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Federal Excise Tax Reform Update: Beer Transferred in Bond

Last month, the TTB released TTB Procedure Number 2018-1 addressing the transfer of beer between breweries not of the same ownership. Unlike wineries, prior to the Tax Cuts & Jobs Act of 2017 (the “Act”), breweries could not transfer beer under bond unless the transferring and receiving brewer were under common control. However, the Act now allows the transfer of beer under bond (i.e., without the payment of excise tax) between breweries not of the same ownership, subject to certain conditions, and only through December 31, 2019. In these transfers, the receiving brewery must accept responsibility for the payment of excise taxes on the beer, when the beer is ultimately removed from the receiving brewery for sale. TTB Procedure Number 2018-1 sets out the record keeping and documentation requirements for these transfers, and also provides instructions for completing TTB operational reports to reflect transfers of beer under bond.

Note that a brewery may only claim the reduced excise tax rates on beer that the brewery has produced. Beer is considered to be “produced” if it is brewed or produced at a brewery premises, including beer that has been brewed by fermentation or to which water or other liquids have been added during any stage of production. However, blending or combining two beers does not count as “production” for reduced tax purposes. Thus, for beer transferred in bond, the receiving brewery may not be eligible to claim the reduced excise tax rates on the beer received under bond. However, transfers beer produced at the brewery to another brewery for bottling, and which receives the same beer back under bond, would be eligible to remove such beer at reduced tax rates.

The TTB is still working on guidance regarding the Act’s changes to alcohol excise taxes. For more information on the excise tax changes, production requirements, and the alternate procedure relating to claiming the excise tax credit, we have previously blogged on these subjects here, here, and here. The TTB has not yet issued guidance on the controlled group and single taxpayer rules, but such guidance could impact how your business is able to claim the Act’s reduced excise tax rates. We will continue to post updates on the TTB’s guidance as it is released.

If you have any questions about how the recent excise tax changes may affect your business, contact one of the attorneys at Strike & Techel.

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