27 C.F.R. Subpart H—Records
Title 27 - Alcohol, Tobacco Products and Firearms
Each person claiming drawback on taxpaid distilled spirits used in the manufacture of nonbeverage products shall maintain records showing the information required in this subpart. No particular form is prescribed for these records, but the data required to be shown shall be clearly recorded and organized to enable appropriate TTB officers to trace each operation or transaction, monitor compliance with law and regulations, and verify the accuracy of each claim. Ordinary business records, including invoices and cost accounting records, are acceptable if they show the required information or are annotated to show any such information that is lacking. The records shall be kept complete and current at all times, and shall be retained by the manufacturer at the place covered by the special tax stamp for the period prescribed in §17.170. (a) Distilled spirits received in tank cars, tank trucks, barrels, or drums. For distilled spirits received in tank cars, tank trucks, barrels, or drums, the manufacturer shall record, with respect to each shipment received— (1) The date of receipt; (2) The name and address of the person from whom received; (3) The serial number or other identification mark (if any) of each tank car, tank truck, barrel, or drum; (4) The name of the producer or warehouseman who paid or determined the tax; (5) The effective tax rate (if other than the rate prescribed by 26 U.S.C. 5001); and (6) The kind, quantity, and proof (or alcohol percentage by volume) of the spirits. (b) Distilled spirits received in bottles. For distilled spirits received in bottles, the manufacturer shall record— (1) The date of receipt; (2) The name and address of the seller; (3) The serial number of each case, if the bottles are received in cases; (4) The name of the bottler; (5) The effective tax rate (if other than the rate prescribed by 26 U.S.C. 5001); and (6) The kind, quantity, and proof (or alcohol percentage by volume) of the spirits. (c) Distilled spirits received by pipeline. For distilled spirits received by pipeline, the manufacturer shall record— (1) The date of receipt; (2) The name of the producer or warehouseman who paid or determined the tax; (3) The effective tax rate (if other than the rate prescribed by 26 U.S.C. 5001); and (4) The kind, quantity, and proof (or alcohol percentage by volume) of the spirits. (d) Determination of quantity. At the time of receipt, each manufacturer shall determine (preferably by weight) and record the exact number of proof gallons of distilled spirits received. The amount received in bottles may be determined by the required statements on the labels. The amount received in sealed drums with no evidence of leakage may be determined from the record of shipment, which is required by §19.780 of this chapter to accompany spirits received from a distilled spirits plant. If spirits are received in a tank car or tank truck, and the result of the manufacturer's gauge of the spirits is within 0.2 percent of the number of proof gallons reported on the record of shipment required by §19.780, then the number of proof gallons reported on that record may be recorded as the quantity received. Nevertheless, the receiving gauge shall be noted on the record of receipt. If, for any shipment, the amount recorded in the manufacturer's records as the quantity received is greater than the amount shown as taxpaid on the record required by §19.780, a deduction equivalent to the excess shall be made from the amount of drawback claimed in the manufacturer's claim covering that period. If no claim is filed for that period, then the deduction shall be made in the manufacturer's next claim. Losses in transit that exceed the 0.2 percent limitation provided in this paragraph shall be determined and noted on the record of receipt. Such losses shall not be recorded as distilled spirits received. (e) Receipt of imported rum, or spirits from Puerto Rico or the Virgin Islands. If spirits are received which contain at least 92% rum, and which originate from Puerto Rico or the U.S. Virgin Islands, the record of receipt shall indicate the place of origin. If rum is received, the record shall indicate whether it is from Puerto Rico, from the U.S. Virgin Islands, imported from other countries, or domestic. (f) Shipments from distilled spirits plants. If spirits are received directly from the distilled spirits plant that paid or determined the tax, the manufacturer shall retain the record of shipment required by §19.780 of this chapter. To the extent that the information on that record duplicates the requirements of this section, retention of that record shall satisfy those requirements. If there are differences between the information on the record of shipment and the information required to be recorded by this section, the requirements of this section may be met by appropriate annotations on the record of shipment. (a) Shipments from distilled spirits plants. For each shipment of taxpaid spirits from the bonded premises of a distilled spirits plant, the manufacturer shall obtain the record of shipment prepared by the supplier under §19.780 of this chapter. This record shall be retained with the commercial invoice (if the latter is a separate document) as evidence of taxpayment of the spirits. The record shall show the effective tax rate(s) (if other than the rate prescribed by 26 U.S.C. 5001) applicable to the shipment. (b) Purchases from wholesale and retail liquor dealers. Manufacturers shall obtain commercial invoices or other documentation pertaining to purchases of distilled spirits from wholesale and retail liquor dealers (including such dealership operations when conducted in conjunction with a distilled spirits plant). For spirits other than alcohol, grain spirits, neutral spirits, distilled gin, or straight whisky (as defined in the standards of identity prescribed by §5.22 of this chapter), the manufacturer of nonbeverage products shall obtain evidence, from the producer or bottler of the spirits, as to the effective tax rate paid thereon. (c) Imported spirits. For imported spirits that were taxpaid through Customs, evidence of such taxpayment (such as Customs Forms 7501 and 7505, receipted to indicate payment of tax, and the certificate of effective tax rate computation, if applicable) shall be secured from the importer and retained by the manufacturer. (d) Evidence of effective tax rate. If the evidence of effective tax rate, required by this section for distilled spirits products that may contain wine or flavors, is not obtained, drawback shall only be allowed based on the lowest effective tax rate possible for the kind of distilled spirits product used. (a) General. Each manufacturer shall keep a production record for each batch of intermediate product and for each batch of nonbeverage product. The production record shall be an original record made at the time of production by a person (or persons) having actual knowledge thereof. If any product is produced by a continuous process rather than by batches, the production record shall pertain to the total quantity of that product produced during each claim period. (b) Information to be shown. The record shall show the name and formula number of the product, the actual quantities of all ingredients used in the manufacture of the batch (including the proof or alcohol percentage by volume of all spirits), the date when eligible spirits were considered used (see §17.152), the effective tax rate applicable to those spirits (if other than the rate prescribed by 26 U.S.C. 5001), and the quantity of product produced. The alcohol content of the product shall be shown if a test of alcohol content was made (see paragraph (e) of this section). Usage of eligible and ineligible spirits shall be shown separately. If spirits from Puerto Rico or the U.S. Virgin Islands, containing at least 92% rum, were used, the record shall indicate their place of origin. If rum was used, the record shall indicate whether it was from Puerto Rico, from the U.S. Virgin Islands, imported from other countries, or domestic. If spirits were recovered, the production record shall so indicate, and the record required by §17.168 shall be kept. If drawback is claimed on spirits consumed as an essential part of the manufacture of a nonbeverage product, which were not contained in that product at its completion, then the production record shall show the quantity of spirits so consumed in the manufacture of each batch. (c) Specificity of information. The production record shall refer to ingredients by the same names as are used for them in the product's formula. This includes formulas submitted to TTB and formulas contained in the publications listed in §17.132. Other names for the ingredients may be added in the production record, if necessary for the manufacturer's operations. Usage of ingredients (including spirits) may be shown in units of weight or volume. (d) Determining quantity of distilled spirits used. Each manufacturer shall accurately determine, by weight or volume, and record in the production records the quantity of all distilled spirits used. When the quantity used is determined by volume, adjustments shall be made if the temperature of the spirits is above or below 60 degrees Fahrenheit. A table for correction of volume of spirituous liquors to 60 degrees Fahrenheit, Table 7 of the “Gauging Manual,” is available. See subpart E of part 30 of this chapter and §30.67. Losses after receipt due to leakage, spillage, evaporation, or other causes not essential to the manufacturing process shall be accurately recorded in the manufacturer's permanent records at the time such losses are determined. (e) Tests of alcohol content. At representative intervals, the manufacturer shall verify the alcohol content of nonbeverage products. The results of such tests shall be recorded. For raw ingredients destined to be used in nonbeverage or intermediate products, the manufacturer shall record, for each shipment received— (a) The date of receipt; (b) The quantity received; and (c) The identity of the supplier. (a) Shipments. For each shipment of nonbeverage products, the manufacturer shall record— (1) The formula number of the product; (2) The date of shipment; (3) The quantity shipped; and (4) The identity of the consignee. (b) Other disposition. For other dispositions of nonbeverage products, the manufacturer shall record— (1) The type of disposition; (2) The date of disposition; and (3) The quantity of each product so disposed of. (c) Exception. The manufacturer need not keep the records required by paragraphs (a) and (b) of this section for any nonbeverage product which either contains less than 3 percent of distilled spirits by volume, or is sold by the producer directly to the consumer in retail quantities. However, when needed for protection of the revenue, the appropriate TTB officer may at any time require the keeping of these records upon giving at least five days' notice to the manufacturer. (a) Distilled spirits. The “on hand” figures reported in Part II of TTB Form 5154.2 shall be verified by physical inventories taken as of the end of each quarter in which nonbeverage products were manufactured for purposes of drawback. Spirits taxpaid at different effective tax rates shall be inventoried separately. The inventory record shall show the date inventory was taken, the person(s) by whom it was taken, subtotals for each product inventoried, and any gains or losses disclosed; and shall be retained with the manufacturer's records. The manufacturer shall explain in Part IV of the supporting data (Form 5154.2) any discrepancy between the amounts on hand as disclosed by physical inventory and the amounts indicated by the manufacturer's records. Any gain in eligible spirits disclosed by inventory requires an equivalent deduction from the claim with which the inventory is reported. Gains shall not be offset by known losses. If no claim is filed for a quarter (nor for any monthly period therein), then no physical inventory is required for that quarter. (b) Raw ingredients and nonbeverage products. When necessary for ensuring compliance with regulations and protection of the revenue, the appropriate TTB officer may require a manufacturer to take physical inventories of finished nonbeverage products, and/or raw ingredients intended for use in the manufacture of nonbeverage or intermediate products. The results of such inventories shall be recorded in the manufacturer's records. Any discrepancy between the amounts on hand as disclosed by physical inventory and such amounts as indicated by the manufacturer's records shall also be recorded with an explanation of its cause. (a) Each manufacturer intending to recover distilled spirits under the provisions of this part shall first notify the appropriate TTB officer. Any apparatus used to separate alcohol is subject to the registration requirements of 26 U.S.C. 5179 and subpart C of part 29 of this chapter. Recovery operations shall only be conducted on the premises covered by the manufacturer's special tax stamp. (b) The manufacturer shall keep a record of the distilled spirits recovered and the subsequent use to which such spirits are put. The record shall show— (1) The date of recovery; (2) The commodity or process from which the spirits were recovered; (3) The amount in proof gallons, or by weight and proof (or alcohol percentage by volume) of distilled spirits recovered; (4) The amount in proof gallons, or by weight and proof (or alcohol percentage by volume) of recovered distilled spirits reused; (5) The commodity in which the recovered distilled spirits were reused; and (6) The date of reuse. (c) Whenever recovered spirits are destroyed (see §17.183), the record shall further show— (1) The reason for the destruction; (2) The date, time, location, and manner of destruction; (3) The number of proof gallons destroyed; and (4) The name of the individual who accomplished or supervised the destruction. [T.D. ATF–379, 61 FR 31412, June 20, 1996, as amended by T.D. ATF–462, 66 FR 42736, Aug. 15, 2001] When intermediate products are transferred as permitted by §17.185(b), supporting records of such transfers shall be kept at the shipping and receiving plants, showing the date and quantity of each product transferred. Each manufacturer shall retain for a period of not less than 3 years all records required by this part, a copy of all claims and supporting data filed in support thereof, all commercial invoices or other documents evidencing taxpayment or tax-determination of domestic spirits, all documents evidencing taxpayment of imported spirits, and all bills of lading received which pertain to shipments of spirits. In addition, a copy of each formula submitted on TTB Form 5154.1 shall be retained at each factory where the formula is used, for not less than 3 years from the date of filing of the last claim for drawback under the formula. A copy of an approval to use an alternate method or procedure shall be retained as long as the manufacturer employs the method or procedure, and for 3 years thereafter. Further, the appropriate TTB officer may require these records, forms, and documents to be retained for an additional period of not more than 3 years in any case where he or she deems such retention to be necessary or advisable for protection of the revenue. All of the records, forms, and documents required to be retained by §17.170 shall be kept at the place covered by the special tax stamp and shall be readily available during the manufacturer's regular business hours for examination and copying by appropriate TTB officers. At the same time, any other books, papers, records or memoranda in the possession of the manufacturer, which have a bearing upon the matters required to be alleged in a claim for drawback, shall be available for inspection by appropriate TTB officers. (Sec. 5133, 68A Stat. 623 (26 U.S.C. 5133); sec. 201, Pub. L. 85–859, 72 Stat. 1348 (26 U.S.C. 5146)).
Title 27: Alcohol, Tobacco and Firearms
PART 17—DRAWBACK ON TAXPAID DISTILLED SPIRITS USED IN MANUFACTURING NONBEVERAGE PRODUCTS
Subpart H—Records
§ 17.161 General.
§ 17.162 Receipt of distilled spirits.
§ 17.163 Evidence of taxpayment of distilled spirits.
§ 17.164 Production record.
§ 17.165 Receipt of raw ingredients.
§ 17.166 Disposition of nonbeverage products.
§ 17.167 Inventories.
§ 17.168 Recovered spirits.
§ 17.169 Transfer of intermediate products.
§ 17.170 Retention of records.
§ 17.171 Inspection of records.
