ALCOHOL LAW ADVISOR
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
Alcohol Excise Taxes
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Detailed Summary of Federal Requirements for Production of Hand Sanitizing Products

To meet the growing need for hand sanitizing products, various federal agencies including the Alcohol Tobacco Tax and Trade Bureau (TTB), Federal Drug Administration (FDA), Health and Human Services (HHS) and Congress have been rapidly updating and providing guidance for alcohol manufacturers interested in producing or supplying alcohol for the production of these important products. The below neatly summarizes the key issues surrounding the production of alcohol for use in or production of hand sanitizers for distilled spirts plants (DSPs). Tax Treatment: Denatured and undenatured alcohol may be withdrawn from the bonded premises after December 31, 2019 and before January 1, 2021 free of tax for use in or contained in hand sanitizer made in accordance with FDA guidance. Formula requirements: No prior formula approval is required for DSPs or industrial alcohol users if: the hand sanitizer is produced in accordance with World Health Organization (WHO)...

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Mississippi Supreme Court Rejects ‘Passage of Title’ DTC Theory

Last week, the Supreme Court of Mississippi handed down an opinion in Fitch v. Wine Express Inc., No. 2018-SA-01259-SCT. A state court decision on the rather dry subject of personal jurisdiction often merits little comment, but the Fitch opinion features an emphatic rejection of the legal theory relied upon by many direct-to-consumer retail alcohol sellers today. As a “control” state for wine sales, Mississippi law generally prohibits the importation, transportation and sale of alcoholic beverages (a term that includes wine) outside of the state’s monopoly control system. And, as in virtually every state, the retail sale of wine to consumers is reserved to state licensees and, in the case of control jurisdictions, the state itself. In 2017, the state investigated online wine retailers. While most did not accept orders for shipment to a location in Mississippi, the state found three online retailers that accepted such orders. After further investigation, the...

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Federal Alcohol Excise Taxes 101

There are many laws at both the federal and state level that govern the production and distribution of distilled spirits. For example, craft distillers must comply with licensing and permitting requirements, trade practice laws, advertising restrictions, and, depending on the jurisdiction, alcohol franchise law. One of the most fundamental—and most complex—areas of law governing distilled spirits is excise taxes. An article authored by McDermott’s Bethany K. Hatef in the Winter 2020 issue of Artisan Spirit Magazine provides a high-level overview of the federal alcohol excise tax system and some specific features that apply to distilled spirits, and also explains the current status of the Craft Beverage Modernization Act, the legislation temporarily providing for reduced tax rates for certain amounts of distilled spirits. Access the full article. Originally published in Artisan Spirit Magazine: Winter 2020.

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TTB Publishes New Nonbeverage Product Formula Form

On August 12, 2019, the Alcohol and Tobacco Tax and Trade Bureau (TTB) published its updated Formula and Process for Nonbeverage Product, TTB Form 5154.1. The Nonbeverage Product approval process is critical to obtain “drawback” (a refund) on most of the alcohol excise tax on distilled spirits used to make such products deemed “unfit for beverage purposes.” The Nonbeverage Formula Form accordingly is important to producers of flavorings and extracts, soft drink concentrates and other non-beverage products made using potable alcohol. Nonbeverage drawback claimants, using the Formula Form, must show that taxpaid distilled spirits were used in the manufacture of a product unfit for beverage use. Today, most formulas are submitted online, although TTB’s National Laboratory in Maryland can still accept paper submissions. Notable features of the new form include: Previously, the Nonbeverage Formula Form requested information specifically if the finished product...

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TTB Publishes NPRMs to Repeal Standards of Fill for Wine and Distilled Spirits

On Monday, July 1, 2019, the Alcohol and Tobacco Tax and Trade Bureau (TTB) published two eagerly anticipated notices of proposed rulemaking (NPRMs) to largely repeal the standards of fill for wine and distilled spirits containers. The highlights: In the preamble to both NPRMs, TTB advances a number of significant policy beliefs on the topic of standards of fill, including: Standards of fill are no longer needed to help protect the revenue and enforce the excise tax. Standards of fill are not critical to protecting consumers, because consumers can rely on mandatory net content statements on labels. The lack of any standards of fill for malt beverages has not created any revenue or consumer deception problems. For spirits, TTB proposes to eliminate all standards except for a minimum of 50 milliliters and a maximum of 3.785 liters (one gallon). The maximum reflects the Federal Alcohol Administration Act’s statutory maximum for distilled spirit containers. For...

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Winds of Change Blowing for Craft Brewers

For those who follow developments in the law and craft brewing with equal passion, every year has its share of substantial issues. This year has been no exception, with a pending Supreme Court case; a substantial upswing in federal trade practice enforcement activity; a massive rewrite of US Tax and Trade Bureau (TTB) labeling and advertising regulations; and prospects for extending the biggest cuts in the excise tax on beer since the repeal of Prohibition. As these developments play out over the next year, we may see changes translate into the marketplace. Find out what you can expect. Access the full article. Originally published in The New Brewer, May/June 2019.

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TTB Spring 2019 Updates to Semi-Annual Regulatory Agenda

The spring edition of the federal government’s semi-annual Unified Agenda of Federal Regulatory and Deregulatory Actions (Regulatory Agenda) has been published. Like other federal agencies, the Alcohol and Tobacco Tax and Trade Bureau (TTB) uses the Regulatory Agenda to report on its current rulemaking projects. The Regulatory Agenda provides glimpses into TTB’s policy focus and aspirations. But, readers should recognize that TTB rulemaking moves very slowly, and the Agency often does not meet the aspirational dates published in the Regulatory Agenda.  The updated Regulatory Agenda lists the following projects of interest: Wines, Distilled Spirits and Malt Beverages In terms of importance, the list must begin with TTB Notice 176—the Notice of Proposed Rulemaking (NPRM) to “modernize” the labeling and advertising regulations applicable to all three commodities. Comments on Notice 176 are due on or before June 26, 2019. Three separate entries continue to...

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Further CBP Guidance on Craft Beverage Modernization Act

Earlier this week, US Customs and Border Protection (CBP) issued further guidance on the procedures for importers to take the lower tax rates and credits available under the Craft Beverage Modernization Act (CBMA). Key points of the new guidance: CBP will process drawback claims on an oldest-entry-first basis. Failure to substantiate drawback claims by January 31, 2019, risks a loss of the CBMA rates/credits for the entries in question. Going forward, every entry seeking to claim CBMA rates/credits must be accompanied by a CBMA Spreadsheet based on a template provided by CBP. Each importer must also submit a Controlled Group Spreadsheet, based on a template provided by CBP, for each controlled group it belongs to (foreign producers have the option of providing this information directly to CBP). Importers are responsible for immediately reporting to CBP any changes to the information in the Controlled Group Spreadsheet. Each foreign producer must provide their...

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New CBMA Guidance Further Clarifies Excise Tax Rules for Imported Beverages

Last week Customs & Border Protection (CBP) issued additional guidance on the Craft Beverage Modernization Act (CBMA) rules for applying the CBMA lower excise tax rates (for beer and distilled spirits) and credits (for wine) to alcohol beverages imported from other countries. The new guidance provides further clarity on the procedures required to make claims for drawback (refund) of taxes paid at the non-CBMA rate on product imported since the beginning of calendar 2018. It also indicates that CBP expects to provide additional guidance this month (October) on taking the lower rates and credits contemporaneously with importing additional product going forward. Among other things, CBP apparently will soon publish: (1) a Controlled Group Spreadsheet to track eligibility for the lower rates and credits; and (2) an Assignment Certification that foreign producers must execute and their importers must file in order to claim the CBMA lower rates and credits. In...

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Customs and Border Protection Interim Regulations for Refunds of Excise Taxes on Imported Beer, Wine and Spirits

US Customs and Border Protection (CBP) expects to publish tomorrow Interim Regulations authorizing the refund of beer, wine, and spirits excise taxes in connection with the 2017 tax reform act’s reduced rates and credits. The Interim Regulations specify: Claims must be filed with the National Revenue Center of the Alcohol and Tobacco Tax and Trade Bureau (TTB). Claims must be filed on TTB Form 5620.8. A separate claim is required for entries made at each US port or internal revenue region. The interim regulations will be effective on the date of publication (expected to be August 16, 2018). CBP also initiated a 60-day comment period that will provide interested parties with opportunities to raise questions or identify issues that are not addressed in the interim regulations. Please let us know if you have any questions about this development.

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