Excise tax, transfers of beer between breweries | KPMG | GLOBAL
close
Share with your friends

Excise tax, transfers of beer between breweries not of same ownership

Excise tax, transfers of beer between breweries

The U.S. Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) this week issued a “procedure” as guidance reflecting changes to the excise tax rules for transfers of beer between breweries “not of the same ownership.”

1000

Related content

TTB Procedure No. 2018-1 is intended to implement changes made to Code section 5414 by the new tax law (Pub. L. No. 115-97, enacted December 22, 2017).

Background

The new tax law amended section 5414 to allow more situations when beer may be transferred tax-free under bond. Under the new law, brewers may transfer beer from one brewer to another when: 

  • The breweries are owned by the same person (prior law).
  • One brewery owns a controlling interest in the other (new).
  • The same person(s) have a controlling interest in both breweries (new).
  • The proprietors of the transferring and receiving premises are independent of each other, and the transferor has divested itself of all interest in the transferred beer and the transferee has accepted responsibility for the payment of tax (new).

TTB guidance

TTB Procedure No. 2018-1 provides brewers with guidance regarding the transfer of beer, without payment of tax, from one brewery to another brewery not of the same ownership.  

As noted in the guidance, existing TTB regulations address transfers of beer between breweries of the same ownership without payment of tax—but not the new law’s rules for transfers of beer between breweries not of the same ownership. The TTB release explains that because of the length of time required to amend the regulations and the fact that the recent statutory changes are effective for a two-year period, TTB issued this guidance to apply the same requirements currently prescribed by regulation for transfers of beer between breweries of the same ownership to transfers of beer between breweries not of the same ownership. 

This TTB guidance also addresses the effect of transfers of beer between breweries not of the same ownership on the applicability of the reduced beer excise tax rates included in the new tax law.  

TTB Procedure No. 2018-1 describes:

  • The procedure for transferring beer between breweries including:
    • The record of beer transferred (such as transfer document information, reconsignment of beer, the return of beer, and disposition of the invoice)
    • The rules for preparation of records and reports
    • Bond coverage
    • The kinds or types of containers
    • Rules for determining the quantity transferred
  • Application of the reduced rates of tax for beer transferred between brewers not of the same ownership including:
    • When reduced rates apply (transfers of domestically produced beer in bulk or packaged beer)
  • Records for substantiating the tax rate and losses in transit 
  • Storage
  • Marks, brands, and labeling requirements

Effective date

The TTB guidance explains that the new law measures relate to the transfer of beer between breweries not of the same ownership with an effective date through December 31, 2019. 

Brewers that transferred beer on or after January 1, 2018, but prior to the issuance of the TTB guidance (July 17, 2018), may vary from the specific requirements discussed in TTB  Procedure No. 2018-1 for the beer transferred prior to the issuance of the TTB guidance, provided that they have records sufficient to substantiate, to the satisfaction of TTB, any transfers made without payment of tax and any tax rate applied to beer received from another brewery and removed for consumption or sale.

 

For more information, contact a tax professional with KPMG’s Excise Tax Practice group:

Deborah Gordon | +1 (202) 533 5965 | dkgordon@kpmg.com
Taylor Cortright | +1 (202) 533 6188 | tcortright@kpmg.com

© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit