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“Single taxpayer” rules excise tax on beer, wine, distilled spirits

TTB guidance: “Single taxpayer” rules excise tax

The U.S. Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) issued guidance concerning the “single taxpayer” rules for excise tax credits and reduced rates on beer, wine, and distilled spirits produced in the United States.

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TTB Industry Circular 2018-5 (September 14, 2018) responds to questions regarding the application of the “single taxpayer” rules of the new U.S. tax law (Pub. L. No. 115-97, enacted December 22, 2017). 

The TTB guidance addresses certain situations when two or more domestic industry members would be treated as a “single taxpayer” and how this affects their eligibility to claim the credits or reduced rates available under the new tax law on the beer, wine, or distilled spirits they produce and remove subject to tax.  

Background

The new U.S. tax law amended the rules for excise taxes on beer, wine, and distilled spirits, and included tax credits and reduced excise tax rates on certain limited quantities of products removed from breweries, bonded wine cellars (including bonded wineries), and distilled spirits plants in the United States during calendar years 2018 and 2019.

The new tax law provides that two or more entities (whether or not under common control) that produce products such as beer or distilled spirits under a similar brand, license, franchise, or other arrangement are to be treated as a single taxpayer for the reduced rates—the “single taxpayer” rules.

The credits and reduced rates generally apply with respect to the first products removed subject to tax from these facilities in the calendar year—subject to certain limitations including the “single taxpayer” rules that apply to domestic producers of beer, wine, and distilled spirits. 

Application of the “single taxpayer” rules

According to the TTB industry circular, under the “single taxpayer” rules, “two or more entities” are “treated as a single taxpayer” when they “produce [beer, wine, or distilled spirits] marketed under a similar brand, license, franchise, or other arrangement,” even if those entities are not under common control.  

Thus, similar to “controlled group” rules—i.e., rules to aggregate the production of commonly controlled entities for the purpose of determining eligibility for credits or reduced rates among the commonly controlled entities—the “single taxpayer” rules aggregate the production of multiple entities under various arrangements for determining eligibility for credits and reduced rates under the new tax law.   

The TTB industry circular notes that under the new tax law, each producer is eligible for a credit or reduced rate on only a fixed quantity of products, and the “single taxpayer” rules prevent producers from obtaining the credits or reduced rates on products beyond that quantity by contracting out the production of their products to other producers.  

Examples are provided to illustrate the basic application of the “single taxpayer” rules.

 

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

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