Alcohol and Tobacco Tax and Trade Bureau

Program Summary by Budget Activity

(Dollars in thousands)

Appropriation FY 2010 FY 2011 FY 2012 FY 2010 to FY 2012

Enacted Annualized

CR Level

Request $ Change % Change

 Collect the Revenue $53,000 $53,000 $48,939 ($4,061) (7.7%)

 Protect the Public $50,000 $50,000 $48,939 ($1,061) (2.1%)

Subtotal, Alcohol and Tobacco Tax and Trade Bureau $103,000 $103,000 $97,878 ($5,122) (5.0%)

Offsetting Collections - Reimbursables $4,234 $3,050 $2,997 ($1,237) (29.2%)

Total Program Operating Level $107,234 $106,050 $100,875 ($6,359) (5.9%)

Direct FTE 535 535 502 (33) (6.2%)

Reimbursable FTE 15 15 15 - -

Total FTE 550 550 517 (33) (6.0%)

Note: In FY 2010, Congress appropriated $3 million in two-year funds for the hiring, training, and equipping of special agents 

and related support personnel. This funding expires September 30, 2011.

Summary

The Alcohol and Tobacco Tax and Trade 

Bureau (TTB) serves as the nation’s primary 

federal authority in the regulation of the 

alcohol and tobacco industries. TTB is 

responsible for the administration and 

enforcement of the Internal Revenue Code 

associated with the collection of excise taxes 

on alcohol, tobacco, firearms, and 

ammunition, and the Federal Alcohol 

Administration Act, which provides for the 

regulation of those engaged in the alcohol 

beverage industry and the protection of 

consumers of alcohol beverages. 

In FY 2012, TTB will continue to focus its 

efforts on enforcing compliance with alcohol,

tobacco, firearms and ammunition laws and 

regulations, in the interest of collecting all 

appropriate excise taxes, and promoting a 

marketplace for alcohol beverages that 

complies fully with federal production, 

labeling, advertising, and marketing standards. 

The FY 2012 President’s budget request 

enables TTB to continue its programs and 

activities necessary to meet the performance 

measures that support TTB’s strategic goals of 

collecting revenue and protecting the public. 

Total resources required to support TTB 

activities for FY 2012 are $100,875,000, 

including $97,878,000 from direct appropriations, and $2,997,000 from other offsetting 

collections and reimbursable programs.

Collect the Revenue - TTB is charged with 

collecting alcohol, tobacco, firearms, and 

ammunition excise taxes. These products 

generate nearly $24 billion in tax revenue 

annually, making TTB the third largest tax 

collection agency in the federal government. 

Alcohol and tobacco taxes collected by TTB 

are remitted to the Department of the Treasury 

General Fund. Firearms and ammunition 

excise taxes are remitted to the Fish and 

Wildlife Restoration Fund under provisions of 

the Pittman-Robertson Act of 1937.

The excise taxes collected by TTB come from 

taxes imposed and collected at the producer 

and importer level of operations. Members of 

the regulated industries paying excise taxes are 

distilleries, breweries, bonded wineries, 

bonded wine cellars, manufacturers of paper 

and tubes for tobacco products, manufacturers 

of tobacco products, and manufacturers and 

importers of firearms and ammunition. About 
200 of the largest taxpayers account for 98

percent of the annual excise tax collected. In 

FY 2010, the majority of taxes collected were 

from tobacco (67 percent) and alcohol (31

percent), with the remainder from firearms and 

ammunition (2 percent). 

Strategies used to collect the revenue rightfully 

due include identifying any gaps in tax 

payment, identifying any illegal entities or 

individuals operating outside the excise tax 

system, developing a balanced field approach 

of audits and investigations that target noncompliant industry members, and establishing 

an identifiable presence within all of industry 

that encourages voluntary compliance.

Protect the Public - TTB works to ensure the 

integrity of the alcohol and tobacco industries 

and of beverage alcohol products found in the 

marketplace, and regulates roughly 53,000 

alcohol and tobacco businesses. Under this 

activity, TTB enforces federal laws related to 

the issuance of permits to new businesses 

engaged in the alcohol and tobacco industries

and regulates the production, labeling, 

advertising, and marketing of alcohol 

products. TTB conducts these activities 

through investigations, application reviews, 

laboratory testing, and educational programs. 

TTB works with industry, foreign and state 

governments, and other interested parties to 

make it easier to comply with regulatory 

requirements and maintain the appropriate 

level of oversight to ensure public safety. 

TTB’s work with foreign governments also 

facilitates the import and export trade in its 

regulated commodities. Education, partnerships, and open communication are paramount 

strategies in facilitating compliance with 

regulatory requirements.

TTB FY 2012 Budget Highlights

(Dollars in thousands)

Appropriation Amount

FY 2010 Enacted $103,000

FY 2011 Annualized CR Level $103,000

Changes to Base:

Adjustment to Reach Policy Level: $2,571

Adjustment to Reach FY 2011 President's 

Policy

$2,571

Maintaining Current Levels (MCLs): $832

Maintaining Current Levels $832

Efficiencies, Savings & Base Reductions: ($8,525)

Audits, Investigations, Outreach & Trade 

Facilitation

($1,584)

Law Enforcement/Special Agents $0

Licensing and Registration Fees Initiative ($5,500)

New Regulations to Simplify Reporting 

Requirements

($300)

Overhead/Operating (Reduced 

Staffing/Overtime/Travel/Contracts, etc.)

($841)

Paperless Initiative (Permits Online) ($300)

Subtotal FY 2012 Changes to Base ($5,122)

Total FY 2012 Base $97,878

Total FY 2012 Request $97,878

FY 2012 Budget Adjustments

FY 2011 Annualized CR Level

The FY 2011 Annualized CR Level for TTB is 

$103,000,000.

Adjustment to Reach Policy Level 

Adjustment to Reach FY 2011 President's 

Policy +$2,571,000 / +12 FTE 

Adjustment from the FY 2011 Annualized 

Continuing Resolution (CR) Rate to reach the 

FY 2011 President's Policy Level. The 

President's Policy Level is equal to the FY 

2011 President's Budget as adjusted for the 

proposed pay freeze.

Maintaining Current Levels (MCLs) 

Maintaining Current Levels +$832,000 / +0 

FTE 

Funds are requested for inflation adjustments 

in non-labor expenses such as GSA rent 

adjustments, postage, supplies and equipment 

and health benefits and the increase in Federal 

Employee Retirement System participation. 

No inflation adjustment is requested for pay in 

FY 2012.
Efficiencies, Savings & Base Reductions 

Audits, Investigations, Outreach & Trade 

Facilitation -$1,584,000 / -15 FTE 

Savings realized from a reduction of staff, 

combined with an improved strategy for tax 

and regulatory enforcement that focuses on the 

areas that present the highest revenue risk, and 

a reinvented approach to industry outreach and 

international trade activities.

Law Enforcement/Special Agents +$0 / -10 

FTE 

Reduction of 10 FTE due to the expiration of 

two-year funding (FY 2010-2011) for law 

enforcement agents and related support 

personnel whose focus was on criminal 

activities surrounding the alcohol and tobacco 

commodities.

Licensing and Registration Fees Initiative -

$5,500,000 / -12 FTE 

Reduction due to the exclusion from the FY 

2012 Presidents Budget of a licensing and 

registration fee program, which would have 

required the collection of annual fees from 

alcohol and tobacco industry members to fund 

TTB operations.

New Regulations to Simplify Reporting 

Requirements -$300,000 / -3 FTE 

Savings realized from simplifying the 

reporting requirements for distilled spirits 

plants (DSP) by updating the regulations to 

consolidate the required monthly operations 

reports for non-industrial DSP.

Overhead/Operating (Reduced Staffing

/Overtime/Travel/Contracts, etc.) -$841,000 / -

2 FTE 

Savings realized from the reduction of 

operating costs such as overtime, travel, 

supplies, GSA rent, equipment, software, and 

the reduction of management staff.

Paperless Initiative (Permits Online) -

$300,000 / -3 FTE

Savings realized from staffing reduction 

enabled by efficiencies gained from the 

Permits Online electronic filing system due to 

processing time reduction and the streamlining 

of business processes.

Explanation of Budget Activities

Salaries and Expenses

Collect the Revenue ($48,939,000 from direct 

appropriations, and $1,499,000 from 

reimbursable programs)

This budget activity includes all tax 

processing, verification, enforcement, and 

outreach efforts related to tax administration 

performed by TTB. Collect the Revenue 

includes three programs: 1) Alcohol and 

Tobacco Tax Collections, 2) Firearms and 

Ammunition Excise Tax Collections, and 3) 

Outreach and Voluntary Compliance. 

Principal business activities within these 

programs include:

• Tax Collection, Claims, Refunds, and 

Classification, which involves preparing 

taxpayer notices and assessments, processing claims and settlement agreements, 

and assigning a tax classification to a 

product based on regulatory standards;

• Tax Verification, Audits, and Investigations, which includes the reconciling and 

auditing of tax returns and reports of 

business operations; on-site audits of 

alcohol, tobacco, firearms, and ammunition industry members; investigating 

criminal allegations or indications of tax 

fraud; conducting compliance investigations of permittees who have substantial 

potential for tax liability; and initiating 

adverse actions for willful violations of the 

Internal Revenue Code; and

• Voluntary Compliance, which supports 

outreach and education efforts for 

members of the regulated industries, and 
includes preparing regulatory guidance, 

Web site postings, and newsletters; 

participating in and/or hosting conferences 

and seminars; and industry and state 

liaison activities.

TTB uses an interagency approach in applying 

its enforcement strategies that involves 

cooperation with local, state, federal, and 

foreign government counterpart agencies to 

maximize the deterrent impact of enforcement 

actions.

Protect the Public ($48,939,000 from direct 

appropriations, and $1,498,000 from 

reimbursable programs)

This budget activity funds the programs that 

ensure the integrity of products and industry 

members in the marketplace, promote

compliance with laws and regulations by 

regulated industries, and provide information 

to the public as a means to prevent consumer 

deception. Protect the Public includes four 

programs: 1) Permits and Business Assurance; 

2) Advertising, Labeling, and Product Safety; 

3) Trade Facilitation; and 4) Outreach and 

Voluntary Compliance. Principal business 

activities within these programs include:

• Business Integrity, which involves enforcing compliance with federal laws 

related to the issuance of permits to those 

who wish to operate in the alcohol, 

tobacco, firearms, and ammunition 

industries; 

• Product Integrity, which includes 

reviewing alcohol beverage label applications; evaluating alcohol beverage 

product advertisements; reviewing alcohol 

beverage formula submissions; evaluating 

specially denatured alcohol and other 

nonbeverage alcohol formulas to verify the 

tax drawback claim of the applicant; 

investigating incidents of suspected unsafe 

conditions or product deficiencies related 

to the production and labeling of alcohol 

beverages; and testing samples of beverage 

alcohol sold at the retail and producer 

levels to ensure that these products meet 

formulation and labeling requirements, do 

not contain unauthorized substances or 

contaminants, and are properly classified 

for tax purposes; and

• Market Integrity, which includes 

monitoring the trade practices of the 

alcohol industry and taking enforcement 

actions on violations, monitoring and 

reviewing international trade in alcohol 

beverages to identify, prevent, and address 

trade barriers and incidents of international 

fraud and contaminated products, and 

promoting international agreements on 

product integrity.

TTB works with industry, foreign and state 

governments, and other interested parties to 

reduce the burden of compliance with 

regulatory requirements and to maintain the 

appropriate level of oversight to ensure public 

safety. Industry education, interagency 

partnerships, international cooperation, and 

open communication are paramount strategies 

in facilitating compliance with regulatory 

product and trade requirements.

Legislative Proposals

Extend Pay Demonstration Project: TTB 

proposes to continue the Pay Demonstration 

Project by amending the General Provision 

language to extend the program for one 

additional year.
TTB Performance by Budget Activity

Budget Activity Performance Measure FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Actual Actual Actual Target Target

Economic competitiveness Average Number of Days to 

Process an Original Permit 

Application at the National 

Revenue Center (E)

64.0 64.0 65.0 72.0 65.0

Economic competitiveness National Revenue Center (NRC) 

Customer Satisfaction Survey 

Results (%) (Oe)

90.0 89.0 89.0 85.0 85.0

Economic competitiveness Percent of Electronically Filed 

Certificate of Label Approval 

Applications (E)

62.0 74.0 79.0 81.0 83.0

Economic competitiveness Percentage of Importers 

Identified by TTB as Illegally 

Operating without a Federal 

Permit (%) (Oe)

22.0 15.0 15.0 19.0 14.0

Revenue collected Amount of Revenue Collected 

Per Program Dollar (E)

313.0 427.0 478.0 400.0 410.0

Revenue collected Percent of Voluntary Compliance 

from Large Taxpayers in Filing 

Tax Payments Timely and 

Accurately (In Terms of 

Revenue) (Oe)

94.0 94.0 94.0 92.0 94.0

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, M - Management/Cust. Satisfaction, 

DISC - Discontinued, and B - Baseline

Description of Performance

The bureau continues to collect the federal 

excise taxes due on its regulated commodities 

in a highly efficient manner, and continues to

enforce compliance with alcohol and tobacco 

laws and regulations. During FY 2010, TTB 

met all of its targeted performance goals, while 

showing continued improvements in 

performance scores. The bureau plans to 

continue to monitor its performance, and will 

use performance information to both measure 

and improve the effectiveness of its programs. 

The investments in the Collect the Revenue 

activity resulted in the following performance 

highlights and accomplishments during

FY 2010:

• TTB collected $23.8 billion in excise taxes 

and other revenues from 7,070 taxpayers in 

the alcohol, tobacco, firearms, and 

ammunition industries. The recent rise in 

excise tax collections for tobacco resulted 

in a return on investment for the Collect 

the Revenue program of $478 for every $1 

expended on collection activities. 

• TTB closed 36 criminal investigations 

involving diversion of products having an 

estimated tax liability of more than $30 

million.

• TTB identified 190 business entities who 

imported cigarettes into the U.S. without a 

Federal permit. All entities either ceased 

their illegal operations or obtained a permit 

to import tobacco products.

• TTB completed 145 targeted audits, which 

contributed to the identification of 
additional tax revenue of more than $8 

million. 

• TTB processed $387 million in cover-over 

payments to Puerto Rico and the U.S. 

Virgin Islands. Federal excise taxes 

collected on rum produced in Puerto Rico 

and the Virgin Islands that are

subsequently imported into the United 

States are “covered-over” (or paid into) the 

treasuries of Puerto Rico and the Virgin 

Islands.

• TTB processed $297 million in drawback 

claims. Under current law, persons who 

use nonbeverage alcohol in the

manufacture of medicines, food products, 

flavors, extracts, or perfume and other nonpotable products may be eligible to claim 

drawback of excise taxes paid on distilled 

spirits used in their products. 

The investments in Protect the Public activity

resulted in the following performance 

highlights and accomplishments during

FY 2010:

• TTB processed 132,600 Certificate of 

Label Approval (COLAs) applications 

through the bureau’s COLAs Online 

system for electronic filing of label 

applications. About 79 percent of the 

applications were filed electronically. The 

Federal Alcohol Administration Act 

requires importers and bottlers of alcohol 

beverages to obtain a COLA prior to 

introduction of the product into commerce.

• TTB processed 5,771 original permits and 

approved 18,230 amended permits. A 

TTB permit is required before a business 

can operate in the alcohol and tobacco 

industries. 

• TTB initiated more than 700 field investigations of industry members regarding 

permit applications, consumer complaints, 

tax fraud, trade practice violations, and 

product and labeling integrity verifications.