HOW CAN THE FEDERAL "PATH ACT" AMENDMENT HELP YOU $AVE MONEY?
Are you a Bonded Wine, Beer, or Distilled Spirits Manufacturer that holds a valid permit from TTB - National Revenue Center? Then you may want to review the Industry Circular 2016-2 available online at htts://www.ttb.gov or consult with a Compliance Professional (send me an email) and see how you may benefit from the changes that resulted from "the PATH Act" that took effect on January 1, 2017. In the Industry Circular, TTB is advising on the amendments made to tax return due dates as well as the removal of bond requirements for eligible taxpayers who pay taxes below certain maximum amounts on wine, beer and spirits.
Annual Filing: Beginning January 1, 2017, taxpayers who reasonably expect to be liable for not more than $1,000 (related to alcohol production) in excise taxes for the calendar year and who were liable for not more than $1,000 in such taxes in the preceding calendar year, may pay those returns annually, rather than semi-monthly or quarterly. (Certain wine proprietors already had the option to choose to file annually under 27 CFR 24.273.)
Taxpayers with multiple locations must combine their tax liability for all locations with respect to distilled spirits, wine, or beer to determine their eligibility to use the annual return period. Taxpayers who choose to use the annual return period must identify the return period they are using on their tax return form, and are not required to notify TTB in advance. The annual tax return will generally be due January 14th of each year. See 26 U.S.C. 5061.
Taxpayers who become ineligible to use the annual return period (for example, their excise taxes exceed $1,000 in a calendar year or they expect an increase in production capacity that would increase their excise tax liability to over $1,000) may choose to use either quarterly or semimonthly return periods, as authorized in the TTB regulations. See 27 CFR 19.235, 24.271, 25.164, 26.112.
Bond Exemption: The PATH Act amendments to the Internal Revenue Code "IRC" also authorized a new bond exemption for certain eligible taxpayers. Starting with the calendar quarter January 1, 2017, taxpayers who reasonably expect to be liable for not more than $50,000 in taxes imposed on distilled spirits, wine, and beer for the calendar year (and who were liable for not more than $50,000 in such taxes in the preceding calendar year) and who pay excise taxes on a semi-monthly, quarterly, or annual basis, are exempt from the requirements to file bonds covering operations or withdrawals of distilled spirits or wines for nonindustrial use, or beer.
Because eligibility for the bond exemption depends in part on a taxpayer’s expected tax liability, taxpayers who are eligible for the bond exemption and who want to operate without a bond must notify TTB and obtain TTB approval.
New applicants must notify TTB that they are eligible for the bond exemption during the initial application process. Existing taxpayers who wish to apply for the bond exemption must do so by amending their permit or brewers’ notice. TTB amended its application forms (including the online equivalents submitted using TTB’s Permits Online system) to allow taxpayers to notify TTB that they are eligible for the bond exemption and request TTB approval to operate without a bond. For more efficient processing, TTB recommends that taxpayers who have previously applied using Permits Online, as well as all new applicants, use Permits Online to submit applications and amendments. Existing taxpayers who do not have accounts in Permits Online should file this amendment by paper application.
New Applicants: To streamline the application process, TTB recently added a field for paper applications and applications submitted using Permits Online, in which applicants may indicate that they reasonably expect to pay less than $50,000 in excise taxes in the calendar year in which they begin operations. If applicants who make this indication are eligible for the bond exemption, TTB will process their applications so that they can operate without a bond upon approval. As a reminder, to remain eligible for the bond exemption, taxpayers must pay taxes on a semi-monthly, quarterly, or annual basis. Taxpayers who conduct operations or withdrawals of distilled spirits or wine for industrial use, are still required to furnish bonds to cover such activities.
Existing Proprietors: Existing taxpayers who are eligible for the bond exemption and wish to terminate their bonds must do so by amending their permits or brewers’ notices, using Permits Online or the required paper forms. An existing taxpayer’s eligibility for the bond exemption is based partly on the excise tax liability for the preceding calendar year. As a result, TTB cannot begin processing an existing taxpayer’s bond termination request until it receives their final tax payments for any remaining excise taxes. If a taxpayer has not filed required reports, returns, or tax payments, TTB will not be able to verify its eligibility for the bond exemption.