Ask Me Anything: About TTB Reporting
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Do you have a question about TTB Reporting? Ask Me Anything! Submit a question here at the ADI Webpage and Donald Snyder of Whiskey Resources LLC will publish the questions and his responses on-line. Even though posted questions will not show the asker, please avoid asking or sharing anything confidential or incriminating as the question may be posted online for all to see.
Q: What can we expect during a TTB audit?
A: There are several different types and scopes of a TTB Audit including an on-site review of taxpayer’s records and reports, on-site product integrity audits, and even off-site audits of submitted reports and returns. The goal of the TTB Audit Division is to complete its mission: “To ensure the proper payment of excise taxes and compliance with laws and regulations in a manner that protects the revenue and prevents unlawful activity in the commodities that TTB regulates.” Be prepared to show support documentation including production records, bottling records, withdrawals from bond records/invoices, and other documentation that support the numbers reported on the monthly operations reports and the federal excise tax returns. The auditors may request a private place to sit and work, interview your staff, tour your facilities, request a copy of your plant registration, and request copies of support documentation and reports for the last 3 years. It is absolutely crucial to be welcoming, professional, understanding, open minded, and nice. The TTB wants you to be successful and to continue to generate tax revenue and you want to run an organization that is in full compliance with the law. In the end, everyone has the same objective – To Protect the Revenue! For more information on a TTB audit visit: http://www.ttb.gov/offices/tad.shtml
Q: Where can I get help with the questions on the DSP Application? For example, what is the TTB looking for with this question: “Describe step by step procedures used to produce spirits from an original source. Beginning with treating, mashing or fermenting of raw materials and continuing through each step; distilling, purifying and refining and production gauge:”
A: The New Business Development/Start Up module on Whiskey Systems Online (www.whiskeysystems.com), will walk you through the entire DSP Application providing clarity and help with all the questions, documents needed to be uploaded, and even which check boxes to check or un-check. Here is a teaser answer from the module for the above question: “Making Whiskies: Grains (corn, barley, wheat, rye, oats or other grains, or prepared malts of these grains) will be set to ferment in XXX gallon batches, then distilled at about XXX proof, with an approximate yield of XXX proof gallons per batch. Upon completion, whisky will be gauged and filled into barrels for aging.”
Q: What are the labeling regulations for craft spirits? What verbiage can a distiller use to describe their product whether fermented, distilled, rectified, or bottled?
A: Deciding on the right label verbiage for your spirit can be a very complicated, personal, and time consuming process. Even after you decide on language for your label, you may get required changes from the TTB during the Label Approval Process. Increased transparency to your specific processes is always a safe bet. Here are the specific regulations that will help you decide what language is best for your specific labels.
Q: We are in need of additional room for barrel aging or temporary storage of bottled finished goods and are in the process of finding another building that is not directly adjacent to my current distillery bonded space. How do I get approval?
A: That is called an application for a Non-Contiguous Premise. It is an extension of your bond to a separate location where you can report all the operations as if it was all under one DSP. You can apply for a Non-contiguous premise on Permits Online but I would reach out to your TTB specialist for help. There are no specific limitations in the regulations about how far the off-site location can be from your bond but general rule is no more then 5-10 miles from your distillery. You may need an additional surety bond to cover any In-Bond spirits in transit moving between locations.
Q: My DSP gets wine in from an adjacent Bonded Winery for distillation. How do I report receiving and using that?
A: If the wine coming into your distillery will be used only for distillation, you only need to report the wine being used as a raw material or fermentable on the Production Report Page 2, “Part 6 – Materials Used”. Most distilleries will put the number of gallons of wine distilled on “Line 9. Grapes” or on “Line 10” and manually write “Wine”. Bringing in wine for distillation does not require a Transfer in Bond. The resulting distilled brandy or spirits are reported as normal on the Production, Storage, and/or Processing reports. Make sure you keep local copies of your Bill of Ladings or other Records of Receipt in the event of an audit.
Q: How do I track or report Heads and Tails?
A: Records of heads and tails production, re-distillation, or destruction are for internal use only kept locally at the distillery. If you don’t re-use or re-distill heads and tails, make sure you are disposing of the spirits and recording the destruction locally in a way that is compliant with your local regulations. Heads and tails are considered Unfinished Spirits and are only reported to the TTB on the Production Report each Quarter on “Line 17 b. Unfinished Spirits” if you have a tank with heads or tails left over in a Production Tank at the end of the quarter. Most distilleries will physically do something with the heads and tails after each run and not leave any balance of or report Unfinished Spirits at the end of the Quarter.
Q: What TTB reports does a craft distiller have to file and when?
A: Distillers making Beverage Alcohol only (no industrial or denatured spirits) must file monthly operations reports including a Production Report (F5110.40), Storage Report (F5110.11), and Processing Report (F5110.28) due by the 14thof the next month. In addition, distillers must file and pay a Federal Excise Tax (FET) Return (F5000.24) after every tax period.
Q: How and when do craft distillers have to pay taxes?
A: Most craft distillers pay $13.50/proof gallon for any cases of beverage alcohol they remove from the bonded distillery space including cases they move to their gift shop or tasting room areas. For a craft distillery who pays less than $50,000 in excise tax per year (or ~3,700 six pack cases per year), they can pay every quarter (4 times per year). If a distillery pays more than $50,000/year in one calendar year, they must pay every 15 days and 3 times in September.
Q: What do I do if I have to destroy bad spirits or finished cases?
A: If you need to destroy alcohol still in-bond due to contamination or some other issue, complete an internal Record of Destruction (see 27 CFR 19.459 for specifics on what exactly needs to be recorded). This record should be kept internally in the event of an audit and should not be mailed to the TTB with your monthly reports.
Q: What is the difference between a Gallon, a Wine Gallon, and a Proof Gallon?
A: When distillers talk about a Gallon, they traditionally are referring to a volumetric measurement of liquid without any regard to proof or % alcohol. For example, a milk jug has 1 Gallon of liquid. This is also referred to as a “Wine Gallon” as winery operations and taxation is based on the volume of gallons of wine. A Proof Gallon is a universal measure of the amount of alcohol inside that gallon. Proof Gallons are measured by the Wine Gallons (corrected for volume expansion of alcohol to 60 degrees F) times the Proof/100. For example, if a 1 gallon milk jug had 150 proof spirits (or 75% ABV), it would have 1 Wine Gallon or 1.5 Proof Gallons of alcohol. A 1 gallon milk jug with 50 proof spirits (or 25% ABV) has 1 Wine Gallon or 0.5 Proof Gallons. A 50 gallon tank holding 80 proof spirits (or 40% ABV) would have 40 Proof Gallons.
Q: I’m trying to export my production into the US. Is there is a minimum of content for the alcoholic beverages in order to sell in the US?
A: There is no minimum bottling proof in order to import and sell distilled spirits into the US. The easiest and best approach is to contact the TTB directly to have the product reviewed and classified with a Pre-Import Evaluation. The TTB will help classify the spirit and will let you know if it requires a formula or if there are any specific issues with importing the product. They may require a sample. Check out the International Affairs page at TTB.gov for more information.
Q: Can a distillery be in the same building that may have some residential units? Not an apartment complex but in a multi-floor mixed used building that may have some loft apartments?
A: This is very tricky and is the source of much debate. Here is the exact regulation: “Subpart F – Location and Use (of distilleries) § 19.131 Restrictions as to locations. Distilled spirits plants shall not be located in any dwelling house, or in any shed, yard, or enclosure connected with any dwelling house, or on board any vessel or boat, or on premises where beer or wine is produced, or liquors of any description are retailed, or (except as provided in §19.133) on premises where any other business is conducted.” In my personal interpretation, if the distillery is physically connected to one of the loft apartments, it may not be approved. You may also run into local or county fire or zoning regulations that may prohibit the distillery in the building. I highly encourage you to reach out to the TTB directly to have a conversation about the specifics of your potential distillery space before you submit your DSP Application and wait the 120 days for review only to get rejected. Here is some relevant ADI Forum Discussion on the subject.
Q: What happens if I made a mistake on a monthly report that has been sent in already? Is there a way to correct that, or send a corrected report in after the due date?
A: As soon as you identify an error in a past report, it is important to Amend that report as soon as possible, even if the report was from several months back. To Amend a report, simply re-submit the report again (and any subsequent monthly reports that may be impacted with changed inventories) with the correct data for the month. If submitting via Pay.gov, check the Box for “Amended” (vs “Original”). If you submit paper copies through the mail, hand-write in the margin “Amended”.
Q: What do I do with the liquid remaining in the pot still after the distillation run is completed? Do I need to report it as destroyed?
A: After the distillation run is completed and you have gauged the yield from the condenser and parrot (low wines, feints, heads, hearts, and/or tails), the remaining liquid remaining in the still can be safely disposed of as permitted by local regulations. There will always be some proof gallons of alcohol remaining in the pot still after the run but the proof gallons should be small and can be disposed of without gauging or reporting them as destroyed.
Q: What are craft distilleries allowed to serve in their tasting room or bar area?
A: This is actually managed at the state level with each state setting their own limitations. Many states don’t allow sales by the drink or by the mixed cocktail. Some states have limitations on sample sizes. Of the states that do permit cocktail sales, some have different regulations on what can be sold. For example, in some states you cannot serve alcohol that you don’t make like vermouth for a martini, beer, or wine. A great resource to find the local regulations would be to connect with a craft distillery in your state who has a tasting room or bar to see what is permitted.
Q: If we purchase another still, are we required to fill any forms out for the TTB?
A: Buying a new still requires an amendment to your plant registration to update the TTB that you have new equipment. If you got your permit via Permit Online, you can amend your permit online. If you applied via paper, you need to file an amended registration thru the mail.
Q. Are all distilleries required to register with the FDA?
A. Yes. All distilleries in the USA must register with the Food and Drug Administration (FDA) as a Food Facility.
Q. What is the most recent guidelines for using caffeine in alcohol?
A. According to the TTB, additional caffeine added to alcohol beverages is an “unsafe food additive” and is not permitted for sale. This is a very complicated issue and I encourage anyone interested in learning more about caffeinated alcohol to follow this link for more information or to contact the TTB directly with questions.
Q. On the TTB New DSP Application form, how do I calculate the number of Proof Gallons produced each day?
A. The TTB is trying to gauge the size of your distillery to ensure you have the correct storage and withdrawal bonds in place to cover your expected inventory levels. Estimate the total # of Proof Gallons you will be producing off your still daily. A general ratio is 10-1 of your still size if you are distilling from fermentation. If you have a 500 gallon still, you can estimate ~50 PG/day. For more help on your TTB DSP Application, please check out the “Startup Distillery Planning Tools” at www.whiskeysystems.com.
Q: Is whiskey taxed federally when it is put into the barrel, when its bottled, or when it’s shipped?
A: Since Prohibition, the federal excise tax payment structure for distilleries has changed dramatically. Many, many years ago, distilleries did gauge and pay the tax when whiskey was put into the barrel and when it was bottled but that is no longer the current regulation. Today, distilleries get to defer paying that tax and will only pay federal excise tax after finished cases are withdrawn, tax determined, from the distillery’s bonded space. For example, a distillery can ferment, distill, barrel, and bottle spirits but will not pay any tax until the bottles are actually removed or shipped from the distillery.
Q: What licensing is necessary to buy bulk whiskey, store it at your location, blend, bottle and sell to wholesaler?
A: Even though there may not be any mashing or distilling in your operation, a full “Distilled Spirits Plant” permit from the TTB is required to store and bottle distilled spirits. You can apply via TTB.Gov thru their Permits Online portal. You may also be required to obtain a local or state license or permit. Check with your local distiller’s guilds for what is required in your area.
Important Disclaimer: The content above has been provided by Donald Snyder, Whiskey Resources LLC, and Whiskey Systems Online and are not affiliated with the TTB and answers posted are only from personal experience and personal understanding of the Federal Regulations. Individual distilleries and owners are ultimately responsible for ensuring all actions taken are compliant and follow TTB and other Federal Regulations. Advice and links posted on this site should be used at your own discretion. Donald Snyder, Whiskey Resources LLC, and Whiskey Systems Online will not be held liable for any damages resulting from advice, responses, or answers posted on this page.
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TTB Proofing Video Series:
Introduction to Proofing Video Series (4:09) – TTB’s Beverage Alcohol Laboratory offers a proofing video series to walk you through several frequently used procedures to proof distilled spirits correctly.
Part 1 – Proofing Spirits with a Hydrometer (4:29) – Learn how to proof spirits using a hydrometer; this technique is cost effective and accurate.
Part 2 – Proofing Spirits with a Densitometer (3:19) – Learn how to proof spirits using a densitometer; this technique is fast and can be automated.
Part 3 – Distilling Spirits for Proofing (4:54) – High solid spirits must be distilled before proofing. Learn how to distill samples using a small laboratory distillation unit.
Part 4 – Determining Proof Obscuration by Evaporation (3:08) – Dissolved solids may obscure the true proof of a sample. Learn how to determine proof obscuration using the evaporation method.