Is Your Company Eligible for TTB Drawback Refunds? Here is a Quick Way to Check.

Does Your Company use Beverage Grade Alcohol in Product Manufacturing?

If so, you may be eligible for TTB "drawback" refund claims. Beverage grade alcohol is by default subject to federal excise taxes imposed by the Alcohol & Tobacco Tax & Trade Bureau ("TTB"). However, if the products you manufacture comply with TTB rules and regulations, TTB may refund almost all of the excise taxes paid on the alcohol purchased.

Manufacturers of Non-beverage Products ("MNBPs") can claim TTB drawback refunds on the federal excise tax paid on distilled spirits used in the manufacturing of various products, including medicine, medicinal preparations, food products, flavor/flavor extracts, or perfume. Generally speaking, TTB must approve the formula for the manufactured products in order to recover the drawback refund.

The drawback refund rate is the applicable federal excise tax rate, minus $1.00. For distilled spirits, the excise tax rate is either $13.50, $13.34, or $2.70 per proof gallon, depending on whether reduced excise tax rates applied to the order.

Although MNBP's have 6 months to file a claim from the time the distilled spirits were used in the manufacturing of the product, the applicable rules and regulations clarify that noncompliance with the 6 month filing period will not bar a manufacturer from claiming drawback, but instead will simply result in a penalty for late filing. It may still be worth filing past the 6 month filing period, depending on the eligible amount of alcohol used.

What is the Statute of Limitations to File 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. For many MNBP's, $1,000.00 is far less than the amount of federal excise tax eligible for drawback.

In other words, if your business used alcohol to manufacture non-beverage products over the past 6 years, you may still be eligible for federal excise tax drawback.

What is the First Step in Determining TTB Drawback Eligibility?

First, one should determine if they are buying and using alcohol that is eligible for drawback. One quick and efficient strategy is to review ERP records for purchases of bulk alcohol, which are often identified in invoices, bills of lading, and purchase orders as "Ethyl Alcohol" or "Ethanol", most commonly at 95% alcohol by volume, or 190 Proof. Typically, the federal excise tax rate will be itemized on the invoice. Although this does not guarantee eligibility in and of itself, it is a quick and easy first step to see if TTB drawback refunds may be a possibility.

If you have questions regarding MNBP drawback claim eligibility, and are interested in a consultation on potential claim filing, please contact an attorney for a claim evaluation.