Source: http://www.alcohol.law/digest/archive/ttb
Timestamp: 2018-10-17 08:34:58
Document Index: 39884328

Matched Legal Cases: ['§ 5041', '§ 5041', '§ 5041', '§ 5041', '§ 25', '§ 25', '§ 25', '§ 6', '§ 13']

Category archives for “TTB”
ABC Issues Guidance on Use of Cannabis on ABC Licensed Premises
On January 1, 2018, adult use cannabis became legal in California, raising questions for many alcoholic beverage licensees about their ability to hold cannabis licenses and to sell or serve cannabis products on their alcohol licensed premises. The Department of Alcoholic Beverage Control (“ABC”) responded to several of these questions on January 18, 2018, by way of an Industry Advisory. First, the ABC confirmed that there is nothing in the ABC Act or the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) that prohibits ownership in both alcohol and cannabis related licenses. However, licenses cannot be held at the same location and the premises need to be sufficiently separated so that a person going to a licensed cannabis establishment will not be required to pass through a licensed alcohol establishment and vice versa. The ABC also clarified that cannabis cannot be sold or consumed on ABC licensed premises and that infusing alcohol with cannabis products is strictly prohibited.
Contact one of the attorneys at Strike & Techel if you have questions about cannabis under MAUCRSA or the ABC Act.
TTB Delays Hard Cider Tax Labeling Requirement
In January 2017, the federal laws on alcoholic cider were revised to expand the definition of what constitutes “hard cider” and to revise its federal tax rate. We posted about those and other developments in the “hard cider” arena here and here.
Included in those changes to the law was a requirement, to be effective starting January 1, 2018, that the statement “Tax class 5041(b)(6)” appear on any hard cider removed from wine premises or Customs custody for which the “hard cider” tax rate is claimed. However, on December 5, 2017, the TTB published a temporary rule, delaying the new labeling requirement until January 1, 2019. Until the new effective date, the tax class statement continues to be optional.
Along with the labeling delay, the TTB has also decided to reopen the public comment period, providing an opportunity for the public to make additional comments over the next two months regarding both the delayed labeling requirement and other “hard cider” regulatory amendments.
For more information regarding hard cider licensing and regulatory requirements, contact one of the attorneys at Strike & Techel.
Federal Definition of “Hard Cider” Will Be Expanded in 2017
On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”) (LINK). The PATH Act provides for changes to the definition of “hard cider,” which will bring valuable tax rate changes for some makers of cider and perry. Currently, “hard cider” is defined as a “still wine derived primarily from apples or apple concentrate and water, containing no other fruit product, and containing at least one-half of 1 percent and less than 7 percent alcohol by volume.” 26 U.S.C. § 5041(b)(6). Because the current definition of hard cider states that the wine must be still, the definition excludes ciders with carbonation in excess of 0.392 grams of carbon dioxide per 100 milliliters. 26 U.S.C. § 5041(a). The current definition also excludes perry, which is wine made from pears. Finally, the alcohol content of many wines made from cider apples ranges from approximately 5% to 8.5% alcohol by volume, and cider products with more than 7% alcohol do not meet the current hard cider definition.
Beverages that meet the definition of hard cider are taxed at the rate of 22.6 cents per gallon. 26 U.S.C. § 5041(b)(6). This rate is much more favorable than the $1.07 per gallon tax rate on still table wines, as well as the $3.40 per gallon tax rate on sparkling wines, and the $3.30 per gallon tax on artificially carbonated wines. 26 U.S.C. § 5041(b). Passage of the PATH Act will be welcome news to the cider and perry producers who have advocated for an expansion of the definition of hard cider in order to get the lower tax rate. Beginning on January 1, 2017, the definition of hard cider will be a wine that meets the following parameters:
Contains not more than 0.64 grams of carbon dioxide per 100 milliliters;
Contains no other fruit product or fruit flavoring other than apple or pear; and
Contains at least 0.5% and less than 8.5% alcohol by volume.
For more information on cider and perry, see our July 29, 2015 blog post “Comparing Apples and Pears” (LINK), and contact one of the attorneys at Strike & Techel for further guidance.
TTB Further Expands List of Malt Beverage Ingredients Exempt from Formula Approval
The Alcohol and Tobacco Tax and Trade Bureau (TTB) has further expanded the list of ingredients used in the production of beer that are exempt from the formula requirements of 27 C.F.R. § 25.55. On December 17, 2015, the TTB issued Ruling 2015-1, Ingredients and Processes Used in the Production of Beer Not Subject to Formula Requirements (LINK), which modifies and supersedes Ruling 2014-4. Ruling 2014-4 exempted 35 ingredients from formula approval requirements, including ingredients such as honey, chocolate, cherries, oranges, allspice, and clove. Ruling 2015-1 now exempts more than 50 additional ingredients from the formula requirements, including ingredients such as tea, oyster shells, jasmine, rosemary, grapes, and figs. A complete list of ingredients used in the production of beer that are exempt from formula requirements is located in Attachment 1 to Ruling 2015-1 (LINK).
Ruling 2015-1 also clarifies the TTB’s position regarding extracts, essential oils, and syrups. These preparations may contain alcohol or other ingredients, and thus are not exempt from formula requirements. For example, although vanilla, spearmint, and strawberries are included on the list of exempt ingredients, the use of vanilla extract, essential oil of spearmint, or strawberry syrup would still trigger the formula requirements of 27 C.F.R. § 25.55.
Ruling 2015-1 was issued in response to an ongoing conversation between the TTB and the Brewers Association, which has been petitioning the TTB since 2006 to expand the list of exempt ingredients. The most recent Brewers Association petition was submitted on September 30, 2015, and Ruling 2015-1 exempts all of the ingredients requested by the Brewers Association in that petition, with the exception of licorice, juniper branches, pluot, spruce leaves, squid ink, and woodruff. The TTB declined to adopt licorice as an exempt ingredient due to Food and Drug Administration (FDA) regulations regarding that ingredient. The TTB declined to adopt the remaining ingredients at this time because it did not find that the available data established that these ingredients are “traditional” in the production of beer. Although the TTB did not exempt all the ingredients requested by the Brewers Association, the TTB is open to future petitions from brewers regarding additional ingredients that brewers believe should be exempted from formula requirements. A procedure for such a petition is located at 27 C.F.R. § 25.55(f).
Contact an attorney at Strike & Techel today with any questions about beer regulations or formula requirements.
Re-Register Your Labels in Louisiana
Louisiana recently changed its system for label registration, and all labels previously registered with the state must be re-registered in the new system by the end of 2015.
Louisiana is one of many states that requires label registration before alcoholic beverages can be sold in the state. Until recently, Louisiana’s Department of Health and Hospitals handled the registration process, but as of August 2015, the label registration function is being handled by Louisiana Alcohol and Tobacco Control (ATC), the state’s alcohol beverage regulatory agency. The move should create a more efficient registration system, and allows the same agency that enforces alcoholic beverage laws to oversee the label registration process, which is consistent with how registration works in nearly all other states that have a registration requirement.
Labels must now be renewed annually, and all labels currently registered in the state must be updated with the ATC by December 31, 2015. Importantly, label registration can be completed online here. When a licensee with a valid Louisiana license number submits a label with an approved Certificate of Label Approval (COLA), the registration process is complete with no need to wait for further approval. Additionally, the price to register labels has been reduced from $27 per label to $5 per label.
Call one of the attorneys at Strike & Techel if you have any questions about label registration in Louisiana or other states.
Congratulations! You have your alcohol license and you are now in business. Don’t forget though, applying for and getting your license is not the end of your regulatory responsibilities – you also have ongoing reporting obligations. If anything changes in your business, e.g., if you get new investors, or some investors leave, if you appoint a manager, if your officers or directors change, or if you move or open a new location, you must report it to the licensing authorities. Depending on the nature of the change, it may even be deemed a license transfer and may require the same type of paperwork that was involved in getting your license in the first place.
A winery in Northern California recently found this out the hard way after it failed to update its federal permit when there was a change of ownership, with shares in the business being moved into a trust. The Alcohol and Tobacco Tax & Trade Bureau (TTB) discovered this fact during a routine audit and took disciplinary action. The winery settled the matter by submitting an offer in compromise of $3,000, for failing to meet its reporting and tax obligations, which was accepted by the TTB. You can find out more HERE.
An industry member’s reporting obligations should not be taken lightly. If you make any changes to your business, you should report them as soon as possible. In California and under the federal regulations, you have thirty (30) days to report such changes and failure to do so may expose your license to disciplinary actions like the one described above.
If you have any questions about reporting or licensing, please contact one of the attorneys at Strike & Techel.
TTB Circular Warns Industry Members of Improper Tie-In Sales
Last week, the TTB issued an Industry Circular on the issue of tie-in sales, which are illegal under the Federal Alcohol Administration Act (FAA Act) and 27 C.F.R. § 6.72. Tie-in sales occur when a retailer is forced to purchase a product (which it may or may not want) in order to get the product that it wants. Tie-in sales include combination sales in which one or more products may only be purchased in combination with other products.
In its Circular, available here, the TTB provides a list of examples of prohibited tie-in sales. The examples include:
- A retailer must purchase a certain amount of regular distilled spirits, whether bottled or cased, in order to be allowed to purchase distilled spirits in a special holiday container or packaging.
- A retailer must purchase ten cases of Winery X’s Merlot from a wholesaler in order to purchase ten cases of Winery X’s Chardonnay.
- A retailer must purchase an industry member’s pre-mixed alcohol beverage specialty product (for example, strawberry daiquiri) in order to purchase a certain amount of their regular distilled spirits case goods. In other words, the regular distilled spirits products are not sold separately but only in combination with the specialty product.
- A retailer is required to purchase a two-bottle package containing one each of a winery’s Merlot and Chardonnay in order to get the Merlot. The Merlot is not available for purchase separately.
- A retailer must purchase a slow moving wine in order to purchase a distilled spirit that is in heavy demand. The distilled spirit is not available for purchase separately.
The take-away point is that each alcoholic beverage item needs to be available for purchase separately. It is still permissible to package alcohol products together or with other consumer goods, subject to state and federal restrictions, but the alcohol components should also be available separately. For additional information on the rules applicable to combination packs, contact one of the attorneys at Strike & Techel with any questions.
TTB Proposed Revisions to Distilled Spirit Plants Reports and Regulations
Currently, distilled spirits plants (DSPs) are required to complete and file operational report forms, which can number up to seven per month. The TTB has proposed eliminating the current forms and replacing them with two new report forms (TTB F 5110.77 and TTB F 5110.78) in order to streamline the reporting process and reduce costs. According to the TTB’s research, DSPs currently submit an average of 28.4 operational reports per year. The TTB notes that certain data within the required reports is not analyzed or used. Moreover, the increased use of alcohol as a fuel and the growth in artisanal distillers has resulted in many new DSPs and the corresponding burden on TTB to process the paperwork from these DSP has grown tremendously. If the proposal is approved, one report would be used for operations involving spirits for beverage use, while the other would handle reporting on industrial use spirits. Additionally, DSPs that submit quarterly tax returns could switch to quarterly operational reporting, as opposed to the current monthly reporting requirement. The comment period for this proposed revision runs through February 3, 2012, which is right around the corner. The full text of the proposal can be found here.
End of Year Viticultural Area (AVA) Report
There were a number of new viticultural areas, commonly referred to as AVAs, approved by the TTB late this year, as well as an expansion of certain AVAs and several new proposed areas for which comments are due in early 2012. A summary on the latest activity is below. The TTB designates viticultural areas in order to allow vintners to more precisely describe the origins of their wines and so that consumers may make purchasing decisions with such specific origination information in mind.
Expanded Areas Effective December 16, 2011
Russian River Valley (California) – The Russian River Valley AVA, located in Sonoma County, California, was expanded by 14,044 acres.
Northern Sonoma (California) – The Northern Sonoma AVA, also located in Sonoma County, California, was expanded by 44,244 acres.
New Viticultural Areas Effective January 13, 2012
Coombsville (California) – The Coombsville AVA in Napa County, California covers 11,075 acres. The area is within the Napa Valley and North Coast viticultural areas. The Coombsville AVA is nearly identical to the previously proposed Tulocay AVA, which the TTB withdrew from consideration in June 2008.
Fort Ross-Seaview (California) – The Fort Ross-Seaview AVA in Sonoma County, California embodies 27,500 acres. The area is within the Sonoma Coast viticultural area, which in turn is within the North Coast viticultural area.
Naches Heights (Washington) – The Naches Heights AVA in Yakima County, Washington covers 13,254 acres. The Naches Heights AVA is within the Columbia Valley viticultural area located mainly in central and southern Washington, although a small portion of northern Oregon is also included within the Columbia Valley AVA.
New Proposed Viticultural Areas
Inwood Valley (California) – The TTB has proposed creating a 28,298-acre Inwood Valley AVA in Shasta County, California. Comments on the proposal must be received by February 3, 2012.
Middleburg Virginia (Virginia) – The TTB has proposed creating a 198-square mile Middleburg Virginia AVA located in the northern Virginia counties of Loudoun and Fauquier. Comments on the proposal must be received by January 9, 2012.
New Grape Variety Names – Thanks TTB!
In February we posted about The Alcohol and Tobacco Tax and Trade Bureau’s proposed rule to add new names to the approved list of grape variety names that can be used to designate United States wines. The original post is available here. The TTB has completed its rulemaking process and the revised rule will go into effect November 28, 2011, the Monday after Thanksgiving. More than 50 new names were added to the list, including some popular well known varietals like Grenache Blanc and Grüner Veltliner. To aid in locating information within the new and lengthy list, the TTB also included synonyms for a number of entries. Full details on the revised rule are available here.
European Commission Petition Spurs TTB to Reexamine Vintage Date Allowances
Trigged by a petition from the European Commission, the Alcohol and Tobacco Tax and Trade Bureau (TTB) has proposed revisions to the current vintage date requirements in order to allow vintage dates to appear on wine that is labeled with a country as the appellation of origin. Currently 27 CFR 4.27(a) defines vintage wine as “wine labeled with the year of harvest of the grapes,” and in order to include a vintage wine identification the wine “must be labeled with an appellation of origin other than a country (which does not qualify for vintage labeling.)” The original reasoning behind such a requirement was to ensure that customers can easily ascertain information about a wine’s quality and identity. The European Commission’s petition did not take issue with that underlying goal, but rather argued that some of its member countries are smaller than states within the United States. The practical effect of the vintage date rule thus essentially means a wine from California labeled with a “California” appellation can include a vintage date while a wine from the country of Austria, which is about half the size of California, cannot include a vintage date if the wine is labeled with “Austria” as the appellation.
The TTB will be taking public comment on the proposed rule through January 3, 2012. The full rulemaking notice is available here.
TTB Investigating Websites for Compliance with Responsible Advertiser Laws
Alcohol Beverage industry members may soon hear from the TTB if their websites do not contain a responsible advertiser statement and other information that is mandatory on all alcohol advertisements. Industry member websites are considered advertisements subject to these requirements, and recently the TTB has been independently investigating websites for compliance. If the mandatory information is not present on a website’s homepage, the TTB has begun sending letters to industry members requiring compliance and a confirming response to the TTB.
The federal requirements vary slightly depending whether the alcohol being advertised is beer, wine, or distilled spirits, but in general all alcohol advertisements are required to contain a responsible advertising statement that includes the permittee’s name and address, as well as statements regarding the class and type of alcohol.
Industry members – check your websites and other advertisements and make sure they contain all mandatory information! If you have any questions about these requirements, the attorneys at Strike & Techel are available to help.
New TTB Guidance on COLAs
The TTB recently announced new guidance on personalized labels, which supersedes its prior guidance in TTB G 2010-1 from April 7, 2010. The guidance provided in 2010 did not allow changes to artwork or graphics on a personalized label without resubmission of the label for approval. The TTB has relaxed its view and now will allow changes to graphics and artwork on personalized labels without requiring application for a new certificate of label approval (“COLA”). Names, event dates and salutations can also be changed without applying for a new COLA, as was previously allowed under the 2010 guidance. Personalized labels are for use with targeted customers or clients for things like weddings and grand openings. They are distinct from private labels, which remain subject to the standard COLA requirements and require resubmission for a COLA when label artwork is changed.
In order to obtain this flexibility on personalized labels, such preference must be indicated on the initial COLA application and the information that may change must be described. The label must still contain all standard mandatory label information. When issuing the COLA approval for personalized labels the TTB will include a qualification stating that the COLA covers the label and any changes in “graphics, salutations, congratulatory dates and names, and artwork to personalize the label as indicated on the application.” The new guidance is available here. If you would like to discuss COLA applications, please feel free to contact any of the attorneys at Strike & Techel.
We Want COLAs! When Do We Want Them? NOW!
While patience is a long standing member of the virtue list, it’s not always easy. But a little patience goes a long way when dealing with regulatory compliance matters like certificate of label approvals (COLAs). The Alcohol and Tobacco Tax and Trade Bureau (TTB) began accepting COLA applications online several years ago, which reduced the processing time for new COLA applications to just a few days. In their ongoing efforts to streamline their processes for industry members, the TTB began accepting formulas and permit applications online as well. More recently, the TTB announced a streamlined approval process along with the end of expedited review (previously discussed here and here). Notwithstanding these efforts, the volume of COLA applications has continued to swell with processing times becoming progressively longer. To help people estimate their wait time the TTB is now providing average COLA processing times through its website (the information is in a chart on the upper right hand side of the page) or by phone (dial 1-866-927-2533, press 4 for malt beverages and distilled spirits labels and 6 for wine labels). Given government budgets cuts and increases in label approval applications, it seems likely that the days of getting labels approved in four or five days are not likely to return. The federal labeling regulations allow the TTB to take up to 90 days to approve a COLA application. 27 C.F.R. § 13.21(b) (2011). Processing times currently are much shorter than that, but industry members should plan accordingly and allow at least 30 days for label approval through COLAs Online. The attorneys are Strike & Techel are available if you need assistance with TTB regulatory matters, including COLAs.
TTB Bonded Wine Premises Audits
Nobody hopes for an audit, but like cold cloudy summers in San Francisco, they’re bound to happen. Ideally, if you’re selected for an audit by the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), you will have already been following the federal requirements. To aid in compliance, last March the TTB issued a tutorial about the common issues found during TTB audits, which is available here. As the ramp up to harvest begins, this is a good resource to circle back with to ensure compliance. Within the tutorial the TTB listed the most common compliance issues by area, and within that by frequency of occurrence. Further, they provided helpful tips on how to avoid problems in those areas. The issues most frequently seen by the TTB’s Tax Audit Division are:
Transfer in bond record;
Tax paid removal records; and
Export documentations.
Inventory timing, records and signature;
Inventory losses and loss limits; and
Records of bottled or packed wine.
Reporting and Tax Payment:
Timely filing the Report of Wine Premises Operations and correctly completing the form;
Calculating and paying tax on wine;
Filing claims for wine or spirits lost or destroyed while in bond;
Tax payment and filing TTB F5000.24 Excise Tax Returns; and
Basic Permit, Registration and Bond:
Filing amended applications to report changes; and
Maintaining adequate bond coverage.
If you would like assistance with a TTB audit or help with TTB compliance matters, please feel free to contact the attorneys at Strike & Techel.