[Federal Register Volume 71, Number 22 (Thursday, February 2, 2006)]
[Rules and Regulations]
[Pages 5598-5605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-981]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau
27 CFR Parts 19, 24, 25, 26 and 70
[T.D. TTB-41]
RIN 1513-AB17
Quarterly Excise Tax Filing for Small Alcohol Excise Taxpayers
(2005R-441P)
AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.
ACTION: Temporary rule; Treasury decision.
-----------------------------------------------------------------------
SUMMARY: This temporary rule implements the quarterly excise tax
payment procedure for small alcohol excise taxpayers contained in
section 11127 of the Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users, which amended section
5061 of the Internal Revenue Code of 1986. Before passage of this law,
most Federal alcohol excise taxpayers paid the tax on a semimonthly
basis. We are amending the applicable regulations on a temporary basis
to incorporate the legislative change allowing quarterly payments. We
also are soliciting comments from all interested parties on the
implementation of this new procedure through a notice of proposed
rulemaking published elsewhere in this issue of the Federal Register.
DATES: Effective Date: This temporary rule is effective on January 1,
2006.
FOR FURTHER INFORMATION CONTACT: For questions concerning quarterly
filing procedures, contact James S. McCoy, National Revenue Center,
Alcohol and Tobacco Tax and Trade Bureau (513-684-2120); for other
questions concerning this document, contact Marjorie Ruhf, Regulations
and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau (202-
927-8202 or [email protected]).
SUPPLEMENTARY INFORMATION:
Background
This temporary rule implements the statutory change contained in
section 11127 of the Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users, Pub. L. 109-59, 119
Stat. 1144 (``the Act''), signed by President Bush on August 10, 2005.
Section 11127 of the Act amended section 5061(d) of the Internal
Revenue Code of 1986 (IRC), 26 U.S.C. 5061(d), by redesignating
paragraphs (4) and (5) as paragraphs (5) and (6), respectively, and by
inserting a new paragraph (4) which allows certain Federal alcohol
excise taxpayers to pay taxes quarterly, rather than on a semimonthly
basis as provided in section 5061(d) before the amendment. This new
provision applies to quarterly tax payment periods beginning on and
after January 1, 2006.
New paragraph (4) of section 5061(d) specifically references taxes
imposed under subparts A, C, and D of part I of subchapter A of chapter
51 of the IRC and section 7652 of the IRC. The taxes imposed under
subparts A, C, and D involve gallonage taxes on distilled spirits (26
U.S.C. 5001), wines (26 U.S.C. 5041), and beer (26 U.S.C. 5051). These
taxes apply to spirits, wines, and beer produced in or imported into
the United States. The Alcohol and Tobacco Tax and Trade Bureau (TTB)
collects these taxes from proprietors of domestic bonded premises
pursuant to regulations contained in 27 CFR parts 19, 24, and 25, and
the Bureau of Customs and Border Protection (CBP) collects these taxes
from importers of these products pursuant to regulations contained in
title 19 of the CFR. Section 7652 (26 U.S.C. 7652) imposes a tax on
spirits, wines, and beer coming to the United States from Puerto Rico
and the U.S. Virgin Islands. TTB collects these taxes from regulated
premises in Puerto Rico under regulations in 27 CFR part 26, and CBP
collects these taxes pursuant to title 19 of the CFR when the products
in question come to the United States from the U.S. Virgin Islands. Tax
payments in connection with transactions that are subject to
regulations administered by CBP are not dealt with in this document.
The provisions of new paragraph (4) apply to ``any taxpayer who
reasonably expects to be liable for not more than $50,000 in taxes * *
* for the calendar year and who was liable for not more than $50,000 in
such taxes in the preceding calendar year.'' In such a case the
taxpayer must pay the tax no later than the 14th day after the last day
of the calendar quarter during which the action giving rise to the tax
(that is, withdrawal, removal, entry, and bringing in from Puerto Rico)
occurs. The statute defines a ``calendar quarter'' as the three-month
period ending on March 31, June 30, September 30, or December 31.
New paragraph (4) also provides that the quarterly tax payment
procedure does not apply to a taxpayer for any remaining portion of the
calendar year following the date on which the aggregate amount of tax
due from the taxpayer exceeds $50,000. If at any point during the year
the taxpayer's liability exceeds $50,000, any tax that has not been
paid on that date becomes due on the 14th day after the last day of the
semimonthly period in which that date falls. Thus, in effect, a
taxpayer whose taxpayments exceed the $50,000 limit during the calendar
year is required to revert to the semimonthly payment procedure for the
remainder of the year.
Basic Interpretative Considerations
Based on a careful reading of the statutory language, TTB has
applied the following considerations in drafting the implementing
regulatory changes set forth in this document.
[[Page 5599]]
1. We note that the longer deferral period allowed under new
paragraph (4) will result in a larger unpaid tax liability, with a
consequent impact on bonds as discussed below in this document. While
we recognize that the intent of the statutory change is to ease the
regulatory burden on small taxpayers, we also must acknowledge the need
to protect the revenue by ensuring that unpaid taxes are covered by
appropriate bond amounts. If a taxpayer otherwise eligible for the new
quarterly payment procedure does not wish to adjust the penal sum of
its bond, that taxpayer should be allowed to continue to make
taxpayments and file returns on a semimonthly basis.
Accordingly, we have decided to treat the quarterly payment
procedure as optional rather than mandatory in the implementing
regulations in order to provide flexibility to those taxpayers. Looking
at section 5061 as a whole, and noting the placement of the semimonthly
payment procedure in paragraph (d)(1) as a provision of general
applicability, we believe this interpretation is permissible because it
makes the semimonthly procedure available to any taxpayer eligible for
deferred payment of taxes, even if the taxpayer is also eligible for
the quarterly payment procedure. The Conference Report of the Committee
of Conference on H.R. 3, Report 109-203 at page 1133, describes the
statutory change as follows: ``[D]omestic producers and importers of
distilled spirits, wine, and beer with excise tax liability of $50,000
or less attributable to such articles in the preceding calendar year
may file returns and pay taxes within 14 days after the end of the
calendar quarter instead of semi-monthly.'' The use of the word ``may''
indicates Congress viewed the continued use of the semimonthly
procedure as an option.
2. Based on the wording of new paragraph (4) and of redesignated
paragraph (5) of section 5061(d), we believe that the ``special rule
for taxes due in September'' properly applies only to semimonthly
return periods and therefore does not apply to quarterly payments under
new paragraph (4). Therefore we have changed the regulations referring
to this payment to restrict its application to taxpayers who file
semimonthly returns.
3. New paragraph (4) extends the quarterly payment option to a
taxpayer who reasonably expects to be liable for not more than $50,000
in alcohol excise taxes during the calendar year and who was liable for
not more than $50,000 in the preceding calendar year. We understand
``taxpayer'' to mean an entity (including an individual, partnership or
corporation) with a single taxpayer identification number. A single
taxpayer may have multiple locations; if so, the combined liability of
all locations and the same taxable commodity must be considered in
determining eligibility for quarterly payments.
4. Since the taxes imposed by 26 U.S.C. 5001, 5041 and 5051 apply
to commodities produced in or imported into the United States, a
taxpayer who has both domestic operations and import transactions must
combine the tax liability on the domestic operations and the imports to
determine eligibility for the quarterly procedure.
5. New paragraph (4) makes no mention of controlled groups.
Accordingly, we believe it is appropriate to take into account only the
taxpayer's own liability in determining eligibility for quarterly
payments, even if the taxpayer is considered to be a member of a
controlled group for other purposes under the IRC. We also note that
there may be some individual taxpayers who are eligible for the
quarterly payment procedure but who are required to pay taxes by
electronic fund transfer (EFT) because they are part of a controlled
group that owes more than $5 million in distilled spirits, wine, or
beer excise taxes per year. See 26 U.S.C. 5061(e). These individual
taxpayers must transmit the quarterly payments via EFT.
6. With regard to the requirement that a taxpayer ``reasonably
expect'' to be liable for not more than $50,000 in a tax year, we
believe it is appropriate to define ``reasonably expect'' in the
implementing regulations to mean both that the taxpayer was not liable
for more than $50,000 in taxes the previous year and that there are no
other existing or anticipated circumstances (such as an increase in
production capacity) that would cause the taxpayer's liability to
increase beyond that limit.
7. If a taxpayer exceeds $50,000 in tax liability during a taxable
year and therefore must revert to the semimonthly payment procedure,
that taxpayer may resume quarterly payments only after a full calendar
year has passed in which the taxpayer's liability did not exceed
$50,000. New taxpayers will be eligible to file quarterly returns in
their first year of business simply if they reasonably expect to owe
less than $50,000 in taxes during that calendar year.
Effect on Bond Amounts
The bond regulations that apply to domestic producers of distilled
spirits and wine at 27 CFR 19.245 and 24.148, and the regulations
covering deferral bonds for proprietors bringing distilled spirits,
wine, and beer to the United States from Puerto Rico at 27 CFR 26.66
(for distilled spirits), 26.67 (for wine) and 26.68 (for beer), require
proprietors to calculate the penal sum of their deferral bonds to cover
the unpaid tax that is chargeable against the bond at any one time. We
do not believe that new paragraph (4) requires any changes to these
regulatory provisions, the terms of which will clearly apply to
taxpayers who use the quarterly payment procedure. We note, however,
that it would be prudent for a taxpayer who uses the quarterly payment
procedure to review the current deferral bond coverage, which in all
likelihood is based on anticipated semimonthly taxes plus a 14-day
deferral period. Such taxpayers may need to increase the deferral
coverage for anticipated quarterly taxes because of the longer three-
month plus 14-day deferral period.
We note that the penal sum amount set by regulation at 27 CFR 25.93
for a brewer's bond is 10 percent of the maximum amount of annual tax
liability, with a minimum amount of $1,000. This 10 percent/minimum
amount provides adequate bond coverage for small brewers who incur less
than $50,000 of annual taxable liability each year and who file on a
semimonthly basis. However, we also note that the average maximum tax
liability per return period for small brewers who pay quarterly will be
approximately 29 percent of their annual liability. Our calculation
indicates that the average maximum liability for a quarter of the year
plus the additional liability incurred during the 14 day period
provided for payment, equals between 2.5 and 3.0 times the amount of
the bond coverage presently required. Thus we conclude that required
bond coverage under Sec. 25.93 is inadequate for small brewers who pay
taxes quarterly. As a result, we are increasing the required bond
coverage for small brewers who pay excise taxes quarterly to 29 percent
of the maximum amount of annual tax liability. Further, such increased
bonding liability will apply only to small brewers who pay excise taxes
quarterly and not to other small brewers who continue to pay
semimonthly.
Effect on Reporting Requirements
In general, proprietors of distilled spirits plants, bonded wine
cellars, and breweries must file monthly reports of operations. Since
proprietors who are small taxpayers may be filing quarterly tax
returns, we considered whether
[[Page 5600]]
these proprietors should file quarterly reports of operations as well.
The beer regulations at 27 CFR 25.297(b) already allow brewers to
file quarterly reports if they produce less than 10,000 barrels of beer
during a calendar year. This level of activity represents a tax
liability of $70,000 per year at the reduced rate of tax for small
brewers, so brewers eligible to file quarterly returns under new
paragraph (4) of section 5061(d) are already eligible to file quarterly
reports under the existing rule. Therefore, we have not made any
changes to the regulations regarding the brewers' report of operations.
The wine regulations at 27 CFR 24.300(g)(2) already allow small
proprietors to file an annual, rather than a monthly, report of
operations if they are eligible to pay taxes on an annual basis and
their total wine to be accounted for in a calendar month does not
exceed 20,000 gallons. We believe it is appropriate to allow wine
premises proprietors to file quarterly reports of operations if they
are eligible to make quarterly tax payments. Accordingly, we have
revised paragraph (g) of Sec. 24.300 to give quarterly taxpayers the
option of filing quarterly reports of operations. However, in this
revised text we have set a maximum activity level of 60,000 gallons of
wine to be accounted for in a calendar quarter in order to ensure that
proprietors with very large production or storage capacity who pay
little or no tax will continue to file monthly reports of operations.
We are also making a corresponding conforming change to 27 CFR 24.313,
Inventory records.
For distilled spirits plant proprietors, there are four operational
report forms, and there is no provision in the TTB regulations
specifying a reporting interval less frequent than monthly. We do not
believe this document is the appropriate vehicle for making a change in
the timing for reports of operations. Because of the short time
available before this temporary rule takes effect, we will defer
consideration of adoption of a quarterly report of operations for
distilled spirits plant proprietors.
Other Considerations
The TTB regulations include provisions that allow TTB to require
prepayment of taxes or to make a jeopardy assessment of taxes if we
believe such action is necessary to protect the revenue. We have
reviewed those prepayment and jeopardy assessment provisions and have
determined that no changes to them are needed in order for them to
apply to taxpayers who pay on a quarterly basis.
We also considered whether to require the filing of a notice of
intent by a taxpayer who chooses to make quarterly tax payments before
the taxpayer begins the procedure. Since we can determine from records
we already have that a taxpayer appears to be eligible for the
quarterly payment procedure (in particular, that the taxpayer's
liability for the previous calendar year did not exceed $50,000), and
because advance notice would serve no other useful purpose, we have
decided not to require advance notice.
Discussion of Regulatory Amendments
In addition to the regulatory changes discussed above, we are
including definitions of ``reasonably expects'' and ``taxpayer'' in the
amended provisions of parts 19, 24, 25, and 26. We are also adding a
definition of ``calendar quarter and quarterly'' to the definitions
section of parts 19, 24, and 26. The following additional points are
noted regarding the regulatory amendments contained in this document:
Part 19
We are revising Sec. 19.565 and amending Sec. Sec. 19.522,
19.523, and 19.703 in part to accommodate the quarterly return
procedure. In addition to the removal of the word ``semimonthly'' from
the existing text, the revision of Sec. 19.565 includes a
reorganization of the text for editorial purposes.
Part 24
We are amending Sec. 24.271, which prescribes the return periods
available for proprietors who have deferral bonds, to accommodate the
quarterly procedure.
Since 1990, part 24 has included Sec. 24.273, which allows certain
wine premises proprietors to file annual tax returns and pay taxes
annually. Because the wine bond's coverage is split between operations
coverage and deferral coverage, we were not limited by the existing
language of section 5061, which specified semimonthly return periods
for removals under a bond for deferred payment of taxes. Thus, we were
able administratively to allow an annual return period for small
proprietors who had no bond for deferred payment of taxes and who owed
less than $1,000 per calendar year in taxes. New paragraph (4) of
section 5061(d) does not affect the right of eligible proprietors to
continue to pay taxes on an annual basis under this regulation.
However, we are revising Sec. 24.273 to show that it is an exception
to both semimonthly and quarterly return filing, and we are
reorganizing the section for clarity.
Part 25
We are amending Sec. 25.93 to change the bond penal sum for
quarterly taxpayers, as discussed above. We are also amending
Sec. Sec. 25.164 and 25.164a, which cover tax return filing rules for
brewers, to reflect the adoption of the quarterly return procedure.
Finally, we are amending Sec. 25.166 by replacing the reference to
``semimonthly'' returns.
Part 26
We are amending Sec. 26.112, which concerns returns for taxes
imposed under section 7652, to incorporate the quarterly taxpayment
procedure.
Part 70
We are amending paragraph (a) of Sec. 70.412, which summarizes
alcohol tax return filing procedural rules, to include a reference to
quarterly returns.
Temporary Rule
Based on the January 1, 2006, effective date of the statutory
change to section 11127, TTB believes that proper administration and
enforcement of those requirements necessitates the immediate adoption
of implementing regulations as a temporary rule pursuant to 5 U.S.C.
553(b)(A) and (B), and 5 U.S.C. 553(d)(1), (2), and (3). TTB believes
that such implementing action ensures that affected industry members
will have timely knowledge of the regulatory requirements that will
enable them to obtain the benefits of the statutory change.
Public Participation
To submit comments on these regulations, please refer to the notice
of proposed rulemaking on this subject published in the Proposed Rules
section of this issue of the Federal Register.
Regulatory Flexibility Act
Because no notice of proposed rulemaking is required for temporary
rules, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601
et seq.) do not apply. Pursuant to section 7805(f) of the Internal
Revenue Code, we will submit this temporary rule to the Chief Counsel
for Advocacy of the Small Business Administration for comment on the
impact of the temporary regulations.
Executive Order 12866
It has been determined that this temporary rule is not a
significant regulatory action as defined in E.O. 12866. Therefore, a
regulatory assessment is not necessary.
[[Page 5601]]
Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995, no persons are required
to respond to a collection of information unless it displays a valid
Office of Management and Budget (OMB) control number. The collections
of information contained in the regulations amended by this temporary
rule have been previously reviewed and approved by OMB in accordance
with the Paperwork Reduction Act of 1995 under control numbers 1513-
0053, 1513-0083, and 1513-0090. There is no new collection of
information imposed by this Treasury decision. There is a decrease in
the reporting or recordkeeping burden resulting from the change from
semimonthly to quarterly tax return periods for certain small
taxpayers.
Inapplicability of Prior Notice and Comment and Delayed Effective Date
Procedures
It has been determined that prior notice and comment procedures are
not required pursuant to 5 U.S.C. 553(b)(A), and a delayed effective
date is not required pursuant to 5 U.S.C. 553(d)(2).
Drafting Information
Charles N. Bacon, Daniel J. Hiland, Ramona Hupp, and Marjorie D.
Ruhf of the Regulations and Rulings Division, Alcohol and Tobacco Tax
and Trade Bureau, drafted this document.
List of Subjects
27 CFR Part 19
Administrative practice and procedure, Alcohol and alcoholic
beverages, Authority delegations (Government agencies), Caribbean Basin
Initiative, Chemicals, Claims, Customs duties and inspection,
Electronic funds transfers, Excise taxes, Exports, Gasohol, Imports,
Labeling, Liquors, Packaging and containers, Puerto Rico, Reporting and
recordkeeping requirements, Research, Security measures, Spices and
flavorings, Stills, Surety bonds, transportation, Vinegar, Virgin
Islands, Warehouses, Wine.
27 CFR Part 24
Administrative practice and procedure, Claims, Electronic fund
transfers, Excise taxes, Exports, Food additives, Fruit juices,
Labeling, Liquors, Packaging and containers, Reporting and
recordkeeping requirements, Research, Scientific equipment, Spices and
flavoring, Surety bonds, Vinegar, Warehouses, Wine.
27 CFR Part 25
Administrative practice and procedure, Beer, Claims, Electronic
funds transfers, Excise taxes, Exports, Labeling, Packaging and
containers, Reporting and recordkeeping requirements, Research, Surety
bonds.
27 CFR Part 26
Administrative practice and procedure, Alcohol and alcoholic
beverages, Caribbean Basin Initiative, Claims, Customs duties and
inspection, Electronic funds transfers, Excise taxes, Packaging and
containers, Puerto Rico, Reporting and recordkeeping requirements,
Surety bonds, Virgin Islands, Warehouses.
27 CFR Part 70
Administrative practice and procedure, Claims, Excise taxes,
Freedom of information, Law enforcement, Penalties, Reporting and
recordkeeping requirements, Surety bonds.
Amendments to the Regulations
For the reasons discussed in the preamble, TTB amends 27 CFR parts
19, 24, 25, 26 and 70 as follows:
PART 19--DISTILLED SPIRITS PLANTS
0
1. The authority citation for part 19 continues to read as follows:
Authority: 19 U.S.C. 81c, 1311; 26 U.S.C. 5001, 5002, 5004-5006,
5008, 5010, 5041, 5061, 5062, 5066, 5081, 5101, 5111-5113, 5142,
5143, 5146, 5148, 5171-5173, 5175, 5176, 5178-5181, 5201-5204, 5206,
5207, 5211-5215, 5221-5223, 5231, 5232, 5235, 5236, 5241-5243, 5271,
5273, 5301, 5311-5313, 5362, 5370, 5373, 5501-5505, 5551-5555, 5559,
5561, 5562, 5601, 5612, 5682, 6001, 6065, 6109, 6302, 6311, 6676,
6806, 7011, 7510, 7805; 31 U.S.C. 9301, 9303, 9304, 9306.
0
2. Section 19.11 is amended by adding in appropriate alphabetical order
a definition of ``calendar quarter and quarterly'' to read as follows:
Sec. 19.11 Meaning of terms.
* * * * *
Calendar quarter and quarterly. These terms refer to the three-
month period ending on March 31, June 30, September 30, or December 31.
* * * * *
0
3. Section 19.522 is amending by revising paragraph (a) to read as
follows:
Sec. 19.522 Taxes to be collected by returns.
(a)(1) Deferred payment of taxes. The tax on spirits to be
withdrawn from bond for deferred payment of tax shall be paid pursuant
to a return on Form 5000.24, Excise Tax Return. The return, Form
5000.24, shall be executed and filed for each return period
notwithstanding that no tax is due for payment for such period. The
proprietor of each bonded premises shall include, for payment, on his
return on Form 5000.24, the full amount of distilled spirits tax
determined in respect of all spirits released for withdrawal from the
bonded premises on determination of tax during the period covered by
the return (except spirits on which tax has been prepaid).
(2) Return periods--(i) Definitions. For purposes of this section,
the following terms have the meanings indicated:
Reasonably expects. When used with reference to a taxpayer,
reasonably expects means the taxpayer was not liable for more than
$50,000 in taxes the previous year and there is no other existing or
anticipated circumstance known to the taxpayer (such as an increase in
production capacity) that would cause the taxpayer's liability to
increase beyond that limit.
Taxpayer. A taxpayer is a person who is liable for excise tax
imposed with respect to distilled spirits by 26 U.S.C. 5001 and 7652
under the same Employer Identification Number as defined in 26 CFR
301.7701-12.
(ii) Semimonthly return period. Except in the case of a taxpayer
who qualifies for, and chooses to use, quarterly return periods as
provided in paragraph (b)(3) of this section, all taxpayers must use
semimonthly return periods for deferred payment of tax. The semimonthly
return periods shall run from the 1st day through the 15th day of each
month, and from the 16th day through the last day of each month, except
as otherwise provided in Sec. 19.523(c).
(iii) Quarterly return period. Effective January 1, 2006, a
taxpayer who reasonably expects to be liable for not more than $50,000
in taxes with respect to distilled spirits imposed by 26 U.S.C. 5001
and 7652 for the current calendar year, and who was liable for not more
than $50,000 in such taxes in the preceding calendar year, may choose
to use a quarterly return period. In such a case the last day for
payment of tax and filing of the return will be the 14th day after the
last day of the calendar quarter. However, the taxpayer may not use the
quarterly return period procedure for any portion of the calendar year
following the first date on which the aggregate amount of tax due from
the taxpayer during the calendar year exceeds $50,000, and any tax
which has not been paid on that date will be due on the 14th day after
the last day of the semimonthly period in which that date occurs.
* * * * *
[[Page 5602]]
0
4. In Sec. 19.523, the first sentence of paragraph (a) is amended by
removing the word ``Where'' and adding, in its place, the words
``Except when payment is pursuant to a quarterly return as provided in
paragraph (d) of this section, where'' and a new paragraph (d) is added
to read as follows:
Sec. 19.523 Time for filing returns.
* * * * *
(d) Payment pursuant to quarterly return. Where the proprietor of
bonded premises has withdrawn spirits from such premises on
determination and before payment of tax, and the proprietor uses
quarterly return periods as provided in Sec. 19.522(b)(3), the
proprietor shall file a quarterly tax return covering such spirits on
Form 5000.24, and remittance, as required by Sec. 19.525, not later
than the 14th day after the last day of the quarterly return period. If
the due date falls on a Saturday, Sunday, or legal holiday, the return
and remittance shall be due on the immediately preceding day which is
not a Saturday, Sunday, or legal holiday.
0
5. Section 19.565 is revised to read as follows:
Sec. 19.565 Shortages of bottled distilled spirits.
(a) Determination of shortage. Unexplained shortages shall be
determined by comparing the spirits recorded to be on hand with the
results of the quantitative determination of the spirits found to be on
hand by actual count during the physical inventory required by Sec.
19.402. When the recorded quantity is greater than the quantity
determined by the physical inventory, the difference is an unexplained
shortage. The records shall be adjusted to reflect the physical
inventory.
(b) Payment of tax on shortage. An unexplained shortage of bottled
distilled spirits shall be taxpaid:
(1) Immediately on a prepayment return on Form 5000.24, or
(2) On the return on Form 5000.24 for the return period during
which the shortage was ascertained.
(Sec. 201, Pub. L. 85-859, 72 Stat. 1323, as amended (26 U.S.C.
5008))
0
6. In Sec. 19.703, paragraph (a) is amended by removing the words
``semimonthly tax return'' and adding, in their place, the words ``next
deferred payment of tax''.
PART 24--WINE
0
7. The authority citation for part 24 continues to read as follows:
Authority: 5 U.S.C. 552(a); 26 U.S.C. 5001, 5008, 5041, 5042,
5044, 5061, 5062, 5081, 5111-5113, 5121, 5122, 5142, 5143, 5148,
5173, 5206, 5214, 5215, 5351, 5353, 5354, 5356, 5357, 5361, 5362,
5364-5373, 5381-5388, 5391, 5392, 5511, 5551, 5552, 5661, 5662,
5684, 6065, 6091, 6109, 6301, 6302, 6311, 6651, 6676, 7011, 7302,
7342, 7502, 7503, 7606, 7805, 7851; 31 U.S.C. 9301, 9303, 9304,
9306.
0
8. Section 24.10 is amended by adding in appropriate alphabetical order
a definition of ``calendar quarter and quarterly'' to read as follows:
Sec. 24.10 Meaning of terms.
* * * * *
Calendar quarter and quarterly. These terms refer to the three-
month period ending on March 31, June 30, September 30, or December 31.
* * * * *
0
9. Section 24.271 is amended by revising the section heading and
paragraphs (a) and (b) and the heading of paragraph (c), and by adding
headings to paragraphs (c)(1) and (c)(1)(i), to read as follows:
Sec. 24.271 Payment of tax by return with remittance.
(a) General. The tax on wine is paid by an Excise Tax Return, Form
5000.24, which is filed with remittance (check, cash, or money order)
for the full amount of tax due. Prepayments of tax on wine during the
period covered by the return are shown separately on the Excise Tax
Return form. If no tax is due for the return period, the filing of a
return is not required.
(b) Return periods and due dates. (1) Return periods. (i)
Definitions. For purposes of this section, the following terms have the
meanings indicated:
Reasonably expects. When used with reference to a taxpayer,
reasonably expects means the taxpayer was not liable for more than
$50,000 in taxes the previous year and there is no other existing or
anticipated circumstance known to the taxpayer (such as an increase in
production capacity) that would cause the taxpayer's liability to
increase beyond that limit.
Taxpayer. A taxpayer is a person who is liable for excise tax
imposed with respect to wine by 26 U.S.C. 5041 and 7652 under the same
Employer Identification Number as defined in 26 CFR 301.7701-12.
(ii) Semimonthly return period. Except in the case of a taxpayer
who qualifies for, and chooses to use, the annual return period as
provided in Sec. 24.273 or the quarterly return period as provided in
paragraph (b)(1)(iii) of this section, all taxpayers who have filed a
bond for deferred payment of taxes must use semimonthly return periods.
The semimonthly return periods shall run from the 1st day through the
15th day of each month, and from the 16th day through the last day of
each month, except as otherwise provided in paragraph (c) of this
section.
(iii) Quarterly return period. Effective January 1, 2006, a
taxpayer who has filed a bond for deferred payment of taxes, who
reasonably expects to be liable for not more than $50,000 in taxes with
respect to wine imposed by 26 U.S.C. 5041 and 7652 for the current
calendar year, and who was liable for not more than $50,000 in such
taxes in the preceding calendar year, may choose to use a quarterly
return period. In such a case the last day for payment of tax and
filing the return will be the 14th day after the last day of the
calendar quarter. However, the taxpayer may not use the quarterly
return period procedure for any portion of the calendar year following
the first date on which the aggregate amount of tax due from the
taxpayer during the calendar year exceeds $50,000, and any tax which
has not been paid on that date will be due on the 14th day after the
last day of the semimonthly period in which that date occurs.
(2) Semimonthly and quarterly tax return due dates. The taxpayer
shall file the semimonthly or quarterly return, with remittance, for
each return period not later than the 14th day after the last day of
the return period. If the due date falls on a Saturday, Sunday, or
legal holiday, the return and remittance shall be due on the
immediately preceding day which is not a Saturday, Sunday, or legal
holiday, except as otherwise provided in paragraph (c)(3) of this
section.
(c) Special September rule for taxes due by semimonthly return. (1)
Division of second semimonthly period. (i) General. * * *
* * * * *
0
10. Section 24.273 is revised to read as follows:
Sec. 24.273 Exception to filing semimonthly or quarterly tax returns.
(a) Eligibility for annual filing. A proprietor may file the Excise
Tax Return, Form 5000.24, and remittance, within 30 days after the end
of the calendar year instead of semimonthly or quarterly as provided in
Sec. 24.271, if the proprietor has not given a bond for deferred
payment of wine excise tax and if the proprietor:
(1) Paid wine excise taxes in an amount less than $1,000 during the
previous calendar year, or
(2) Is the proprietor of a newly established bonded wine premises
and expects to pay less than $1,000 in wine
[[Page 5603]]
excise taxes before the end of the calendar year.
(b) Loss of eligibility for annual filing. (1) If before the close
of the current calendar year the wine excise tax owed will exceed the
amount of the coverage under the proprietor's operations bond for wine
removed from bonded wine premises on which tax has been determined but
not paid, the proprietor will file an Excise Tax Return with the total
remittance on the date the wine excise tax owed will exceed such amount
and file an aggregate Excise Tax Return within 30 days after the close
of the calendar year showing the total wine tax liability for such
calendar year. If before the close of the current calendar year the
wine excise tax liability (including any amounts paid or owed) equals
$1,000 or more, the proprietor will commence semimonthly or quarterly
filing of the wine Excise Tax Returns and making of payments as
required by Sec. 24.271.
(2) If there is a jeopardy to the revenue, the appropriate TTB
officer may deny the exceptions to filing tax returns provided in this
section at any time.
(c) Other rules apply. A proprietor who files under this section is
subject to the failure to pay or file provisions of Sec. 24.274.
0
11. Section 24.300 is amended by revising paragraph (g) to read as
follows:
Sec. 24.300 General.
* * * * *
(g) F 5120.17, Report of Bonded Wine Premises Operations. A
proprietor who conducts bonded wine premises operations must complete
and submit a F 5120.17 in accordance with the instructions on the form.
(1) Monthly report. The proprietor must submit F 5120.17 on a
monthly basis, except as otherwise provided in paragraph (g)(2) or
(g)(3) of this section.
(2) Quarterly or annual report. (i) General. A proprietor may file
a completed F 5120.17 on a quarterly or annual basis if the proprietor
meets the criteria in paragraph (g)(2)(ii) or (g)(2)(iii) of this
section. To begin the quarterly or annual filing of a report of bonded
wine premises operations, a proprietor must state the intent to do so
in the ``Remarks'' section when filing the prior month's F 5120.17. A
proprietor who is commencing operations during a calendar year and
expects to meet these criteria may use a letter notice to the
appropriate TTB officer and file F 5120.17 quarterly or annually for
the remaining portion of the calendar year. If a proprietor becomes
ineligible for quarterly or annual filing by exceeding the applicable
tax liability or activity limit, the proprietor must file F 5120.17 for
that month and for all subsequent months of the calendar year. If there
is a jeopardy to the revenue, the appropriate TTB officer may at any
time require any proprietor otherwise eligible for quarterly or annual
filing of a report of bonded wine premises operations to file such
report monthly.
(ii) Eligibility for quarterly report filing. In order to be
eligible to file F 5120.17 on a quarterly basis, the proprietor must be
filing quarterly tax returns under Sec. 24.271, and the proprietor
must not expect the sum of the bulk and bottled wine to be accounted
for in all tax classes to exceed 60,000 gallons for any one quarter
during the calendar year when adding up the bulk and bottled wine on
hand at the beginning of the month, bulk wine produced by fermentation,
sweetening, blending, amelioration or addition of wine spirits, bulk
wine bottled, bulk and bottled wine received in bond, taxpaid wine
returned to bond, bottled wine dumped to bulk, inventory gains, and any
activity written in the untitled lines of the report form which
increases the amount of wine to be accounted for.
(iii) Eligibility for annual report filing. In order to be eligible
to file F 5120.17 on an annual basis, the proprietor must be filing
annual tax returns under Sec. 24.273, and the proprietor must not
expect the sum of the bulk and bottled wine to be accounted for in all
tax classes to exceed 20,000 gallons for any one month during the
calendar year when adding up the bulk and bottled wine on hand at the
beginning of the month, bulk wine produced by fermentation, sweetening,
blending, amelioration or addition of wine spirits, bulk wine bottled,
bulk and bottled wine received in bond, taxpaid wine returned to bond,
bottled wine dumped to bulk, inventory gains, and any activity written
in the untitled lines of the report form which increases the amount of
wine to be accounted for.
(3) No reportable activity. A proprietor who files a monthly F
5120.17 and does not expect an inventory change or any reportable
operations to be conducted in a subsequent month or months may attach
to the filed F 5120.17 a statement that, until a change in the
inventory or a reportable operation occurs, a F 5120.17 will not be
filed.
Sec. 24.313 [Amended]
0
12. Section 24.313 is amended by removing the words ``monthly reports''
in the first sentence and adding, in their place, the words ``monthly
or quarterly reports'' and by adding a new sentence following the
second sentence, to read as follows: ``However, proprietors who file
quarterly reports must select an annual inventory period that begins on
the first day of a calendar quarter.''
PART 25--BEER
0
13. The authority citation for part 25 continues to read as follows:
Authority: 19 U.S.C. 81c; 26 U.S.C. 5002, 5051-5054, 5056, 5061,
5091, 5111, 5113, 5142, 5143, 5146, 5148, 5222, 5401-5403, 5411-
5417, 5551, 5552, 5555, 5556, 5671, 5673, 5684, 6011, 6061, 6065,
6091, 6109, 6151, 6301, 6302, 6311, 6313, 6402, 6651, 6656, 6676,
6806, 7011, 7342, 7606, 7805; 31 U.S.C. 9301, 9303-9308.
0
14. Section 25.93 is amended by revising paragraph (a) to read as
follows:
Sec. 25.93 Penal sum of bond.
(a)(1) Brewers filing semimonthly tax returns. For brewers filing
tax returns and remitting taxes semimonthly under Sec. 25.164(c)(2),
the penal sum of the brewers bond must be equal to 10 percent of the
maximum amount of tax calculated at the rates prescribed by law which
the brewer will become liable to pay during a calendar year during the
period of the bond on beer:
(i) Removed for transfer to the brewery from other breweries owned
by the same brewer;
(ii) Removed without payment of tax for export or for use as
supplies on vessels and aircraft;
(iii) Removed without payment of tax for use in research,
development, or testing; and
(iv) Removed for consumption or sale.
(2) Brewers filing quarterly tax returns. For brewers filing tax
returns and remitting taxes quarterly under Sec. 25.164(c)(3), the
penal sum of the brewers bond must be equal to 29 percent of the
maximum amount of tax calculated at the rates prescribed by law which
the brewer will become liable to pay during a calendar year during the
period of the bond on beer:
(i) Removed for transfer to the brewery from other breweries owned
by the same brewer;
(ii) Removed without payment of tax for export or for use as
supplies on vessels and aircraft;
(iii) Removed without payment of tax for use in research,
development, or testing; and
(iv) Removed for consumption or sale.
* * * * *
0
15. In Sec. 25.164:
0
a. The section heading is revised;
0
b. The first and second sentences of paragraph (a) are amended by
removing the word ``semimonthly'';
[[Page 5604]]
0
c. Paragraphs (c) and (d) are revised;
0
d. The first sentence of paragraph (e)(1) is amended by adding the
words ``or quarterly'' after ``semimonthly''; and
0
e. Paragraph (e)(2) is amended by adding the words ``or quarterly''
after ``semimonthly'' wherever it appears.
The revisions read as follows:
Sec. 25.164 Quarterly and semimonthly returns.
* * * * *
(c) Return periods.
(1) Definitions. For purposes of this section, the following terms
have the meanings indicated:
Reasonably expects. When used with reference to a taxpayer,
reasonably expects means the taxpayer was not liable for more than
$50,000 in taxes the previous year and there is no other existing or
anticipated circumstance known to the taxpayer (such as an increase in
production capacity) that would cause the taxpayer's liability to
increase beyond that limit.
Taxpayer. A taxpayer is a person who is liable for excise tax
imposed with respect to beer by 26 U.S.C. 5051 and 7652 under the same
Employer Identification Number as defined in 26 CFR 301.7701-12.
(2) Semimonthly return period. Except in the case of a taxpayer who
qualifies for, and chooses to use, quarterly return periods as provided
in paragraph (c)(3) of this section, all taxpayers must use semimonthly
return periods for deferred payment of tax. The semimonthly return
periods shall run from the brewer's business day beginning on the first
day of each month through the brewer's business day beginning on the
15th day of that month, and from the brewer's business day beginning on
the 16th day of the month through the brewer's business day beginning
on the last day of the month, except as otherwise provided in Sec.
25.164a.
(3) Quarterly return period. Effective January 1, 2006, a taxpayer
who reasonably expects to be liable for not more than $50,000 in taxes
with respect to beer imposed by 26 U.S.C. 5051 and 7652 for the current
calendar year, and who was liable for not more than $50,000 in such
taxes in the preceding calendar year, may choose to use a quarterly
return period. In such a case the last day for payment of tax and
filing of the return will be the 14th day after the last day of the
calendar quarter. However, the taxpayer may not use the quarterly
return period procedure for any portion of the calendar year following
the first date on which the aggregate amount of tax due from the
taxpayer during the calendar year exceeds $50,000, and any tax which
has not been paid on that date will be due on the 14th day after the
last day of the semimonthly period in which that date occurs.
(d) Time for filing returns and paying tax. Except as otherwise
provided in Sec. 25.164a for semimonthly tax returns, the brewer shall
file the tax return, Form 5000.24, for each return period, and make
remittance as required by this section, not later than the 14th day
after the last day of the return period. If the due date falls on a
Saturday, Sunday, or legal holiday, the return and remittance shall be
due on the immediately preceding day which is not a Saturday, Sunday,
or legal holiday, except as otherwise provided in Sec. 25.164a(c).
* * * * *
0
16. Section 25.164a is amended by revising the section heading and
paragraph (a)(1) to read as follows:
Sec. 25.164a Special September rule for taxes due by semimonthly
return.
(a) Division of second semimonthly period. (1) General. Except as
otherwise provided in paragraph (a)(2) of this section, the second
semimonthly period for the month of September shall be divided into two
payment periods, from the 16th day through the 26th day, and from the
27th day through the 30th day. The brewer shall file a return, Form
5000.24, and make remittance, for the period September 16-26, no later
than September 29. The brewer shall file a return on Form 5000.24, and
make remittance, for the period September 27-30, no later than October
14.
* * * * *
0
17. In Sec. 25.166, the first sentence of paragraph (a) is amended by
removing the words ``semimonthly return'' and adding, in their place,
the words ``return for deferred payment of tax''.
PART 26--LIQUORS AND ARTICLES FROM PUERTO RICO AND THE VIRGIN
ISLANDS
0
18. The authority citation for part 26 continues to read as follows:
Authority: 19 U.S.C. 81c; 26 U.S.C. 5001, 5007, 5008, 5010,
5041, 5051, 5061, 5081, 5111, 5112, 5114, 5121, 5122, 5124, 5131-
5134, 5141, 5146, 5148, 5207, 5232, 5271, 5276, 5301, 5314, 5555,
6001, 6301, 6302, 6804, 7101, 7102, 7651, 7652, 7805; 27 U.S.C. 203,
205; 31 U.S.C. 9301, 9303, 9304, 9306.
0
19. Section 26.11 is amended by adding in appropriate alphabetical
order a definition of ``calendar quarter and quarterly'' to read as
follows:
Sec. 26.11 Meaning of terms.
* * * * *
Calendar quarter and quarterly. These terms refer to the three-
month period ending on March 31, June 30, September 30, or December 31.
* * * * *
0
20. Section 26.112 is amended by revising the section heading and
paragraph (b) and the heading of paragraph (d), and by adding a heading
to paragraph (d)(1) to read as follows:
Sec. 26.112 Returns for deferred payment of tax.
* * * * *
(b) Return periods. (1) Definitions. For purposes of this section,
the following terms have the meanings indicated:
Reasonably expects. When used with reference to a taxpayer,
reasonably expects means the taxpayer was not liable for more than
$50,000 in taxes the previous year and there is no other existing or
anticipated circumstance known to the taxpayer (such as an increase in
production capacity) that would cause the taxpayer's liability to
increase beyond that limit.
Taxpayer. A taxpayer is a person who is liable for excise tax under
26 U.S.C. 7652 under the same Employer Identification Number as defined
in 26 CFR 301.7701-12.
(2) Semimonthly return period. Except in the case of a taxpayer who
qualifies for, and chooses to use, quarterly return periods as provided
in paragraph (b)(3) of this section, all taxpayers must use semimonthly
return periods for deferred payment of tax. The semimonthly return
periods shall run from the 1st day through the 15th day of each month,
and from the 16th day through the last day of each month, except as
otherwise provided in paragraph (e) of this section.
(3) Quarterly return period. Effective January 1, 2006, a taxpayer
who reasonably expects to be liable for not more than $50,000 in taxes
imposed by 26 U.S.C. 7652 for the current calendar year, and who was
liable for not more than $50,000 in such taxes in the preceding
calendar year, may choose to use a quarterly return period. In such a
case the last day for payment of tax and filing the return will be the
14th day after the last day of the calendar quarter. However, the
taxpayer may not use the quarterly return period procedure for any
portion of the calendar year following the first date on which the
aggregate amount of tax due from the taxpayer during the calendar year
exceeds $50,000, and any tax which has not been paid on that date will
be due on the 14th day after the last day of semimonthly period in
which that date occurs.
* * * * *
[[Page 5605]]
(d) Special September rule for taxes due by semimonthly return. (1)
General. * * *
* * * * *
PART 70--PROCEDURE AND ADMINISTRATION
0
21. The authority citation for part 70 continues to read as follows:
Authority: 5 U.S.C. 301 and 552; 26 U.S.C. 4181, 4182, 5146,
5203, 5207, 5275, 5367, 5415, 5504, 5555, 5684(a), 5741, 5761(b),
5802, 6020, 6021, 6064, 6102, 6155, 6159, 6201, 6203, 6204, 6301,
6303, 6311, 6313, 6314, 6321, 6323, 6325, 6326, 6331-6343, 6401-
6404, 6407, 6416, 6423, 6501-6503, 6511, 6513, 6514, 6532, 6601,
6602, 6611, 6621, 6622, 6651, 6653, 6656-6658, 6665, 6671, 6672,
6701, 6723, 6801, 6862, 6863, 6901, 7011, 7101, 7102, 7121, 7122,
7207, 7209, 7214, 7304, 7401, 7403, 7406, 7423, 7424, 7425, 7426,
7429, 7430, 7432, 7502, 7503, 7505, 7506, 7513, 7601-7606, 7608-
7610, 7622, 7623, 7653, 7805.
0
22. In Sec. 70.412, the second sentence of paragraph (a) is revised to
read as follows:
Sec. 70.412 Excise taxes.
(a) Collection. * * * If the person responsible for paying the
taxes has filed a proper bond to defer payment, such person may be
eligible to file semimonthly or quarterly returns, with proper
remittances, to cover the taxes incurred on distilled spirits, wines,
and beer during the semimonthly or quarterly period. * * *
* * * * *
Signed: December 13, 2005.
John J. Manfreda,
Administrator.
Approved: December 23, 2005.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade, and Tariff Policy).
[FR Doc. 06-981 Filed 2-1-06; 8:45 am]
BILLING CODE 4810-31-P