What is the point of bonds? Why are they required for medium and large plants?
Under 26 U.S.C. 5001, tax is imposed on distilled spirits as soon as the spirits are produced or imported. Therefore, though tax is not collected on distilled spirits lawfully produced and used for fuel use, section 5001 and other provisions of the Internal Revenue Code impose liability for tax on distilled spirits upon production of the spirits.
Bonds provide the Government with security against the possible loss of tax revenue.
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