NONBEVERAGE WINE; REVISION OF FORM 702
Proprietors of bonded wine cellars
and others concerned:
Purpose. This circular is issued to advise you of the publication
in the Federal Register for November 29, 1967, of Treasury Decision 6936,
effective December 1, 1967. This Treasury decision provides temporary
regulations in Subpart Z of 26 CFR Part 170, Miscellaneous Regulations
Relating to Liquor, respecting the production and withdrawal of wine and
wine products rendered unfit for beverage use.
Nonbeverage wine regulations. You were advised of the highlights
of the notice of proposed rule making in Industry Circular 67-11, dated
September 27, 1967. Since publication of the notice of proposed rule
making in the Federal Register for September 23, 1967 (32 F.R. 13416),
several changes were made in the proposed regulations by Treasury Decision
6936. The principal changes made are:
(1) In lieu of filing an amended application on
Form 698, a proprietor who intends to produce non-
beverage wine for withdrawal free of tax from his
bonded wine cellar shall, before commencing such opera-
tions, file with the Assistant Regional Commissioner a
written notice, in duplicate, of such intent.
(2) Segregated facilities for the production and
storage of nonbeverage wine will not be required. A
proprietor qualified to produce nonbeverage wine may use
his existing bonded wine cellar facilities for such
purpose, provided the operations are so conducted as to
prevent contamination of wine or wine products for beverage
use.
Formulas. You are again cautioned that formulas on Form 698 Supplemen-
tal must be submitted as required by 26 CFR 170.686 before nonbeverage wine
may be produced. Thus, existing formulas for wine products, such as salted
cooking wine, must be resubmitted, with samples, for approval before such
formulas may be used to produce a nonbeverage wine for withdrawal free of
tax.
Revision of Form 702. Form 702, Monthly Report of Wine Cellar Opera-
tions, is being revised as of January 1968 to provide for the following:
1. Special Natural Wines. Part IX, Special Natural
Wines, is revised to provide separate columns for report-
ing special natural wines (other than vermouth), "Not over
14 percent alcohol by volume" and "Over 14 percent alcohol
by volume."
2. Adjustments. The instructions on Form 702 are
being revised to show the proper method for making adjust-
ing entries necessitated by adjustments made on Form 2050,
Wine Tax Return (as explained in Industry Circular 67-9,
dated July 26, 1967, and Revenue Procedure 67-30 [I.R.B.
1967-30, 20]).
Nonbeverage wine data. Wine used in the production of nonbeverage
wine should be reported as a credit in Part I, Section A, of Form 702.
The quantities of nonbeverage wine produced and withdrawn each month
should be reported, by tax class, in Part X, Report of Special Operations.
Form 702 will be further revised at a later date to make provisions for
reporting the production and removal of nonbeverage wine.
Inquiries. Inquiries regarding this circular should refer to its
number and be addressed to your Assistant Regional Commissioner, Alcohol
and Tobacco Tax.

Harold A. Serr
Director, Alcohol and Tobacco Tax Division
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