New Guidelines for Alternate Premises

TTB clarifies procedures for custom crush and bonded wine cellars

by Linda Jones McKee

Washington, D.C.—The TTB Industry Circular Number 2018 - 3 released May 30 by the Alcohol and Tobacco Tax and Trade Bureau (TTB) advised owners of wineries, breweries and distilleries that they may submit requests to use alternate premises. The circular gives guidelines to proprietors “who wish to ‘alternate’ their premises in a way that varies from TTB requirements for the purpose of storing tax-determined and non-tax-determined products in a more flexible or efficient manner.”

Michael Kaiser, vice-president of WineAmerica, the National Association of American Wineries located in Washington, D.C., told Wines & Vines that these guidelines indicate that the TTB is willing to work with wineries who follow the rules “to make things easier to implement what seems hard to work around.”

Those who want to use alternate methods or procedures (under 27 CFR 19.27, 24.22, or 25.52) should submit requests to the TTB’s Regulations and Rulings Division. The guidelines include the following points:

• The proprietor should have a “good cause basis to use the alternate method or procedure.”

• TTB will review the proprietor’s compliance history.

• The proprietor should give information about how the finished products and alternated areas will be identified.

• The equipment to receive, track and remove the products should be described.

• The physical marking of tax-determined products should be explained.

• The proprietor “should expressly state in the request that tax-determined and non-tax-determined products will not be stored or otherwise commingled in the same area at the same time if that area is designated as one type of premises.”

• Additional points address such issues as record keeping and inventory discrepancies, amendments to the information associated with a permit, and modification or rescission of the permit by TTB. (Circular 2018 - 3 is available at www.ttb.gov.)

Why are these guidelines necessary?

The answer comes partly from the fact that the Tax Cut and Jobs Act is a comprehensive, complex bill that was written quickly and passed without detailed review only days before it was to become effective on Jan. 1, 2018. Another factor is that the language included concerning wineries in the approximately 1000-page bill is not a copy, but a version of the Craft Beverage Modernization and Tax Reform Act (CBMTRA).

While the federal excise tax on table wine remained steady at $1.07 in the Tax Cut and Jobs Act, new tax credits were created that reduced the effective tax rate for small to medium-sized wineries across the country through Dec. 31, 2019. Overall, the wine industry was pleased that federal excise taxes were reduced and that there is almost two years to work on additional changes to enhance the law’s potential to help the wine industry.

What was not anticipated was that the tact bill included additional, incorrect language that could eliminate the benefits for wineries that use custom crush facilities or store wine in bonded wine cellars not on the winery’s premises. The TTB Industry Circular 2018 - 1, published on March 2, interpreted the bill’s language to mean that the excise tax cuts would apply only to wines fully controlled by the producer from production to storage and final sale. Wineries using custom crush facilities or storing wine in bonded wine cellars separate from the winery’s bonded wine premise would have to pay the full excise tax rate of $1.07 per gallon beginning on July 1.

The expiration date problem was solved on May 17, 2018 with the publication of the TTB Industry Circular Number 2018 - 1A, which extended the expiration for “wine that is stored at a bonded winery” to the end of 2019. What was not clear from Circular Number 2018 - 1A was how wine at “alternate premises” such as custom crush facilities should be handled from a tax stand point.

TTB Industry Circular 2018 - 3 now allows for wineries in good standing with the TTB to continue using alternate premises and bonded wine cellars for another 19 months. During that time, wineries will benefit from the reduction in federal excise taxes, but the best solution would be new legislation to make those reductions permanent. Kaiser reports that WineAmerica is working hard to make that happen.

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