Return of Tax Paid Spirits to Bond: How, When and Why (Read Time: 4 mins)

In the US, regulations permit distilleries to receive Tax Paid spirit (bulk or bottled) and return it to bonded premises. This article addresses some of the limitations and considerations when returning to bond.

The primary regulation for this operation is 27 CFR 19.452, which states (in part):

(a) Allowable returns. A proprietor may return spirits to bonded premises if the spirits were taxpaid or tax determined by him, by another distilled spirits plant proprietor, or by an importer upon importation through U.S. Customs and Border Protection. However, consistent with section 5215(a) of the IRC the proprietor may return such spirits to bond only for one of the following reasons:

(1) Destruction, in accordance with § 19.459;

(2) Denaturation, in accordance with subpart O of this part;

(3) Redistillation, in accordance with subpart L of this part;

(4) Reconditioning [The dumping of distilled spirits products in bond after their bottling or packaging, for filtration, clarification, stabilization, reformulation, or other purposes, other than destruction, denaturation, redistillation, or rebottling.]; or

(5) Rebottling.

These five "allowable reasons" cover just about any operation that you might wish to perform on your formerly-tax paid spirit bottled spirit. The only thing you cannot do after returning to bond is re-sell the bottles as-is. You have to do something to them in bond (at the very least, rebottle).

When it comes to Bulk Tax-Paid spirit, you cannot bottle it as-is - you have to abide by one of the first 3 allowable reasons.

When you return spirit to bond, be sure to indicate which of the 5 reasons applies in your batch notes or other recordkeeping system.

Federal Excise Taxes - Claims and Refunds

Once you have returned tax paid spirit to bonded premises for one of the itemized "allowable reasons" in 19.452, you now have the option (but not the obligation) to file a claim with TTB to get a refund of the Federal Excise Tax that was originally paid.

It does not matter who originally paid the Federal Excise Tax: the DSP that returns the product to bonded premises is the only one who can file a claim for a refund. This is logical because the DSP that performed the "return to bond" is liable for Federal Excise Tax on that spirit once it is removed, for the second time, from bonded premises taxpaid or tax determined.

Your claim may request the minimum possible Federal Excise Tax rate (accounting for CBMA reductions, wine credits and flavor credits) without substantiating the original tax determination & payment. However, if you wish to claim a credit for more than the minimum rate (e.g. $13.34/PG instead of $2.70/PG), your claim must include substantiating documentation from the original taxpayer which indicates the rate(s) originally paid on the products being returned to bond.

Filing a Claim

Here's the claim form in PDF: https://www.ttb.gov/images/pdfs/forms/f56208.pdf

Complete the claim, referencing 19.452 (a)(1)-(5) in part 1 and choose "Allowance of Credit" in part 2. Include substantiating records of the original tax payment, if required.

Scan the completed & signed PDF, and then upload it here: https://my.ttb.gov/nrc-claims-submission/claim-form

Claim form FAQs from TTB: https://www.ttb.gov/ttb-form-56208b

Once your claim is approved (not before), you can take the appropriate adjusting credit on your next Federal Excise Tax filing.