rules addressing certain malt beverages derived from beer, in 

which flavors containing distilled spirits are added and some elements of the beer may be 

removed. Because beer is taxed at a lower tax rate by volume than distilled spirits, there is a tax 

incentive for a manufacturer of such a product to characterize it as beer. Under the final 

regulations, for both tax and labeling purposes, if 51 percent or more of the alcohol in the 

product is derived from fermentation, then the product is treated as beer if its alcohol content is 

six percent or less. In the case of a beer with an alcohol content of more than six percent by 

 64 Final Rule, Certification Requirements for Imported Natural Wine, T.D. TTB-70, 73 F.R. 

22816, April 28, 2008. 

65 Notice of Proposed Rulemaking, Labeling and Advertising of Wines, Distilled Spirits, and 

Malt Beverages, 72 F.R. 41860, RIN 1513-AB07, July 31, 2007. 
17 

volume, no more than 1.5 percent of the volume of beer may consist of alcohol derived from 

added flavors. Otherwise, it is treated as distilled spirits.66

5. European Commission claim that U.S. small domestic producer wine credit is 

discriminatory 

The United States provides an excise tax credit to small domestic wine producers, defined 

as domestic wine producers producing not more than 250,000 wine gallons of wine during a 

calendar year. The amount of the credit is $0.90 per wine gallon ($0.056 per wine gallon in the 

case of hard cider) on the first 100,000 wine gallons (other than champagne and other sparkling 

wines) removed from the bonded premises.67 The credit is reduced by one percent for each 

1,000 wine gallons produced in excess of 150,000 wine gallons in a calendar year. Importers are 

not eligible for this credit. 

In its report titled United States Barriers to Trade and Investment Report, the European 

Commission states that a GATT panel found in March 1992 that the small domestic wine 

producer credit violated U.S. obligations under Art. III.2 of GATT and that the issue was raised 

at the European Commission/United States wine talks held in 2006 and 2007.68

6. Cooperation with the Food and Drug Administration (“FDA”) 

TTB routinely examines alcohol beverage labels and tests product samples for 

compliance with laws and regulations. If this analysis indicates a potential risk to public health 

or safety, TTB’s policy is to take immediate action. Any food product (including an alcohol 

beverage) is considered adulterated under the Federal Food, Drug and Cosmetic Act if it contains 

a poisonous or deleterious substance or an unapproved food additive (or contains approved 

additives above approved limits). Contaminated alcohol beverages are considered adulterated 

for purposes of the Food, Drug and Cosmetic Act and are mislabeled under the FAA Act. Thus, 

they are subject to enforcement action by both FDA and TTB. Under the terms of a 

Memorandum of Understanding between the two agencies, TTB notifies FDA when an 

adulterated alcohol beverage is encountered, consults with FDA before implementing a voluntary 

recall, and keeps FDA apprised of the situation.

7. Cooperation with the United States Department of Agriculture (“USDA”)

On October 21, 2002, USDA finalized rules implementing the National Organic 

Program. This program establishes national standards for the production and handling of 

organically produced products, including alcohol beverages. Consequently, USDA and TTB 

 66 Final Rule, Flavored Malt Beverage and Related Regulatory Amendments, T.D. TTB-21, 70 

F.R. 194, RIN 1513-AA12, January 3, 2005. 

67 A wine gallon is a United States gallon of liquid measure equivalent to the volume of 231 

cubic inches. Sec. 5041(d). 

68 United States Barriers to Trade and Investment Report for 2007, European Commission, April, 

2008. 
18 

share in the regulatory control of alcohol products that bear an organic claim on their labeling. A 

Memorandum of Understanding between USDA and TTB establishes procedures that allow for a 

timely concurrent review of these labels to ensure that they comply with all federal labeling 

regulations. In addition, TTB cooperates with USDA by providing information on tobacco 

product manufacturers and importers to assist USDA in verifying tobacco buyout payments 

under the Fair and Equitable Tobacco Reform Act of 2004. 

8. Federal Trade Commission (“FTC”) cross-jurisdiction 

FTC and TTB have cross-jurisdictional authority in the area of alcohol beverage 

advertising. TTB has worked with FTC on several occasions in response to complaints about 

alcohol advertisements, most recently regarding the advertisement and placement of so-called 

“malternatives” in retail shops. Since TTB recently expanded its advertising enforcement 

program, the opportunities for working together with FTC will increase. 

9. Other State governmental organizations with which TTB works closely 

State tax authorities

TTB administers a State Agreement program that controls the exchange of tax 

information between TTB and the various States. Although the disclosure of tax returns and 

return information by Federal agencies is generally prohibited by section 6103 of the Code, 

subsection 6103(d) provides that “[r]eturns and return information...shall be open to inspection 

by, or disclosure to any State agency, body, or commission, or its legal representative, which is 

charged under the laws of such State with responsibility for the administration of State tax laws 

for the purpose of, and only to the extent necessary in, the administration of such laws....” The 

statute requires a State tax agency to send a formal, detailed, written request for tax-related 

information from the head of the State agency. In order to ease the burden of the formal request 

process, TTB’s predecessor agency executed agreements with most State agencies responsible 

for the administration of alcohol and tobacco taxes. When TTB was established, it instituted a 

program to update the existing agreements and to negotiate new agreements with other State tax 

agencies. As of the end of March 2008, TTB had executed updated agreements with 12 State 

agencies, and negotiations are ongoing with 23 additional State tax agencies. 

Federation of Tax Administrators (“FTA”) 

The FTA represents State agencies that collect taxes. TTB attends FTA meetings that 

focus on the collection of excise taxes on alcohol and tobacco products. During these meetings, 

TTB and representatives of the various State agencies share general information and foster 

relationships to improve efforts on collection of excise taxes. 

State liquor regulators

TTB also works with State liquor regulators and their two associations, the National 

Conference of State Liquor Administrators and the National Association of Beverage Control 

Administrators. The National Conference of State Liquor Administrators represents the States 

that require licensing and that act as regulators and tax collectors. The National Association of 

Beverage Control Administrators represents 19 States known as the “control states” which not 
19 

only regulate alcohol beverage distribution within their respective borders, but also sell these 

products at the wholesale and, in many cases, retail level. 
20 

IV. TOBACCO LAWS ADMINISTERED BY TTB 

A. Excise Taxes on Tobacco Products and Cigarette Papers 

and Tubes Under Chapter 52 of the Code 

Return filing and payment

Chapter 52 of the Code imposes excise taxes on tobacco products and cigarette papers 

and tubes that are manufactured in, or imported into, the United States.69 Tobacco products are 

cigars (both small and large), cigarettes (both small and large), smokeless tobacco (snuff and 

chewing tobacco), pipe tobacco, and roll-your-own tobacco.70 The tax liability legally comes 

into existence the moment that the tobacco products or cigarette papers and tubes are 

manufactured or imported, but the requirement to pay the tax is not triggered until the product is 

removed from the taxpayer’s premises or, in the case of an imported product, from customs 

custody or bond. The tax is determined and paid at the time of removal from the manufacturer’s 

premises unless the taxpayer has a deferral bond in place, in which case the taxes are paid on the 

basis of semi-monthly return periods.71 The tax is paid on the basis of a return. Any taxpayer 

who is liable for a gross amount of taxes equal to or exceeding $5,000,000 during a calendar year 

must make deposits of tax for the following year by electronic funds transfer.72 A special 

occupational tax is imposed annually on manufacturers and export warehouse proprietors (but 

not importers).73

A listing of excise tax rates applicable to tobacco products and cigarette papers and tubes 

is included in the Appendix. 

Transfer rules and removals without tax

Tobacco products and cigarette papers and tubes may be transferred between bonded 

premises of manufacturers of tobacco products and export warehouse proprietors without 

payment of the tax; the transferee is liable for the tax on the transferred tobacco products and 

papers and tubes.74 Tobacco products and cigarette papers and tubes may also be removed 

without payment of tax for exportation; the exporter is relieved from the tax once proof of 

 69 Sec. 5701. 

70 Sec. 5702. 

71 Sec. 5703. 

72 Sec. 5703(b). 

73 Secs. 5731-34. 

74 Secs. 5703(a) and 5704. 
21 

exportation is obtained.75 Tax-paid product exported from the United States is eligible for 

drawback of the tax under certain conditions.76

Imported tobacco products may be released from customs custody in bulk for transfer to 

the bonded premises of a manufacturer or export warehouse proprietor without payment of the 

tax. The transferee is then responsible for the taxes.77 Previously exported domestic tobacco 

products may be relanded in the United States only if they are transferred to the original 

manufacturer or to an export warehouse proprietor authorized by the original manufacturer.78 In 

order to prevent the diversion of tobacco products destined for export without payment of tax, 

however, packages bearing export marks are not allowed in the domestic marketplace.79

The tax is refunded or credited (without interest) for products withdrawn from the market 

and returned to bonded premises.80 Tax-paid products that are lost by casualty or disaster are 

eligible for tax refunds or credits.81

Permits and bonds

Before commencing operations, a manufacturer or importer of tobacco products or 

cigarette papers or tubes and an export warehouse proprietor must file an application for a 

permit.82 Permits are subject to suspension or revocation for noncompliance.83 A surety bond is 

required to be furnished by manufacturers and export warehouse proprietors.84 Importers are not 

required to post a surety bond because the requirement to pay the tax is triggered at the time the 

tobacco products or cigarette papers or tubes are released from customs custody. Prior to that 

time, the customs bond is applicable. 

 75 Sec. 5704(b). 

76 Sec. 5706. 

77 Sec. 5704(c). 

78 Secs. 5754 and 5761(c). 

79 Secs. 5754(a) and 5761(c). 

80 Sec. 5705. 

81 Secs. 5705 and 5708. 

82 Secs. 5712 and 5713. 

83 Sec. 5713(b). 

84 Sec. 5711. 
22 

Operational rules

Upon removal, tobacco products and cigarette papers and tubes must be in packages and 

bear such marks, labels, and notices as required by the regulations.85 The Code prohibits lottery 

features and indecent or immoral material from being contained in or attached to a package of 

tobacco products or cigarette papers or tubes.86

Tobacco products may be furnished by a manufacturer to its employees or put to 

experimental use without payment of the tax under conditions set forth in regulations.87

Miscellaneous rules, including industry reporting and recordkeeping requirements

Manufacturers, importers, and export warehouse proprietors are required to keep records 

and make accurate inventories as required by regulations.88 Tobacco products manufacturers and 

export warehouse proprietors must also file operating reports, including inventories. Civil and 

criminal penalties, including forfeiture, apply in the case of noncompliance with various 

provisions of Chapter 52.89 The criminal and forfeiture provisions of subtitle F of the Code that 

apply to taxes in general also apply to tobacco taxes. 

 85 Sec. 5723(a) and (b). 

86 Sec. 5723(c) and (d). 

87 Sec. 5704(a). 

88 Secs. 5721-22 and 5741. 

89 Secs. 5751-52 and 5761-63. 
23 

B. Selected Legislative, Regulatory, and Enforcement Issues 

1. Smuggling and diversion of tobacco products 

Smuggling of tobacco products generally refers to the act of entering items into the 

United States without payment of duty and tax.90 Diversion of tobacco products generally refers 

to the unauthorized distribution of items without payment of tax. For example, (1) cigarettes 

may be removed without payment of tax for exportation but once removed may be diverted for 

domestic sale, or (2) may be produced by an unauthorized manufacturer. These types of 

schemes also affect State excise tax receipts. TTB coordinates its efforts with State tax 

authorities, CBP, and U.S. Immigration and Customs Enforcement, as appropriate. 

2. Rate of excise tax on large cigars 

Under present law, cigars weighing over three pounds per thousand are taxed at a rate 

equal to 20.719 percent of the price for which sold but not more than $48.75 per thousand. 

Large cigars are the only tobacco product whose tax calculation is determined based upon price 

sold, and many of these cigars are subject to the $48.75 cap. Imported large cigars tend to be 

more expensive than domestically manufactured large cigars. As a result of this market 

fragmentation, when Congress attempted in 2007 to equitably reset the range of excise tax rates 

on tobacco products and cigarette papers and tubes to fund the reauthorization of the Children’s 

Health Insurance Program, it was particularly challenging to set a new excise tax rate and an 

appropriate tax cap with respect to large cigars.91

3. Treatment of small cigars for purposes of tax and the Master Settlement Agreement 

(“MSA”) 

Under present law, small cigars are taxed at a much lower rate than small (regular) 

cigarettes. Small cigars are taxed at a rate of $1.828 per thousand, while small cigarettes are 

taxed at a rate of $19.50 per thousand. In addition, small cigars are not assessed to fund the 

MSA. Perhaps as a result of these factors, recently a number of new brands of small cigars have 

entered the market and the volume of small cigar sales has increased. The Children’s Health 

Insurance Program Reauthorization Act of 2007 (“CHIP”) would have equalized the excise tax 

rates on small cigars and small cigarettes.92 In 2006, TTB proposed regulations that would 

 90 For example, section 401 of the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432 

(December 20, 2006), addresses a certain type of smuggling of tobacco products in which U.S. 

individuals order certain tobacco products from foreign sources via the internet and the items are 

delivered to them through the U.S. mail or other common carrier. The provision clarifies that the customs 

personal use exemption from duty and tax (e.g., 200 cigarettes) does not apply with respect to such 

“delivery sales.”

91 The Children’s Health Insurance Program Reauthorization Act of 2007 provided for a tax rate 

on large cigars equal to 52.988 percent of the selling price, with a cap of $3.00 per cigar. 

92 The Children’s Health Insurance Program Reauthorization Act of 2007 was passed by both 

Houses of Congress twice and was vetoed by the President both times. H.R. 3963 (passed November 1, 

2007) and H.R. 976 (passed September 27, 2007). 
24 

clarify the classification of cigars and cigarettes, with particular reference to the distinction 

between small cigars and cigarettes. The proposed regulations attempt to provide more objective 

product classification criteria in order to reduce possible revenue losses through the 

misclassification of cigarettes as small cigars and to facilitate the determination of payments 

under the MSA.93

4. Rate and definitional changes under CHIP 

CHIP would have increased the rates of excise tax on tobacco products and cigarette 

papers and tubes by approximately 150 percent, generally in a proportionate manner. In 

addition, under CHIP, roll-your-own tobacco would include any tobacco, which because of its 

appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or 

purchased by, consumers as tobacco for making cigars as well as cigarettes, or for use as 

wrappers for making cigars. 

5. Legislative enforcement proposals 

CHIP also contained several tax enforcement provisions, which are briefly described 

below. 

Processed tobacco

The provision would create a new category of manufacturers and importers who are 

subject to regulation but not to Federal excise tax. Under this provision, manufacturers and 

importers of “processed tobacco” would be subject to the present-law permit, inventory, 

reporting, and recordkeeping requirements. Processed tobacco would be defined as any tobacco 

other than tobacco products. However, the processing of tobacco does not include the farming or 

growing of tobacco or the handling of whole tobacco leaf solely for sale, shipment, or delivery to 

a manufacturer of tobacco products or processed tobacco. The purpose of the provision is to 

better track the path of processed tobacco to manufacturers of tobacco products in order to 

prevent the diversion of processed tobacco to unauthorized manufacturers. 

Permit suspension or revocation in some circumstances

Under this provision, permits could be denied, suspended, or revoked if the applicant or 

holder is convicted of, or in some circumstances, in legal proceedings involving the violation of, 

a Federal or State criminal felony law relating to tobacco products or cigarette papers or tubes. 

Impose statute of limitations provided in tax statutes on imported items

Under this provision, notwithstanding any customs law, the general three-year statute of 

limitations for assessment under the tax law would apply with respect to taxes imposed on 

 93 Notice of Proposed Rulemaking, Tax Classification of Cigars and Cigarettes, 71 F.R. 62506, 

RIN 1513-AB34, October 25, 2006. 
25 

imported distilled spirits, wines, beer, tobacco products, and cigarette papers and tubes. This 

provision would apply to alcohol as well as tobacco. 

Inventory of unauthorized manufacturers of tobacco products subject to immediate 

seizure

Under this provision, in the case of any tobacco products or cigarette papers or tubes 

produced in the United States at any place other than the premises of a manufacturer that had 

obtained a permit (if required) and approval of a bond, the excise tax would be due and payable 

immediately upon manufacture. This provision would facilitate the seizure of inventory of 

unauthorized manufacturers of tobacco products. A similar provision currently applies in the 

case of distilled spirits, wine, and beer. 

6. Cooperation with State governmental organizations 

In addition to working closely with many of the State organizations described in the 

portion of this pamphlet pertaining to alcohol regulatory and enforcement issues, TTB also 

works with the National Association of Attorneys General (“NAAG”). NAAG is the coordinator 

of the MSA concerning cigarettes and smokeless tobacco among the various State governments. 

Because NAAG is interested in collecting MSA payments from domestic manufacturers and 

importers, TTB has provided domestic production and import information to NAAG in 

accordance with the disclosure provisions of the Code. 
26 

V. FIREARMS AND AMMUNITION LAWS ADMINISTERED BY TTB 

A. Excise Taxes on Firearms and Ammunition Under 

Sections 4181 and 4182 of the Code 

Return filing and payment

The Federal firearms and ammunition excise taxes are ad valorem excise taxes imposed 

on firearms, shells, and cartridges that are manufactured or produced in, or imported into, the 

United States.94 The tax liability legally comes into existence upon the first domestic sale of the 

taxable article or when a manufacturer, producer, or importer removes an article from inventory 

and puts the article to a taxable business use.95 A listing of excise tax rates applicable to firearms 

and ammunition is included in the Appendix. 

Three types of transactions are exempt from the firearms and ammunition excise taxes: 

(1) sales in which the transfer tax under section 5811 has been paid;96 (2) purchases made by a 

military department of the Department of Defense or the Coast Guard with appropriated funds; 

and (3) transactions of a manufacturer, importer, or producer that manufactures, produces, and 

imports fewer than 50 firearms in a calendar year.97 In addition, there are five types of 

transactions which can qualify for tax-free status if the taxpayer meets applicable statutory and 

regulatory requirements: (1) sales for further manufacture; (2) sales for export; (3) sales to state 

or local governments for their exclusive use; (4) sales for use as supplies for vessels or aircraft; 

and (5) sales to non-profit educational organizations for their exclusive use.98

Generally, the tax liability is based upon a manufacturer’s or importer’s arm’s-length 

domestic wholesale price for the taxable article; however, the taxpayer is permitted to exclude 

certain costs that are not related to the manufacture or importation of the taxable article when 

computing its taxable sale price.99 The purpose of these rules is to ensure a degree of tax parity 

between these types of sales transactions and those at wholesale. 

 94 Sec. 4181. 

95 Secs. 4181 and 4218(a). 

96 Section 5811 is part of the National Firearms Act, which is enforced by ATF. 

97 Sec. 4182. 

98 Sec. 4221(a). 

99 Sec. 4216(a). For example, such excludable costs include the transportation, delivery, and 

insurance expenses incurred when shipping the taxable article to a purchaser. In a number of sale 

situations the taxpayer may elect (or is required to calculate) a new taxable sale price pursuant to the 

constructive sale price rules. Common examples of such sale situations include sales at retail, to retail 

dealers, sales that are not at arm’s length, and sales for less than fair market value. 
27 

The detailed rules for collecting the firearms and ammunition excise taxes are prescribed 

by regulations.100 A taxpayer is generally required to file tax returns and pay tax on a quarterly 

basis but may be required to file such returns on a monthly or semi-monthly basis under certain 

circumstances. Taxpayers are also required to deposit their taxes on a semi-monthly basis when 

their tax liability exceeds $2,000 for a given tax quarter. 

Taxpayers may file claims for credit or refund of tax overpayments, but in most instances 

must first comply with certain conditions. These rules require that a taxpayer must pass along to 

its purchaser the amount of tax refunded unless the taxpayer either is able to demonstrate that it 

did not include the tax in the sale price of the article or receives a waiver of this requirement 

from the purchaser.101 

Operational and miscellaneous rules

 Taxpayers are required by regulations to maintain accurate records relating to their 

tax liability and eligibility for claims.102 The procedural, civil penalty, criminal, and forfeiture 

provisions of subtitle F of the Code that apply to other taxes in general also apply to the firearms 

and ammunition excise taxes. 

 100 27 C.F.R. part 53, subpart L. 

101 Sec. 6416. 

102 27 C.F.R. part 53, subpart C. 
28 

B. Selected Regulatory and Enforcement Issues 

Several of the general rules included in chapter 32 of the Code, for example, rules 

pertaining to exemptions and the determination of price, apply to a broad range of manufacturers 

excise taxes administered by the IRS, in addition to the firearms and ammunition excise taxes. 

Accordingly, TTB coordinates with the IRS to ensure that their rules and interpretations in these 

areas are consistent. In particular, the IRS is responsible for the administration and collection of 

excise taxes imposed on other recreational equipment, i.e., on sport fishing equipment and bows 

and arrows. The two agencies work to ensure that similar transactions in different types of 

taxable recreational equipment are taxed in a similar manner. 
29 

VI. APPENDIX 

A. Excise Tax Rates on Alcohol, Tobacco, and Firearms 

Table 3.–General Excise Tax Rates for Alcohol 

Item Current Tax Rate Prior Tax Rate Date Rate L

Distilled Spirits $13.50 per proof gallon1 $12.50 1/1Wine2-- 

 Still Wines --  No more than 14 percent alcohol  More than 14 percent but not  more than 21 percent alcohol  More than 21 percent but not  more than 24 percent alcohol  More than 24 percent alcohol  Hard apple cider 

$1.07 per wine gallon3

$1.57 per wine gallon $3.15 per wine gallon Taxed at the distilled spirits rate $0.226 per wine gallon 

 $0.17  $0.67  $2.25  $1.07 

 1/1 1/1 1/1 10/1

 Sparkling Wines --  Champagne and other naturally  sparkling wines  Artificially carbonated wines 

$3.40 per wine gallon $3.30 per wine gallon 

 $0.17  per half pint  $2.40 

 1/1 1/1

Beer $18.00 per barrel4 $9.00 1/11 A “proof gallon” is a U.S. liquid gallon consisting of 50 percent alcohol. Credits are allowed for wine content and flavors 

content of distilled spirits. 

2 Small domestic wine producers (i.e., those producing not more than 250,000 wine gallons in a calendar year) are allowed a credit 

of $0.90 per wine gallon ($0.056 per wine gallon in the case of hard cider) on the first 100,000 wine gallons (other than champagne and other sparkling wines) removed from the bonded premises. The credit is reduced by one percent for each 1,000 wine gallons produced in excess of 150,000 wine gallons per calendar year. 

3 A “wine gallon” means a United States gallon of liquid measure equivalent to the volume of 231 cubic inches. 4 A “barrel” is equal to 31 gallons, each gallon equivalent to the volume of 231 cubic inches. A domestic brewer who produces not mo

a calendar year is subject to a per barrel rate of $7.00 on the first 60,000 barrels produced in that year. 
30 

Table 4.–General Excise Tax Rates for Tobacco Products and Cigarette Papers and Tub

Item Current Tax Rate Prior Tax Rate Date Ra

Cigarettes --  Small Cigarettes (no more than three  pounds per thousand)  Large Cigarettes (no more than three pounds 

 per thousand) 

$19.50 per thousand  ($0.39 per pack) $40.95 per thousand 

$17.00 per thousand  ($0.34 per pack) $35.70 per thousand 

Cigars --  Small Cigars (no more than three pounds  per thousand)  Large Cigars (no more than three pounds  per thousand) 

$1.828 per thousand 20.719% of price sold, not to exceed $48.75 per thousand

$1.594 per thousand 18.063% of price sold, not to exceed $42.50 per thousand 

Cigarette Papers $0.0122 for each 50 papers $0.0106 per 50 Cigarette Tubes $0.0244 for each 50 tubes $0.0213 per 50 Snuff $0.585 per pound $0.51 per pound Chewing Tobacco $0.195 per pound $0.17 per pound Pipe Tobacco $1.0969 per pound $0.9567 per pound Roll-Your-Own Tobacco $1.0969 per pound $0.9567 per pound 
31 

Table 5.–General Excise Tax Rates for Firearms and Ammunition 

Item Current Tax Rate Prior Tax Rate Date Rate 

Pistols and Revolvers 10% of price sold 11% of price sold 1Other Firearms 11% of price sold 10% Shells and Cartridges 11% of price sold 10% Machine Guns and other Heavy Firearms 

$2001 0 

1 This is a transfer tax imposed under section 5811 and administered by ATF. 
32 

Table 6.–Detail on Tax Collections of the Alcohol and Tobacco Tax 

and Trade Bureau for Fiscal Year 2007 

REGISTRY TYPE 2007

Manufacturer of Tobacco Products $7,194,040,000

Manufacturer of Cigarette Papers and Tubes $1,000

Export Warehouse $72,000

Distilled Spirits Plant $3,409,622,000

Brewery $3,198,308,000

Bonded Winery $341,206,000

Bonded Wine Cellar $248,352,000

Manufacturer of Non Beverage Products $34,642,000

Importers $8,000

Firearms Ammunition Mfg $287,835,000

Special Occupational Taxes $2,808,000

Floor Stock Tax $0

Grand Total $14,716,894,000

Source: Alcohol and Tobacco Tax and Trade Bureau. 
33 

B. Organizational Chart for the Alcohol and Tobacco Tax and Trade Bureau 

Source: Alcohol and Tobacco Tax and Trade Bureau FY 2009 Congressional Budget Briefing.

The Alcohol and Tobacco Tax and Trade Bureau

Administrator

John Manfreda

Deputy Administrator

Vicky McDowell 

Executive 

Liaison for 

Industry and 

State Matter

Susan Evans

Equal 

Employment 

Opportunity 

and Diversity 

Advancement

Tram-Tiara Ngo, 

Director

Information 

Resources/CIO

Robert Hughes,

Assistant 

Administrator

Headquarters 

Operations

William Foster,

Assistant 

Administrator

Management/

CFO

Cheri Mitchell,

Assistant 

Administrator

Field 

Operations

Mary Ryan,

Assistant 

Administrator

Advertising, Labeling, and 

Formulation Division

Karen Freelove, Director

International Trade 

Division

Gail Davis, Director

Regulations and Rulings

Division

FrancisFoote, Director

Scientific Services 

Division

Dr. Abdul Mabud, Director

Finance and Performance

Budgeting Division

Joseph Burruss, Director

Acquisition and Facilities 

Management Division

Estelle Martin, Director

Human Resources 

Division

Susan Greemore, Director

Training and Professional 

Development Division

John Brockman, Director

National Revenue 

Center

Roger Bowling, Director

Trade Investigations

Division

Robert Angelo, Director

Tax Audit 

Division

Ronald Hancock, Director

Trade Analysis and 

Enforcement Division

Jerry Bowerman, Director

Knowledge Management 

Staff

Barbara Pearson, Director

Office of 

Inspection

Theresa 

Glasscock, 

Director

The Alcohol and Tobacco Tax and Trade Bureau

Administrator

John Manfreda

Deputy Administrator

Vicky McDowell 

Executive 

Liaison for 

Industry and 

State Matter

Susan Evans

Equal 

Employment 

Opportunity 

and Diversity 

Advancement

Tram-Tiara Ngo, 

Director

Information 

Resources/CIO

Robert Hughes,

Assistant 

Administrator

Headquarters 

Operations

William Foster,

Assistant 

Administrator

Management/

CFO

Cheri Mitchell,

Assistant 

Administrator

Field 

Operations

Mary Ryan,

Assistant 

Administrator

Advertising, Labeling, and 

Formulation Division

Karen Freelove, Director

International Trade 

Division

Gail Davis, Director

Regulations and Rulings

Division

FrancisFoote, Director

Scientific Services 

Division

Dr. Abdul Mabud, Director

Finance and Performance

Budgeting Division

Joseph Burruss, Director

Acquisition and Facilities 

Management Division

Estelle Martin, Director

Human Resources 

Division

Susan Greemore, Director

Training and Professional 

Development Division

John Brockman, Director

National Revenue 

Center

Roger Bowling, Director

Trade Investigations

Division

Robert Angelo, Director

Tax Audit 

Division

Ronald Hancock, Director

Trade Analysis and 

Enforcement Division

Jerry Bowerman, Director

Knowledge Management 

Staff

Barbara Pearson, Director

Office of 

Inspection

Theresa 

Glasscock, 

Director

Organizational Chart
34 

C. Current Regulatory Actions 

TREAS/TTB Prerule Stage Proposed Revisions to the Beer Regulations 1513-

AB05 

TREAS/TTB Prerule Stage Use of Various Winemaking Terms on Wine Labels and in Advertisements; 

Request for Public Comment 

1513-

AB24 

TREAS/TTB Prerule Stage Proposals Related to the Application for and Certification/Exemption of 

Label/Bottle Approval 

1513-

AB54 

TREAS/TTB Proposed 

Rule Stage Denatured Spirits, Articles, and Nonbeverage Products 1513-AB03 

TREAS/TTB Proposed 

Rule Stage Alternating Brewery Proprietors 1513-AB09 

TREAS/TTB Proposed 

Rule Stage 

Use of the Word "Pure" or Its Variants in the Labeling and Advertising of 

Alcohol Beverages 

1513-

AB16 

TREAS/TTB Proposed 

Rule Stage Proposed Expansion of the Santa Maria Valley Viticultural Area 1513-AB31 

TREAS/TTB Proposed 

Rule Stage Proposed Amendment to the Standards of Identity for Distilled Spirits 1513-AB33 

TREAS/TTB Proposed 

Rule Stage 

Proposed Establishment of the Upper Mississippi River Valley Viticultural 

Area 

1513-

AB40 

TREAS/TTB Proposed 

Rule Stage Proposed Establishment of the Pine Mountain-Mayacmas Viticultural Area 1513-AB41 

TREAS/TTB Proposed 

Rule Stage Proposed Establishment of the Lake Chelan Viticultural Area 1513-AB42 

TREAS/TTB Proposed 

Rule Stage Proposed Expansion of the Fort Ross Seaview Viticultural Area 1513-AB44 

TREAS/TTB Proposed 

Rule Stage Proposed Establishment of the Indiana Uplands Viticultural Area 1513-AB46 

TREAS/TTB Proposed 

Rule Stage Proposed Expansion of the Paso Robles Viticultural Area 1513-AB47 

TREAS/TTB Proposed 

Rule Stage 

Firearms and Ammunition Excise Taxes, Consignment Sales of Imported 

Articles 

1513-

AB12 

TREAS/TTB Proposed 

Rule Stage Exportation of Alcohol 1513-AA00 

TREAS/TTB Proposed 

Rule Stage Determination of Tax and Recordkeeping on Large Cigars 1513-AA16 

TREAS/TTB Proposed 

Rule Stage Proposed Revisions to the Distilled Spirits Plant Regulations 1513-AA23 

TREAS/TTB Proposed 

Rule Stage Proposed Addition of New Grape Variety Names for American Wines 1513-AA42 

TREAS/TTB Proposed 

Rule Stage 

Petition To Establish Santa Maria Bench as a New American Viticultural 

Area 

1513-

AA51 

TREAS/TTB Proposed 

Rule Stage Labeling and Advertising of Malt Beverages 1513-AA60 

TREAS/TTB Proposed 

Rule Stage 

Form TTB F 5100.51, Formula and Process for Domestic and Imported 

Alcohol Beverages 

1513-

AB28 

TREAS/TTB Proposed 

Rule Stage Nonbeverage Product Formulas 1513-AB35 
35 

TREAS/TTB Proposed 

Rule Stage Proposed Establishment of the Snipes Mountain Viticultural Area 1513-AB51 

TREAS/TTB Proposed 

Rule Stage 

Proposed Establishment of the Happy Canyon of Santa Barbara Viticultural 

Area 

1513-

AB52 

TREAS/TTB Proposed 

Rule Stage Proposed Establishment of the Tehachapi Valley Viticultural Area 1513-AB53 

TREAS/TTB Proposed 

Rule Stage 

Proposed Establishment of the Antelope Valley of California's High Desert 

Viticultural Area 

1513-

AB55 

TREAS/TTB Proposed 

Rule Stage Standards of Fill for Wine and Distilled Spirits 1513-AB56 

TREAS/TTB Proposed 

Rule Stage Expansion of the Russian River Valley American Viticultural Area 1513-AB57 

TREAS/TTB Final Rule 

Stage New Certification Requirements for Imported Wine 1513-AB00 

TREAS/TTB Final Rule 

Stage Labeling and Advertising of Wines, Distilled Spirits, and Malt Beverages 1513-AB07 

TREAS/TTB Final Rule 

Stage 

Major Food Allergen Labeling for Wines, Distilled Spirits, and Malt 

Beverages 

1513-

AB08 

TREAS/TTB Final Rule 

Stage Quarterly Excise Tax Filing for Small Alcohol Excise Taxpayers 1513-AB17 

TREAS/TTB Final Rule 

Stage Swan Creek 1513-AB20 

TREAS/TTB Final Rule 

Stage Proposed Establishment of the Tulocay Viticultural Area 1513-AB26 

TREAS/TTB Final Rule 

Stage Proposed Establishment of the Paso Robles Westside Viticultural Area 1513-AB27 

TREAS/TTB Final Rule 

Stage Modification of Mandatory Label Information for Wine 1513-AB36 

TREAS/TTB Final Rule 

Stage Proposed Establishment of the Haw River Valley Viticultural Area 1513-AB45 

TREAS/TTB Final Rule 

Stage Tax Classification of Cigars and Cigarettes 1513-AB34 

TREAS/TTB Final Rule 

Stage 

Implementation of Public Law 105-33, Section 9302, Relating to Tobacco 

Product Minimum Manufacturing Requirements and Transfer Marking 

1513-

AB37 

TREAS/TTB Final Rule 

Stage 

Implementation of Public Law 105-33, Section 9302, Requiring the 

Qualification of Tobacco Product Importers and Miscellaneous Technical 

Amendments 

1513-

AA10 

TREAS/TTB Final Rule 

Stage 

Proposal To Recognize Synonyms for Petite Sirah and Zinfandel Grape 

Varieties 

1513-

AA32 

TREAS/TTB Final Rule 

Stage Organic Claims in Labeling and Advertising of Alcohol Beverages 1513-AA46 

TREAS/TTB Final Rule 

Stage Petition To Establish the Fort Ross Seaview Viticultural Area 1513-AA64 

TREAS/TTB Final Rule 

Stage Petition To Establish Calistoga as an American Viticultural Area 1513-AA92 

TREAS/TTB Final Rule 

Stage Suspension of Special (Occupational) Tax 1513-AB04 
36 

TREAS/TTB Final Rule 

Stage Proposed Revision of Part 9--American Viticultural Areas 1513-AB39 

TREAS/TTB Final Rule 

Stage 

Implementation of Public Law 103-465, Section 712, Time for Payment and 

Deposits of Certain Excise Taxes (No. 277) 

1513-

AB43 

TREAS/TTB Final Rule 

Stage Proposed Establishment of the Leona Valley Viticultural Area 1513-AB49 

TREAS/TTB Long-Term 

Actions 

Implementation of Public Law 105-34, Section 1416, Relating To Refund of 

Tax for Domestic Wine Returned To Bond Regardless of Merchantability 

(Taxpayer Relief Act of 1997) 

1513-

AA06 

TREAS/TTB Long-Term 

Actions Amended Standard of Identity for Sherry 1513-AA08 

TREAS/TTB Completed 

Actions 

Prohibition of Alcohol Beverage Containers and Standard of Fill for Distilled 

Spirits and Wine 

1513-

AA07 

TREAS/TTB Completed 

Actions Lehigh Valley 1513-AB19 

TREAS/TTB Completed 

Actions San Francisco Bay Expansion 1513-AB21 

TREAS/TTB Completed 

Actions Proposed Expansion of the Alexander Valley Viticultural Area 1513-AB23 

TREAS/TTB Completed 

Actions Availability of Information 1513-AA98 

TREAS/TTB Completed 

Actions 

Removal of Tobacco Products and Cigarette Papers and Tubes, Without 

Payment of Tax, for Use by the United States in Law Enforcement Activities 

1513-

AA99 

TREAS/TTB Completed 

Actions 

Tobacco Products and Cigarette Papers and Tubes Shipped From Puerto Rico 

to the U.S. 

1513-

AB38 

TREAS/TTB Completed 

Actions Implementation of Wine Credit Provisions of Public Law 104-188 1513-AA05 

Source: Unified Agenda of Regulatory and Deregulatory Actions, located at 

http://www.reginfo.gov/public/do/eAgendaMain, provided by Regulatory Information Service Center of 

the General Services Administration and Office of Management and Budget. 
37 

D. Summary of Certain Related Pending Legislation103

1. H.R. 5689 “Smuggled Tobacco Prevention Act of 2008” 

H.R. 5689, sponsored by Congressman Lloyd Doggett, amends the Internal Revenue 

Code to require manufacturers and importers of tobacco products to legibly print a unique serial 

number on all packages of tobacco products manufactured or imported for sale or distribution. 

In addition, the bill imposes marking requirements for exports of tobacco products; authorizes 

the Secretary of the Treasury to require additional secure methods of identification or marking of 

tobacco products; requires the Secretary to prescribe a system of tobacco tax stamps, meter 

impressions, or other tax-payment indicia for tobacco products; requires tobacco products sold 

on Indian reservations to be visibly and prominently labeled as such; prohibits the export of 

tobacco products without the posting of a bond with the Secretary; extends permit, 

recordkeeping, and reporting requirements to wholesalers of tobacco products; establishes new 

criminal offenses relating to the distribution of tobacco products; increases the civil penalty for 

tobacco-related infractions from $1,000 to $10,000. Finally, the bill amends the federal criminal 

code to: (1) extend criminal penalties for contraband cigarettes to tobacco products (i.e., cigars, 

cigarettes, smokeless tobacco, pipe tobacco, and roll-your-own tobacco) and define “contraband 

tobacco product” for purposes of such penalties; (2) establish new unlawful acts relating to 

tobacco products and machines used to manufacture or package tobacco products; and (3) 

establish whistleblower protections for employees who provide information about violations 

relating to contraband tobacco. 

2. H.R. 4081 “Prevent All Cigarette Trafficking Act of 2007” 

H.R. 4081, sponsored by Congressman Anthony Weiner, amends the Jenkins Act to: (1) 

include smokeless tobacco as a regulated substance; (2) impose shipping and recordkeeping 

requirements on delivery sellers (sellers using the telephone, mails, or the Internet) of cigarettes 

and smokeless tobacco; (3) require common carriers of cigarette products to obtain age and 

identity verification upon delivery of such products; (4) require the Attorney General to compile 

and publish a list of delivery sellers of cigarettes or smokeless tobacco who have not complied 

with the registration or other requirements of such Act; (5) increase criminal penalties and 

impose new civil penalties for violations of this Act; (6) grant jurisdiction to U.S. district courts 

to restrain violations of such Act and direct the Attorney General to administer and enforce such 

Act; and (7) treat cigarettes and smokeless tobacco as nonmailable and prohibit such items from 

being deposited in or carried through the U.S. mails. In addition, the bill prohibits a tobacco 

product manufacturer or importer from selling or delivering in States cigarettes not in 

compliance with model or qualifying state statutes, and authorizes ATF officers to enter the 

premises of certain cigarette shippers to inspect records and inventories. The bill limits the 

applicability of this Act with respect to Indian tribes and certain tribal matters. 

 103 Source: Library of Congress Thomas website located at http://thomas.loc.gov. 
38 

3. H.R. 2571 

H.R. 2571, sponsored by Congressman Bill Pascrell, Jr., amends the Internal Revenue 

Code and the Foreign Trade Zones Act to permit the transfer of distilled spirits used in a foreign 

trade zone for the manufacture or production of nonbeverage products (i.e., medicines, medicinal 

preparations, food products, flavors, flavoring extracts, or perfume, which are unfit for beverage 

purposes) to an activated foreign trade zone without payment of applicable excise taxes. The bill 

authorizes the Secretary of the Treasury to: (1) require manufacturers and producers of such 

nonbeverage products to file an adequate bond and permit; and (2) examine records and compel 

testimony to enforce the provisions of this Act. 

4. H.R. 1610 

H.R. 1610, sponsored by Congressman Earl Pomeroy, amends the Internal Revenue Code 

to reduce from $18 to $9 (its pre-1991 level) the per-barrel tax on beer. 

5. H.R. 2488 

H.R. 2488, sponsored by Congresswoman Shelley Berkley, amends the Internal Revenue 

Code to reduce the tax rate on distilled spirits. 

6. H.R. 3443 “Drawback Simplification Act of 2007” 

H.R. 3443, sponsored by Congressman Mike Thompson, amends the Tariff Act of 1930 

to revise eligibility requirements for the drawback (refund) of duties on merchandise exported 

from the United States. Under the bill, upon the exportation of flavoring extracts, medicinal, or 

toilet preparations (including perfumery) manufactured or produced in the United States in part 

from domestic alcohol on which an internal revenue tax has been paid, there shall be allowed a 

drawback equal in amount to the tax found to have been paid on the alcohol so used. 

In addition, the bill provides that if distilled spirits and wines are imported into the United 

States and such spirits and wines, or substitute merchandise, are then exported, or are 

incorporated into an article that is exported, or a substitute article is exported, duties, fees, and 

taxes imposed upon entry or importation shall be refunded as drawback pursuant to subsection 

(b) notwithstanding any other provision of law. 

Finally the bill provides that upon the exportation of bottled distilled spirits and wines 

manufactured or produced in the United States on which an internal revenue tax has been paid or 

determined, there shall be allowed, under regulations to be prescribed by the Commissioner of 

Internal Revenue, with the approval of the Secretary of the Treasury, a drawback equal in 

amount to the tax found to have been paid or determined on such bottled distilled spirits and 

wines. In the case of distilled spirits, the preceding sentence shall not apply unless the claim for 

drawback is filed by the bottler or packager of the spirits and unless such spirits have been 

stamped or restamped, and marked, especially for export, under regulations prescribed by the 

Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury. 
39 

7. H.R. 1108 “Family Smoking Prevention and Tobacco Control Act” 

H.R. 1108, sponsored by Congressman Henry Waxman, amends the Federal Food, Drug, 

and Cosmetic Act to provide for the regulation of tobacco products by the Secretary of Health 

and Human Services through the Food and Drug Administration, including through disclosure, 

annual registration, inspection, recordkeeping, and user fee requirements. 

The bill sets forth criteria by which tobacco products are deemed adulterated or 

misbranded, and allows the Secretary to require prior approval of all label statements. 

In addition, the bill allows the Secretary to restrict the sale or distribution of tobacco 

products, including advertising and promotion, if the Secretary determines that such regulation 

would be appropriate for the protection of the public health. Prohibits such regulations from: (1) 

limiting product sales or distribution to authorization of a practitioner licensed to prescribe 

medical products; (2) prohibiting product sales in face-to-face transactions by a specific category 

of retail outlets; or (3) establishing a minimum age greater than 18 years of age for product 

purchases. 

Also, the bill prohibits cigarettes from containing any artificial or natural flavor (other 

than tobacco or menthol) or an herb or spice, including strawberry, cinnamon, or coffee; requires 

the Secretary to establish tobacco product standards to protect the public health, but reserves to 

Congress the power to ban any tobacco products or reduce the nicotine level to zero. 

The bill allows the Secretary to take specified actions, including public notification and 

recall, against unreasonably harmful products, requires premarket approval of all new tobacco 

products; sets forth standards for the sale of modified risk tobacco products. 

In addition, the bill sets forth provisions regarding: (1) judicial review; (2) coordination 

with the Federal Trade Commission (FTC); (3) congressional review of regulations; and (4) state 

and local authority, and the bill requires the Secretary to establish a Tobacco Products Scientific 

Advisory Committee. 

Finally, the bill amends the Federal Cigarette Labeling and Advertising Act to change 

cigarette warning label and advertising requirements, and it amends the Comprehensive 

Smokeless Tobacco Health Education Act of 1986 to change smokeless tobacco warning label 

and advertising requirements.