Last week, the Alcohol and Tobacco Tax and Trade Bureau (TTB) published a TTB Procedure governing the transfer in bond of beer between breweries of different ownership. See TTB Procedure 2018-1 (July 17, 2018). In bond transfers between breweries of different ownership were authorized by the 2017 tax reform act and like many provisions of that act, the transfer provision is scheduled to sunset at the end of 2019.
- The beer transfers can include both packaged and bulk beer.
- Transferred beer can be re-consigned while in transit or returned to the shipping brewery.
- Most recordkeeping and recording rules are the same as the current regulations governing transfers between breweries of the same ownership.
- Because the 2017 tax reform act’s lower tax rates apply to beer “produced” by the removing brewery, beer transferred in bulk does not benefit from the lower rates if the receiving brewer makes no changes or only de minimis changes to the transferred beer.
- For excise tax purposes, a beer is “produced” by a brewer if it is “brewed by fermentation or produced by the addition of water or other liquids during any state of production.” Blending alone does not qualify as “production.”
- Packaged beer that was transferred does not receive any lower rate of tax and will be taxed at the $18/barrel rate upon removal.
- Absent evidence of theft or diversion, in-transit losses of up to 2 percent are permitted without the need to file a report or a claim with TTB.
- Bulk containers used to transfer beer between breweries are subject to certain marking requirements.