Rev. Ruling 67-468

The Internal Revenue Service has been asked whether a properly qualified wholesale liquor dealer may locate his premises within the boundaries of a foreign-trade zone and there receive taxpaid domestic liquors on which no drawback is to be claimed, then sell such liquors to liquor dealers located in the United States Customs Territory and subsequently remove the liquors from the foreign-trade zone for delivery to such domestic liquor dealers.

The Regulations relating to Exportation of Liquors provide, at 26 CFR 252.30, that liquors may be transferred to a foreign-trade zone "* * * for the sole purpose of exportation, or storage pending exportation." It should be noted however, that the applicability of this section is limited, by 26 CFR 252.1, to liquors which are destined for export and which (1) have been withdrawn from bond without payment of tax or (2) will be made the subject of a claim for drawback of the tax.

The quoted provision of 26 CFR 252.30 is intended to implement the fourth proviso of 19 U.S.C. 81c, which states that "* * * under the rules and regulations of the controlling Federal agencies, articles which have been taken into a zone from customs territory for the sole purpose of exportation * * * shall be considered to be exported for the purpose of-* * * (b) the statues and bonds exacted for the payment of draw-back, refund, or exemption from liability for internal-revenue taxes * * *. * * * Such articles may not be returned to customs territory for domestic consumption * * *."

In an earlier (the second) proviso of 19 U.S.C. 81c, it is stated that "subject to such regulations respecting identity and the safeguarding of the revenue as the Secretary of the Treasury may deem necessary, articles, the growth, product, or manufacture of the United States, on which all internal-revenue taxes have been paid, * * * may be taken into a zone from the customs territory of the United States, placed under the supervision of the collector, and * * * may be brought back thereto free of quotas, duty, or tax: * * *." Held: Where taxpaid domestic liquors are taken into a foreign-trade zone by a properly qualified wholesale liquor dealers and are not intended for export with benefit of drawback, they are not subject to the restrictions imposed by either 26 CFR 252.30 or the fourth proviso of 19 U.S.C. 81c. Therefore, under the second proviso of 19 U.S.C. 81c such taxpaid liquors may be taken (without benefit of drawback) into foreign-trade zones by such wholesale liquor dealer and later withdrawn for delivery to customers, outside such zones, in the customs territory of the United States.

26 U.S.C. 7805; 27 CFR 252.1