TTB Industry Circular
May 17, 2018
Number: 2018 – 1A
Alternate Procedure for a Wine Producer to Tax Determine and Tax Pay Wine of Its Production That Is Stored Untaxpaid at a Bonded Wine Cellar
To: Proprietors of Bonded Wineries, Bonded Wine Cellars, and Others Concerned.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) is, for a limited time, allowing producing wineries to tax determine and tax pay, upon removal from bond, wine of their production stored untaxpaid at a bonded wine cellar (BWC) or bonded winery, as if it were removed from the producing winery's bonded premises.
This Industry Circular modifies and supersedes Industry Circular 2018-1. In this Industry Circular, TTB restates the alternate procedure provided by Industry Circular 2018-1, but specifically extends its provisions to wine that is stored at a bonded winery, as the prior version only referred to wine stored at a BWC. TTB also extends the duration of the alternate procedure through December 31, 2019, and has amended the text where appropriate.
On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (Public Law 115-97) ("The Act"), which makes extensive changes to the Internal Revenue Code of 1986 (IRC), including provisions related to alcohol that are administered by TTB. Those changes are effective January 1, 2018.
The new law set forth new tax credits for wine (referred to as the "Special Rule") and suspended, through the end of calendar year 2019, the previous tax credit for wine. The statutory provisions that allowed for a transfer of tax credits are also suspended, as they apply specifically only to the tax credit that has now been suspended by the new law. There is no provision in the new law that provides for a transfer of the new tax credits that apply to wine removed in 2018 and 2019. (See the addition of the "Special Rule" at 26 U.S.C. 5041(c)(8) stating that the tax credit provisions of 26 U.S.C. 5041(c)(1) and (c)(2) do not apply after December 31, 2017 and before January 1, 2020, and the provisions of section 5041(c)(6) providing for the transfer of the credit by any person eligible for the credit under section 5041(c)(1).)
As a result, for calendar years 2018 and 2019, any wine that is removed by a wine premises that did not produce the wine is not eligible for the new tax credits. While the Special Rule is in effect (that is, calendar years 2018 and 2019), a winery can only apply the new tax credits to wine produced by the winery. During this time, if the wine is being held at premises that did not produce the wine, the producing wine premises can bring the wine back to its premises and remove the wine taxpaid from its premises in order to apply the new tax credits to the wine. Otherwise, a BWC or other wine premises that removes wine that it did not produce must tax pay the wine at the applicable tax rate, without application of credits that would otherwise be available to the producing wine premises under the Special Rule.
3. Alternate Procedure.
Through this Industry Circular, TTB is authorizing an alternate procedure, in effect through December 31, 2019, under which wine producers will be allowed to tax determine and tax pay wine of their production stored untaxpaid at a BWC without the wine producer being required to physically receive its wine back from the BWC in bond. (For the purposes of this alternate procedure, references to a BWC will be understood to include a bonded winery storing untaxpaid wine produced by another winery.) Rather, this alternate procedure will allow such wine producers to "receive" their wine "in bond" solely through documentation and reporting. The wine producer will report the wine on the TTB F 5120.17temp, Report of Wine Premises Operations, as "received in bond" and "removed taxpaid," and the wine producer must then promptly invoice the wine as taxpaid back to the BWC. The transfer documents used for this special procedure must be clearly marked with reference to this alternate procedure. These "transfers" through documentation, including invoicing the BWC, must be concluded so that all of these documented removals from bond occur on or before December 31, 2019, and the wine must be taxpaid by the due date for the wine producer's first tax return covering the date of such removal. Wine producers may take advantage of this alternate procedure without seeking TTB approval.
After the wine producer completes this process, including providing the invoice of the wine as "taxpaid" back to the BWC, the BWC will promptly record the wine as transferred in bond to the wine producer and store and record the wine as taxpaid. On its next regular Report of Wine Premises Operations, the BWC will (1) report any wine it "transfers" to a wine producer under this alternate procedure on TTB Form 5120.17temp in Part I, Section A, on line 15, and/or in Part I, Section B, Line 9, and (2) list the names of any wine producer for whom the BWC is storing taxpaid wine under this alternate procedure on TTB Form 5120.17temp in Part X, Remarks. Once the BWC has been notified that the wine has changed status from nontaxpaid to taxpaid, the wine must then clearly be shown in the BWC records as taxpaid and, if the BWC has a taxpaid area, the wine must be moved to that area. In instances in which the BWC does not already have a taxpaid area, the BWC will not be required to file an amendment to designate one solely for the storage of products "taxpaid" under this procedure, unless the BWC intends to store taxpaid wine other than in connection with this procedure. Rather, the BWC who does not already have a taxpaid area must clearly identify the wine in the records as "taxpaid" and must mark the outermost packaging of taxpaid wine in such a way that it is readily identifiable as taxpaid. This allowance applies only to wine covered under this alternate procedure.
Questions. If you have any questions concerning this circular, please contact the Regulations and Rulings Division at (202) 453-2265 or use the contact us form.
Signed by John Manfreda
John J. Manfreda
Alcohol and Tobacco Tax and Trade Bureau
Page last reviewed: May 17, 2018
Page last updated: May 17, 2018
Maintained by: Regulations and Rulings Division