TTB Drawback Frequently Asked Questions

What is TTB Drawback?

TTB drawback is a federal excise tax benefit for producers of “nonbeverage” products made using taxpaid distilled spirits. TTB provides a refund on a portion of the excise tax paid on distilled spirits used in the products. The drawback rate is $1.00 less than the excise tax rate paid on the distilled spirits.

What products qualify for “Nonbeverage” Drawback?

In order to qualify as “nonbeverage”, the products must meet two criteria. First, they must be “unfit for beverage” purposes. Second, they must fall within one of the eligible product classes.

“Unfit for beverage purposes” means that the average person would not mistake the product for an alcoholic beverage. Formula approval is required to make this determination.

There are six eligible categories of products that qualify. The six classes are medicines, medicinal preparations, food products, flavors, flavoring extracts, and perfumes. These categories are exclusive.

How do I know if I am eligible to claim drawback?

To qualify, you must meet the following basic requirements:

Purchase taxpaid undenatured alcohol for manufacturing nonbeverage products;

Obtain formula approval from TTB’s Nonbeverage Product Laboratory.

How do I register as an MNBP?

TTB does not require you to obtain a permit, but you must register with TTB annually. You are deemed registered as an MNBP upon filing your first drawback claim of the year, along with supporting documentation.

How far back can I claim TTB Drawback?

MNBP's may claim drawback for up to 6 years after the time the right first accrued, subject to a penalty. The penalty is either $1,000.00, or the amount of the claim, whichever is less.

Is everything I make eligible for Drawback?

No, in fact, almost every product in which you claim drawback must be covered by an approved TTB formula. Formulas are submitted to TTB’s Nonbeverage Products Laboratory to determine whether the products are unfit for beverage use. The formula approval process can be time-consuming and complex, so it’s best to plan ahead and make sure you have all the required information and documentation ready.

The only products that do not require TTB formula approval are products that include alcohol as an ingredient and are listed in the current editions of the United States Pharmacopoeia (U.S.P.), National Formulary (N.F.), or Homeopathic Pharmacopoeia of the United States (H.P.U.S.), subject to minor exceptions.

Can I be audited and penalized by the TTB?

Yes, just like virtually any other TTB industry member, MNBP’s are subject to TTB audits under the authority of 26 U.S.C. § 6201.

The objective of the MNBP Claims audit program is to ensure that taxes refunded for manufacture of nonbeverage products have been legitimately claimed.

Am I required to keep records for TTB compliance purposes?

Yes! Every manufacturer must keep their drawback records for at least three years. These include copies of any claims and the supporting documents, invoices or other paperwork showing tax payment for spirits, and any bills of lading related to alcohol shipments.

In addition, a copy of each formula must be kept at every facility where the formula is used, for at least three years from the date the last drawback claim was filed under that formula.

TTB is authorized to enter your premises and examine all records associated with your drawback claims to verify all matters related to your claims are accurate, so it is important you keep comprehensive records.