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Industry Circular

Number: 2001-2
Date: April 16, 2001

Department of the Treasury
Bureau of Alcohol, Tobacco and Firearms
Washington, DC 20226

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   Elimination of the Bond Requirement for Tax-Free Alcohol Users

       To: All Tax-Free Alcohol Users

       Purpose.  The purpose of this industry circular is to announce the publication of
       the final rule eliminating the requirement for users of tax-free alcohol to file a bond.
       This final rule will be effective May 1, 2001.

       Background.  The use of tax-free alcohol is limited under Federal law to States or
       their political subdivisions, the District of Columbia, or to such organizations as
       educational institutions, scientific universities or colleges, laboratories devoted
       exclusively to research, hospitals, pathology laboratories, and non-profit hospitals
       and clinics.  Tax-free alcohol may be used only for the purposes specified in
       §22.101 of title 27 of the Code of Federal Regulations.  Before procuring tax-free
       alcohol, each user must obtain an Industrial Alcohol User's Permit.

       The laws and regulations governing tax-free alcohol were originally established to
       protect the government against any loss of revenue if the alcohol were diverted to
       beverage uses.  From 1985 to the present, ATF had required that certain larger-
       volume users post a bond in order to qualify for their permits.  The amount of the
       bond was based on the potential tax value of the alcohol the permittee used.

       Based on its experience in regulating this industry since 1985, ATF concluded that
       tax-free alcohol users pose a minimal risk to revenue, and that bond coverage
       should no longer be required of any applicant for a permit to use tax-free alcohol.

       Bond Termination.  Upon the effective date of the final rule, ATF will no longer
       require new applicants for a permit to use tax-free alcohol to file a bond.  In
       addition existing permittees may discontinue their current bond.

       Inquires.  For further information please contact the National Revenue Center at
       (513) 684-7150 or by writing to: Chief, National Revenue Center, Bureau of
       Alcohol, Tobacco and Firearms, 8002 Federal Office Building, 550 Main Street,
       Cincinnati, OH  45202.

Brad Buckles

 

                                       Bradley A. Buckles
                                            Director

 

     

 
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