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5010 Tax Credit


Under 26 U.S.C. 5001 and 7652, Federal excise tax is imposed on all domestically produced or imported distilled spirits products (see TTBGov - Tax and Fee Rates). A producer or importer of distilled spirits products may claim a credit against this tax under 26 U.S.C. 5010 on each proof gallon of alcohol derived from eligible wine and eligible alcohol-containing flavors to the extent the flavors do not exceed 2.5 percent of the finished product on a proof gallon basis.

Eligible wines are those that have not been subject to distillation at a distilled spirits plant and that are still wines (which are wines containing no more than 0.392 g of carbon dioxide per 100 ml under 26 U.S.C. 5041). Eligible flavors are those that TTB’s Nonbeverage Products Laboratory has determined are unfit for beverage use and are manufactured in accordance with the approved formula. 

Standard Effective Tax Rates for Imported Distilled Spirts Products

Under 27 CFR 27.77, an importer of a distilled spirits product who wants to claim  a tax credit under 26 U.S.C. 5010 may obtain approval of a standard effective tax rate based on the least quantity and the lowest alcohol content of eligible wine or eligible flavors used in the manufacture of the product.  The importer may apply for this rate for a distilled spirits product by submitting the following to:

National Laboratory Center
Nonbeverage Products Laboratory
6000 Ammendale Road
Beltsville, Maryland 20705

  • A letter from the importer on company letterhead requesting a standard effective tax rate for the product.
  • Documents disclosing information on the finished product, including:
  • The name of the product;
  • For each wine contained in the product, the quantity, percentage alcohol by volume, and kind (class and type); and
  • For each flavor contained in the product, the quantity, percentage alcohol by volume, and the name and quantity of each ingredient used in the manufacture of the flavor (a Flavor Ingredient Data Sheet (FID Sheet) from the manufacturer of the flavor is acceptable.  See TTBGov - FID Sheet Guidance and Examples for more information).
  • Calculation of the standard effective tax rate for each finished product. The rate must be calculated in accordance with 27 CFR 27.41, and the importer must expressly state that the calculation is based on the least quantity and lowest alcohol content of the eligible wines and eligible flavors used in the manufacture of the product.
  • Samples of the finished distilled spirits product, base distilled spirits, eligible wines, eligible flavors, and any other alcoholic material in the finished product. The Nonbeverage Products Laboratory requests that samples be submitted in volumes of 8 fl. oz. or larger.

The Nonbeverage Products Laboratory analyzes the samples and provides the analytical information to the Regulations and Rulings Division (RRD), which makes the final determination regarding the request and notifies the importer by letter.

For additional information, please refer to TTB Industry Circular 2022-3, Calculating Tax Rates for Distilled Spirits Eligible for Both Craft Beverage Modernization Act Reduced Tax Rates and Tax Credits for Wine and Flavors Content.”


TTB G 2022-3
Issued on 8/3/2022



Last updated: May 21, 2024