TTB Announces Guidance on New Tax Filing and Bond Requirements as PATH Act Becomes Effective

The Trade and Tax Bureau recently published Industry Circular 2016-2, providing guidance for a recent change to tax and bond requirements, which became effective on January 1, 2017.

Late in 2015, the PATH Act was signed into law. Among the provisions of the law were amendments affecting tax and bond requirements for licensed beverage alcohol producers. These provisions only became effective at the beginning of 2017.

Under the new PATH Act rules, licensed producers who 1) reasonably expect to pay less than $1,000 in federal excise taxes over the present calendar year, and 2) actually paid less than $1,000 in federal excise taxes the previous calendar year, are eligible to remit their federal taxes on an annual frequency. As the Industry Circular indicates, tax payers who are eligible for this frequency, and decide to take advantage of it, do not need to notify the TTB prior to filing, but must indicate this new frequency on their tax returns. Non-eligible parties must still file either on a quarterly or semi-monthly frequency.

Also changing under the PATH Act is an exemption to federal bond requirements for licensed producers who 1) reasonably expect to pay less than $50,000 in annual federal excise taxes, and 2) actually paid less than $50,000 in annual federal excise taxes. Eligible parties must notify the TTB prior to taking advantage of this provision, by indicating this on their TTB application. New applicants can indicate this on their initial application; whereas existing licensees must wait until their next renewal application, and can only apply for the exemption after they completely match the eligibility requirements. More details are on the Industry Circular.

The TTB further announced changes to the federal definition of hard cider under the PATH Act. Starting January 1, 2017, wines that meet the definition of "hard cider," and are therefore eligible for the lower tax rate for hard ciders, can now have an ABV of up to (but not equal to) 8.5%, an allowable carbonation of .64 gram per hundred mL, and can now be made from pears as well as apples (but only those fruits). Further guidance on how to comply with these standards is forthcoming from the TTB.
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