What I Need to Know About Selling Tax- Free Alcohol
Under 26 U.S.C. 5214(a)(3), 27, CFR 19.536(a), and 27 CFR 22.111(a), an approved tax-free alcohol user may withdraw from a bonded distilled spirits plant, alcohol free of tax. The alcohol withdrawn under these conditions may only be used for nonbeverage purposes and not for resale or use in the manufacture of any product for sale, subject to the use limitations specified in Subpart G of Part 22 of TTB regulations.
All tax-free alcohol removed, sold, transported, or used in violation of TTB laws or regulations is subject to all provisions of law relating to taxable alcohol, including the requirement for payment of tax on the alcohol. This means, the person removing, selling, transporting, or using tax-free alcohol in violation of laws or regulations pertaining to tax-free alcohol shall be required to pay the distilled spirits tax on the alcohol.
General Requirements for Selling Tax-Free Alcohol
TTB regulations at 27 CFR Parts 19 and 22 require that the bonded distilled spirits plant must have in its possession, a signed photocopy of the user's current permit issued on TTB Form 5150.9, before shipping tax-free alcohol to the approved user.
What must the tax-free user do?
The tax-free user must sign, date, and write the word "copy" on the face of their permit and submit it to you with their initial order. When placing subsequent orders with you, the tax-free user must provide its tax-free permit number and a statement that the user has a valid permit to withdraw tax-free alcohol and a copy of that permit is on file with you. This serves as your authority to ship the spirits.
What must I do?
You may only ship to the name and address designated on the permit. You may not ship tax-free alcohol in excess of the annual withdrawal allowance stated on the permit.
You must prepare, provide, and maintain a record of shipment in accordance with 27 CFR 19.779.
If you learn that any of the information on the user's permit is no longer correct, you may not ship tax-free alcohol until you receive a copy of an appropriately amended permit.
If you ship spirits in excess of the permit allowance or if the user fails to provide you with a copy of the amended permit, you must invoice the alcohol to the user as a taxpaid removal.