As an industry-member regulated by the Alcohol & Tobacco Tax & Trade Bureau (“TTB”), you are likely familiar with the Federal Excise Tax (“FET”) on alcohol. For those non-industry members, the Federal Excise Tax is a tax imposed on producers and importers of alcoholic beverages.
Understanding the appropriate FET liability and making timely filings is one of the most crucial (and non-negotiable) aspects of TTB compliance. This article will help you determine the proper FET rate for your operations as well as provide helpful tips to stay compliant with FET filing requirements.
Determining Your Tax Liability
FET rates vary based on the type and quantity of alcohol, and sometimes the status of the industry member. What may seem like a fairly straightforward calculation can be incredibly fact-specific, so the following summary is provided only for reference, and should not be used as a substitute for professional tax or legal advice.
FET Rates for Beer:
FET rates for beer depend on the number of barrels produced and whether the producer qualifies as a “small producer” (which is a brewer who produces 2,000,000 barrels or less per calendar year). If a brewery qualifies as a small producer, the first 60,000 barrels removed during the calendar year are subject to a tax rate of $3.50 per barrel. After 60,000 barrels and up to 2,000,0000 the tax rate is $16.00 per barrel (the default rate for beer is $18.00 per barrel). More detailed information on TTB beer excise tax can be found here.
FET Rates for Wine:
FET wine rates can vary considerably based on the wine type (e.g., still wine, sparkling wine, hard cider), alcohol content, and number of wine gallons produced. These rates can be incredibly complex and nuanced, but for most smaller, independent wineries in the U.S. who produce a standard still wine under 16% ABV, the wine FET rate is $1.07 per wine gallon, subject to a $1.00 per wine gallon credit for the first 30,000 wine gallons in a calendar year, meaning the FET is effectively $.07 per wine gallon for many small, independent, traditional wineries. A full breakdown of wine FET rates can be found here.
FET Rates for Distilled Spirits:
For distilled spirits, rates depend on the number of proof gallons produced. The default FET rate for spirits is $13.50 per proof gallon; however, all distilled spirits plants, regardless of size, are eligible for a reduced rate of $2.70 per proof gallon for the first 100,000 proof gallons removed during the calendar year. The FET rate then increases to $13.34 per proof gallon for anything over 100,000 proof gallons up to 22,130,000 proof gallons. Anything over that threshold would be subject to the $13.50 per proof gallon FET rate.
Completing the Necessary Forms
Filing the necessary forms is a crucial step in paying federal excise taxes on alcohol. This primarily includes the Excise Tax Return (TTB Form 5000.24). While most producers file excise tax returns monthly, small producers with annual liability of $50,000 or less may be eligible to file quarterly.
Submitting your FET Returns:
TTB generally allows industry members to file and pay FET in two different ways: i) online via Pay.gov, or ii) by mailing payment along with a completed TTB Form 5000.24. In certain instances, TTB requires that industry members pay FET by Electronic Funds Transfer, or “EFT”, and failure to do so can result in penalties.
TTB FET Filing Deadlines:
Meeting filing deadlines is imperative as there can be significant penalties imposed for late filings. Returns and payments are typically due by the second week or the end of the month following the reporting period. Returns and payments for quarterly filers are typically due by the 12th or 14th day of the month following the end of the quarter. Some small producers with minimal tax liability may be eligible to file annually, with returns and payments due by January 14th of the following year. A detailed outline of FET due dates can be viewed here.
Ensuring Future Compliance:
Finally, all industry members should stay informed about changes in tax rates, filing requirements, and deadlines by regularly checking TTB announcements and updates through their website and newsletter. You can also seek advice from tax professionals or consultants familiar with TTB regulations to ensure compliance.