The Alcohol and Tobacco Tax and Trade Bureau (TTB) released Industry Circular 2018-1A, which clarified the new law authorizing tax cuts on wine announcing that, for a limited time, producing wineries can take full advantage of the value of the new federal excise tax credits on wine stored at another bonded wine cellar or bonded winery, as if it were removed from the producing winery’s bonded premises, by following an “alternate procedure.” The “alternate procedure” is needed because many wineries use an alternate facility to store their wine, such as custom crush facilities or bonded wine warehouses, and a strict interpretation of the bill text disallowed these facilities from claiming the tax credit. A black letter reading of the bill meant that for calendar years 2018 and 2019, any wine that was removed by a wine premises that did not produce the wine was not eligible for the new tax credits. A winery could only apply the new tax credits to wine produced by that winery. If the wine was being held at premises that did not produce the wine, the producing wine premises had to physically bring the wine back to its premises and remove the wine taxpaid from its premises in order to take advantage of the tax credits.
Now, the TTB has authorized an alternate procedure, in effect through December 31, 2019, under which wine producers will be allowed to determine taxes on their wine stored (un-taxpaid) at an alternate bonded facility without the wine producer being required to physically receive its wine back from the bonded facility. 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 form “TTB F 5120.17 Temp” as “received in bond” and “removed taxpaid”. The wine producer must then promptly invoice the wine as taxpaid back to the alternate boned storage facility. Wine producers may take advantage of this alternate procedure without seeking TTB approval but must clearly mark the transfer documents with reference to this alternate procedure. Wine producers may view a detailed explanation of the alternate procedure here: Industry Circular 2018-1A .