PART 17—DRAWBACK ON TAXPAID DISTILLED SPIRITS USED IN MANUFACTURING NONBEVERAGE PRODUCTS Authority: 26 U.S.C. 5010, 5111-5114, 5123, 5206, 5273, 6065, 6091, 6109, 7213, 7652, 7805; 31 U.S.C. 9301, 9303, 9304, 9306. Source: T.D. ATF-379, 61 FR 31412, June 20, 1996, unless otherwise noted. Editorial Note: Nomenclature changes to part 17 appear by T.D. ATF-436, 66 FR 5470, 5471, Jan. 19, 2001. Subpart A—General Provisions § 17.1 Scope of regulations. The regulations in this part apply to the manufacture of medicines, medicinal preparations, food products, flavors, flavoring extracts, and perfume that are unfit for beverage use and are made with taxpaid distilled spirits. The regulations cover the following topics: obtaining drawback of internal revenue tax on distilled spirits used in the manufacture of nonbeverage products; and bonds, claims, formulas and samples, losses, and records to be kept pertaining to the manufacture of nonbeverage products. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-79, 74 FR 37401, July 28, 2009] § 17.2 Forms prescribed. (a) The appropriate TTB officer is authorized to prescribe all forms, including bonds and records, required by this part. All of the information called for in each form shall be furnished as indicated by the headings on the form and the instructions on or pertaining to the form. In addition, information called for in each form shall be furnished as required by this part. The form will be filed in accordance with the instructions for the form. (b) Forms prescribed by this part are available for printing through the TTB Web site ( https://www.ttb.gov [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. ATF-436, 66 FR 5470, Jan. 19, 2001; T.D. TTB-44, 71 FR 16925, Apr. 4, 2006; T.D. TTB-196, 89 FR 87937, Nov. 6, 2024] § 17.3 Alternate methods or procedures. (a) General. (1) Good cause has been shown for the use of the alternate method or procedure; (2) The alternate method or procedure is within the purpose of, and consistent with the effect intended by, the method or procedure prescribed by this part, and affords equivalent security to the revenue; and (3) The alternate method or procedure will not be contrary to any provision of law, and will not result in any increase in cost to the Government or hinder the effective administration of this part. (b) Application. (c) Approval. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. ATF-436, 66 FR 5470, Jan. 19, 2001] § 17.4 OMB control numbers assigned under the Paperwork Reduction Act. (a) Purpose. (b) OMB control number 1513-0013. (c) OMB control number 1513-0014. (d) OMB control number 1513-0021. (e) OMB control number 1513-0030. (f) OMB control number 1513-0036. (g) OMB control number 1513-0072. (h) OMB control number 1513-0073. (i) OMB control number 1513-0088. (j) OMB control number 1513-0098. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-79, 74 FR 37401, July 28, 2009; T.D. TTB-196, 89 FR 87937, Nov. 6, 2024] § 17.5 Products manufactured in Puerto Rico or the Virgin Islands. For additional provisions regarding drawback on distilled spirits contained in medicines, medicinal preparations, food products, flavors, flavoring extracts, or perfume which are unfit for beverage purposes and which are brought into the United States from Puerto Rico or the U.S. Virgin Islands, see part 26, subparts I and Ob, of this chapter. [T.D. ATF-436, 66 FR 5470, 5471, Jan. 19, 2001, as amended by T.D. ATF-459, 66 FR 38549, July 25, 2001] § 17.6 Signature authority. No claim, bond, tax return, or other required document executed by a person as an agent or representative is acceptable unless a power of attorney or other proper notification of signature authority has been filed with the TTB office where the required document must be filed. The appropriate TTB officer with whom the claim or other required document is filed may, when he or she considers it necessary, require additional evidence of the authority of the agent or representative to execute the document. Except as otherwise provided by this part, powers of attorney shall be filed on TTB Form 1534 (5000.8), Power of Attorney. Notification of signature authority of partners, officers, or employees may be given by filing a copy of corporate or partnership documents, minutes of a meeting of the board of directors, etc. For corporate officers or employees, TTB Form 5100.1, Signing Authority for Corporate Officials, may be used. For additional provisions regarding powers of attorney, see § 17.105 and 26 CFR part 601, subpart E. § 17.7 Delegations of the Administrator. The regulatory authorities of the Administrator contained in this part are delegated to appropriate TTB officers. These TTB officers are specified in TTB Order 1135.17, Delegation of the Administrator's Authorities in 27 CFR Part 17, Drawback on Taxpaid Distilled Spirits Used in Manufacturing Nonbeverage Products. You may obtain a copy of this order by accessing the TTB Web site ( https://www.ttb.gov [T.D. ATF-436, 66 FR 5470, Jan. 19, 2001, as amended by T.D. TTB-44, 71 FR 16926, Apr. 4, 2006; T.D. TTB-196, 89 FR 87937, Nov. 6, 2024] Subpart B—Definitions § 17.11 Meaning of terms. As used in this part, unless the context otherwise requires, terms have the meanings given in this section. Words in the plural form include the singular, and vice versa, and words indicating the masculine gender include the feminine. The terms “includes” and “including” do not exclude things not listed which are in the same general class. Administrator. Appropriate TTB officer. Approved, approved for drawback. CFR. Distilled spirits, spirits. Effective tax rate. Eligible, eligible for drawback. Filed. Food products. Intermediate products. Medicines. Month. Nonbeverage products. Person. Proof gallon. Quarter. Recovered spirits. Subject to drawback. Tax year. Taxpaid. This chapter. U.S.C. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. ATF-436, 66 FR 5470, Jan. 19, 2001; T.D. TTB-44, 71 FR 16926, Apr. 4, 2006; T.D. TTB-79, 74 FR 37402, July 28, 2009] Subpart C—Registration Source: T.D. TTB-79, 74 FR 37402, July 28, 2009, unless otherwise noted. § 17.21 Registration. Every person claiming drawback under this part must register annually as a nonbeverage domestic drawback claimant. Registration will be accomplished when the claimant submits the first drawback claim for each year along with the supporting data required under subpart G of this part. No registration is required for any year in which the claimant does not file a claim for drawback. § 17.22 Employer identification number. Every person who claims drawback under this part must enter on each claim for drawback filed on TTB Form 5620.8, Claim—Alcohol, Tobacco, and Firearms Taxes, the employer identification number (EIN) assigned by the Internal Revenue Service. (26 U.S.C. 6109, 6723) § 17.23 Application for employer identification number. (a) Use Form SS-4. https://www.irs.gov (b) One EIN only. (26 U.S.C. 6109) [T.D. TTB-79, 74 FR 37402, July 28, 2009, as amended by T.D. TTB-196, 89 FR 87937, Nov. 6, 2024] Subpart D [Reserved] Subpart E—Bonds and Consents of Sureties § 17.101 Bonds in general. (a) Requirement. (b) Bond form. (c) Bonds executed before July 1, 2008. (d) Approval. [T.D. TTB, 74 FR 37402, July 28, 2009] § 17.102 Amount of bond. The bond shall be a continuing one, in an amount sufficient to cover the total drawback to be claimed on spirits used during any quarter. However, the amount of any bond shall not exceed $200,000 nor be less than $1,000. § 17.103 Bonds obtained from surety companies. (a) The bond may be obtained from any surety company authorized by the Secretary of the Treasury to be a surety on Federal bonds. Surety companies so authorized are listed in the current revision of Department of the Treasury Circular 570 (Companies Holding Certificates of Authority as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring Companies), and subject to such amendatory circulars as may be issued from time to time. Bonds obtained from surety companies are also governed by the provisions of 31 U.S.C. 9304, and 31 CFR part 223. (b) A bond executed by two or more surety companies shall be the joint and several liability of the principal and the sureties; however, each surety company may limit its liability, in terms upon the face of the bond, to a definite, specified amount. This amount shall not exceed the limitations prescribed for each surety company by the Secretary, as stated in Department of the Treasury Circular 570. If the sureties limit their liability in this way, the total of the limited liabilities shall equal the required amount of the bond. (c) Treasury Department Circular 570 is published in the Federal Register https://www.federalregister.gov https://fiscal.treasury.gov [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-196, 89 FR 87937, Nov. 6, 2024] § 17.104 Deposit of collateral. Except as otherwise provided by law or regulations, bonds or notes of the United States, or other obligations which are unconditionally guaranteed as to both interest and principal by the United States, may be pledged and deposited by principals as collateral security in lieu of bonds obtained from surety companies. Deposit of collateral security is governed by the provisions of 31 U.S.C. 9303, and 31 CFR part 225. (Sec. 1, Pub. L. 97-258, 96 Stat. 1046 (31 U.S.C. 9301, 9303)) § 17.105 Filing of powers of attorney. (a) Surety companies. (b) Principal. (Sec. 1, Pub. L. 97-258, 96 Stat. 1047 (31 U.S.C. 9304, 9306)) § 17.106 Consents of surety. The principal and surety shall execute on form TTB F 5000.18, Change in Bond (Consent of Surety), any consents of surety to changes in the terms of bonds. Form TTB F 5000.18 shall be executed with the same formality and proof of authority as is required for the execution of bonds. [T.D. TTB-196 89 FR 87937, Nov. 6, 2024] § 17.107 Strengthening bonds. Whenever the amount of a bond on file and in effect becomes insufficient, the principal may give a strengthening bond in a sufficient amount, provided the surety is the same as on the bond already on file and in effect; otherwise a superseding bond covering the entire liability shall be filed. Strengthening bonds, filed to increase the bond liability of the surety, shall not be construed in any sense to be substitute bonds, and the appropriate TTB officer shall not approve a strengthening bond containing any notation which may be interpreted as a release of any former bond or as limiting the amount of either bond to less than its full amount. § 17.108 Superseding bonds. (a) The principal on any bond filed pursuant to this part may at any time replace it with a superseding bond. (b) Executors, administrators, assignees, receivers, trustees, or other persons acting in a fiduciary capacity continuing or liquidating the business of the principal, shall execute and file a superseding bond or obtain the consent of the surety or sureties on the existing bond or bonds. (c) When, in the opinion of the appropriate TTB officer, the interests of the Government demand it, or in any case where the security of the bond becomes impaired in whole or in part for any reason whatever, the principal shall file a superseding bond. A superseding bond shall be filed immediately in case of the insolvency of the surety. If a bond is found to be not acceptable or for any reason becomes invalid or of no effect, the principal shall immediately file a satisfactory superseding bond. (d) A bond filed under this section to supersede an existing bond shall be marked by the obligors at the time of execution, “Superseding Bond.” When such a bond is approved, the superseded bond shall be released as to transactions occurring wholly subsequent to the effective date of the superseding bond, and notice of termination of the superseded bond shall be issued, as provided in § 17.111. Termination of Bonds § 17.111 General. (a) Bonds on TTB Form 5154.3 shall be terminated by the appropriate TTB officer, as to liability on drawback allowed after a specified future date, in the following circumstances: (1) Pursuant to a notice by the surety as provided in § 17.112. (2) Following approval of a superseding bond, as provided in § 17.108. (3) Following notification by the principal of an intent to discontinue the filing of claims on a monthly basis. (b) However, the bond shall not be terminated until all outstanding liability under it has been discharged. Upon termination, the appropriate TTB officer shall mark the bond “canceled,” followed by the date of cancellation, and shall issue a notice of termination of bond. A copy of this notice shall be given to the principal and to each surety. § 17.112 Notice by surety of termination of bond. A surety on any bond required by this part may at any time, in writing, notify the principal and the appropriate TTB officer in whose office the bond is on file that the surety desires, after a date named, to be relieved of liability under the bond. Unless the notice is withdrawn, in writing, before the date named in it, the notice shall take effect on that date. The date shall not be less than 60 days after the date on which both the notice and proof of service on the principal have been received by the appropriate TTB officer. The surety shall deliver one copy of the notice to the principal and the original to the appropriate TTB officer. The surety shall also file with the appropriate TTB officer an acknowledgment or other proof of service on the principal. § 17.113 Extent of release of surety from liability under bond. The rights of the principal as supported by the bond shall cease as of the date when termination of the bond takes effect, and the surety shall be relieved from liability for drawback allowed on and after that date. Liability for drawback previously allowed shall continue until the claims for such drawback have been properly verified by the appropriate TTB officer according to law and this part. § 17.114 Release of collateral. The release of collateral security pledged and deposited to satisfy the bond requirement of this part is governed by the provisions of 31 CFR part 225. When the appropriate TTB officer determines that there is no outstanding liability under the bond, and is satisfied that the interests of the Government will not be jeopardized, the security shall be released and returned to the principal. (Sec. 1, Pub. L. 97-258, 96 Stat. 1046 (31 U.S.C. 9301, 9303)) Subpart F—Formulas and Samples § 17.121 Product formulas. (a) General. (b) Filing. (c) Numbering. (d) Distribution and retention of approved formulas. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. ATF-436, 66 FR 5471, Jan. 19, 2001] § 17.122 Amended or revised formulas. Except as provided in this section, amended or revised formulas are considered to be new formulas and shall be numbered accordingly. Minor changes may be made to a current formula on TTB Form 5154.1 with retention of the original formula number, if approval is obtained from the appropriate TTB officer. In order to obtain approval to make a minor formula change, the person holding the Form 5154.1 shall submit a letter of application to the appropriate TTB officer, indicating the formula change and requesting that the proposed change be considered a minor change. Each such application shall clearly identify the original formula by number, date of approval, and name of product. The application shall indicate whether the product is, has been, or will be used in alcoholic beverages, and shall specify whether the proposed change is intended as a substitution or merely as an alternative for the original formula. No changes may be made to current formulas without specific TTB approval in each case. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. ATF-436, 66 FR 5471, Jan. 19, 2001] § 17.123 Statement of process. Any person claiming drawback under the regulations in this part may be required, at any time, to file a statement of process, in addition to that required by TTB Form 5154.1, as well as any other data necessary for consideration of the claim for drawback. When pertinent to consideration of the claim, submission of copies of the commercial labels used on the finished products may also be required. § 17.124 Samples. Any person claiming drawback or submitting a formula for approval under the regulations in this part may be required, at any time, to submit a sample of each nonbeverage or intermediate product for analysis. If the product is manufactured with a mixture of oil or other ingredients, the composition of which is unknown to the claimant, a 1-ounce sample of the mixture shall be submitted with the sample of finished product when so required. § 17.125 Adoption of formulas and processes. (a) Adoption of predecessor's formulas. (b) Adoption of manufacturer's own formulas from a different location. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. ATF-436, 66 FR 5471, Jan. 19, 2001] § 17.126 Formulas for intermediate products. (a) The manufacturer shall submit a formula on TTB Form 5154.1 for each self-manufactured ingredient made with taxpaid spirits and intended for the manufacturer's own use in nonbeverage products, unless the formula for any such ingredient is fully expressed as part of the approved formula for each nonbeverage product in which that ingredient is used, or unless the formula for the ingredient is contained in one of the pharmaceutical publications listed in § 17.132. (b) Upon receipt of Form 5154.1 covering a self-manufactured ingredient made with taxpaid spirits, the formula shall be examined under § 17.131. If the formula is approved for drawback, the ingredient shall be treated as a finished nonbeverage product for purposes of this part, rather than as an intermediate product, notwithstanding its use by the manufacturer. (For example, see § 17.152(d).) If the formula is disapproved for drawback, the ingredient may be treated as an intermediate product in accordance with this part. Requirements pertaining to intermediate products are found in § 17.185(b). (c) If there is a change in the composition of an intermediate product, the manufacturer shall submit an amended or revised formula, as provided in § 17.122. § 17.127 Self-manufactured ingredients treated optionally as unfinished nonbeverage products. A self-manufactured ingredient made with taxpaid spirits, which otherwise would be treated as an intermediate product, may instead be treated as an unfinished nonbeverage product, if the ingredient's formula is fully expressed as a part of the approved formula for the nonbeverage product in which the ingredient will be used. A manufacturer desiring to change the treatment of an ingredient from “intermediate product” to “unfinished nonbeverage product” (or vice versa) may do so by resubmitting the applicable formula(s) on TTB Form 5154.1. Requirements pertaining to unfinished nonbeverage products are found in § 17.185(c). Approval of Formulas § 17.131 Formulas on TTB Form 5154.1. Upon receipt, formulas on TTB Form 5154.1 shall be examined and, if found to be medicines, medicinal preparations, food products, flavors, flavoring extracts, or perfume which are unfit for beverage purposes and which otherwise meet the requirements of law and this part, they shall be approved for drawback. If the formulas do not meet the requirements of the law and regulations for drawback products, they shall be disapproved. § 17.132 U.S.P., N.F., and H.P.U.S. preparations. (a) General. (b) Exceptions. § 17.133 Food product formulas. Formulas for nonbeverage food products on TTB Form 5154.1 may be approved if they are unfit for beverage purposes. Approval does not authorize manufacture or sale contrary to State law. Examples of food products that have been found to be unfit for beverage purposes are stated below: (a) Sauces or syrups. (b) Brandied fruits. (c) Candies. (d) Other food products. § 17.134 Determination of unfitness for beverage purposes. The appropriate TTB officer has responsibility for determining whether products are fit or unfit for beverage purposes within the meaning of 26 U.S.C. 5111. This determination may be based either on the content and description of the ingredients as shown on TTB Form 5154.1, or on organoleptic examination. In such examination, samples of products may be diluted with water to an alcoholic concentration of 15% and tasted. Sale or use for beverage purposes is indicative of fitness for beverage use. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-79, 74 FR 37402, July 28, 2009] § 17.135 Use of specially denatured alcohol (S.D.A.). (a) Use of S.D.A. in nonbeverage or intermediate products General. (2) Alternative formulations. (b) Use of S.D.A. in ingredients Purchased ingredients. (2) Self-manufactured ingredients. (i) No taxpaid spirits are used in manufacturing such ingredients; and (ii) All S.D.A. is recovered or dissipated from such ingredients prior to their use in nonbeverage or intermediate products. (Recovery of S.D.A. shall be in accordance with subpart K of part 20 of this chapter; recovered S.D.A., with or without its original denaturants, shall not be reused in nonbeverage or intermediate products.) (Sec. 201, Pub. L. 85-859, 72 Stat. 1372, as amended (26 U.S.C. 5273)) § 17.136 Compliance with Food and Drug Administration requirements. A product is not a medicine, medicinal preparation, food product, flavor, flavoring extract, or perfume for nonbeverage drawback if its formula would violate a ban or restriction of the U.S. Food and Drug Administration (FDA) pertaining to such products. If FDA bans or restricts the use of any ingredient in such a way that further manufacture of a product in accordance with its formula would violate the ban or restriction, then the manufacturer shall change the formula and resubmit it on TTB Form 5154.1 . This section does not preclude approval for products manufactured solely for export or for uses other than internal human consumption (e.g. tobacco flavors or animal feed flavors) in accordance with laws and regulations administered by FDA. Under § 17.123, manufacturers may be required to demonstrate compliance with FDA requirements applicable to this section. § 17.137 Formulas disapproved for drawback. A formula may be disapproved for drawback either because it does not prescribe appropriate ingredients in sufficient quantities to make the product unfit for beverage use, or because the product is neither a medicine, a medicinal preparation, a food product, a flavor, a flavoring extract, nor a perfume. The formula for a disapproved product may be used as an intermediate product formula under § 17.126. No drawback will be allowed on distilled spirits used in a disapproved product, unless that product is later used in the manufacture of an approved nonbeverage product. In the case of a product that is disapproved because it is fit for beverage use, any further use or disposition of such a product, other than as an intermediate product in accordance with this part, subjects the manufacturer to the qualification requirements of parts 1 and 19 of this chapter. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-91, 76 FR 5477, Feb. 1, 2011] Subpart G—Claims for Drawback § 17.141 Drawback. Upon the filing of a claim as provided in this subpart, drawback shall be allowed to any person who meets the requirements of this part. Drawback shall be paid at the rate specified by 26 U.S.C. 5114 on each proof gallon of distilled spirits on which the tax has been paid or determined and which have been used in the manufacture of nonbeverage products. The drawback rate is $1.00 less than the effective tax rate. Drawback shall be allowed only to the extent that the claimant can establish, by evidence satisfactory to the appropriate TTB officer, the actual quantity of taxpaid or tax-determined distilled spirits used in the manufacture of the product, and the effective tax rate applicable to those spirits. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-79, 74 FR 37402, July 28, 2009; T.D. TTB-91, 76 FR 5477, Feb. 1, 2011] § 17.142 Claims. (a) General. (b) Manufacturers who are also proprietors of distilled spirits plants. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. ATF-436, 66 FR 5471, Jan. 19, 2001] § 17.143 Notice for monthly claims. If the manufacturer has notified the appropriate TTB officer, in writing, of an intention to file claims on a monthly basis instead of a quarterly basis, and has filed a bond in compliance with the provisions of this part, claims may be filed monthly instead of quarterly. The election to file monthly claims shall not preclude a manufacturer from filing a single claim covering an entire quarter, or a single claim covering just two months of a quarter, or two claims (one of them covering one month and the other covering two months). An election for the filing of monthly claims may be withdrawn by the manufacturer by filing a notice to that effect, in writing, with the appropriate TTB officer. § 17.144 Bond for monthly claims. Each person intending to file claims for drawback on a monthly basis shall file an executed bond on TTB Form 5154.3, conforming to the provisions of subpart E of this part. A monthly drawback claim shall not be allowed until bond coverage in a sufficient amount has been approved by the appropriate TTB officer. When the limit of liability under a bond given in less than the maximum amount has been reached, further drawback on monthly claims may be suspended until a strengthening or superseding bond in a sufficient amount is furnished. § 17.145 Date of filing claim. Quarterly claims for drawback shall be filed within six months after the quarter in which the distilled spirits covered by the claim were used in the manufacture of nonbeverage products. Monthly claims for drawback may be filed at any time after the end of the month in which the distilled spirits covered by the claim were used in the manufacture of nonbeverage products, but shall be filed not later than the close of the sixth month succeeding the quarter in which the spirits were used. § 17.146 Information to be shown by the claim. The claim shall show the following: (a) [Reserved] (b) That the distilled spirits on which drawback is claimed were fully taxpaid or tax-determined at the effective tax rate applicable to the distilled spirits. (c) That the distilled spirits on which the drawback is claimed were used in the manufacture of nonbeverage products. (d) Whether the nonbeverage products were manufactured in compliance with quantitative formulas approved under subpart F of this part. (If not, attach explanation.) (e) That the data submitted in support of the claim are correct. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-79, 74 FR 37402, July 28, 2009] § 17.147 Supporting data. (a) Each claim for drawback shall be accompanied by supporting data presented according to the format shown on TTB Form 5154.2, Supporting Data for Nonbeverage Drawback Claims (or according to any other suitable format which provides the same information). Modifications of Form 5154.2 may be used without prior authorization, if the modified format clearly shows all of the required information that is pertinent to the manufacturing operation. Under § 17.123, the appropriate TTB officer may require additional supporting data when needed to determine the correctness of drawback claims. (b) Separate data shall be shown for eligible distilled spirits taxpaid at different effective tax rates. This requirement applies to all eligible spirits, including eligible recovered alcohol and eligible spirits contained in intermediate products. (c) Separate data shall be shown for imported rum, spirits from Puerto Rico containing at least 92% rum, and spirits from the U.S. Virgin Islands containing at least 92% rum. The total number of proof gallons of each such category used subject to drawback during the claim period shall also be shown, with separate totals for each effective tax rate. These amounts shall include eligible spirits and rum from intermediate products or recovered alcohol. (d) Any gain in eligible distilled spirits reported in the supporting data shall be reflected by an equivalent deduction from the amount of drawback claimed. Gains shall not be offset by known losses. § 17.148 Allowance of claims. (a) General. (b) Penalty. (c) Reasonable cause. (26 U.S.C. 5114(c)) [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-79, 74 FR 37402, July 28, 2009] Spirits Subject to Drawback § 17.151 Use of distilled spirits. Distilled spirits are considered to have been used in the manufacture of a product under this part if the spirits are consumed in the manufacture, are incorporated into the product, or are determined by TTB to have been otherwise utilized as an essential part of the manufacturing process. However, spirits lost by causes such as spillage, leakage, breakage or theft, and spirits used for purposes such as rinsing or cleaning a system, are not considered to have been used in the manufacture of a product. § 17.152 Time of use of spirits. (a) General. (b) Spirits used in an ion exchange column. (c) Products requiring additional processing or treatment. (d) Nonbeverage products used to manufacture other products. § 17.153 Recovered spirits. (a) Recovery from intermediate products. (b) Recovery from nonbeverage products. (c) Cross references. § 17.154 Spirits contained in intermediate products. Spirits contained in an intermediate product are not subject to drawback until that intermediate product is used in the manufacture of a nonbeverage product. § 17.155 Spirits consumed in manufacturing intermediate products. Spirits consumed in the manufacture of an intermediate product—which are not contained in the intermediate product at the time of its use in nonbeverage products—are not subject to drawback. Such spirits are not considered to have been used in the manufacture of nonbeverage products. However, see § 17.127 with respect to optional treatment of ingredients as unfinished nonbeverage products, rather than as intermediate products. Subpart H—Records § 17.161 General. Each person claiming drawback on taxpaid distilled spirits used in the manufacture of nonbeverage products shall maintain records showing the information required in this subpart. No particular form is prescribed for these records, but the data required to be shown shall be clearly recorded and organized to enable appropriate TTB officers to trace each operation or transaction, monitor compliance with law and regulations, and verify the accuracy of each claim. Ordinary business records, including invoices and cost accounting records, are acceptable if they show the required information or are annotated to show any such information that is lacking. The records shall be kept complete and current at all times and shall be retained by the manufacturer at the place where the taxpaid distilled spirits are used in the manufacture or production of nonbeverage products, for the period prescribed in § 17.170. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-79, 74 FR 37402, July 28, 2009] § 17.162 Receipt of distilled spirits. (a) Distilled spirits received in tank cars, tank trucks, barrels, or drums. (1) The date of receipt; (2) The name and address of the person from whom received; (3) The serial number or other identification mark (if any) of each tank car, tank truck, barrel, or drum; (4) The name of the producer or warehouseman who paid or determined the tax; (5) The effective tax rate (if other than the rate prescribed by 26 U.S.C. 5001); and (6) The kind, quantity, and proof (or alcohol percentage by volume) of the spirits. (b) Distilled spirits received in bottles. (1) The date of receipt; (2) The name and address of the seller; (3) The serial number of each case, if the bottles are received in cases; (4) The name of the bottler; (5) The effective tax rate (if other than the rate prescribed by 26 U.S.C. 5001); and (6) The kind, quantity, and proof (or alcohol percentage by volume) of the spirits. (c) Distilled spirits received by pipeline. (1) The date of receipt; (2) The name of the producer or warehouseman who paid or determined the tax; (3) The effective tax rate (if other than the rate prescribed by 26 U.S.C. 5001); and (4) The kind, quantity, and proof (or alcohol percentage by volume) of the spirits. (d) Determination of quantity. (e) Receipt of imported rum, or spirits from Puerto Rico or the Virgin Islands. (f) Shipments from distilled spirits plants. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-92, 76 FR 9090, Feb. 16, 2011] § 17.163 Evidence of taxpayment of distilled spirits. (a) Shipments from distilled spirits plants. (b) Purchases from wholesale and retail liquor dealers. (c) Imported spirits. (d) Evidence of effective tax rate. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-92, 76 FR 9090, Feb. 16, 2011; T.D. TTB-196, 89 FR 87937, Nov. 6, 2024] § 17.164 Production record. (a) General. (b) Information to be shown. (c) Specificity of information. (d) Determining quantity of distilled spirits used. (e) Tests of alcohol content. § 17.165 Receipt of raw ingredients. For raw ingredients destined to be used in nonbeverage or intermediate products, the manufacturer shall record, for each shipment received— (a) The date of receipt; (b) The quantity received; and (c) The identity of the supplier. § 17.166 Disposition of nonbeverage products. (a) Shipments. (1) The formula number of the product; (2) The date of shipment; (3) The quantity shipped; and (4) The identity of the consignee. (b) Other disposition. (1) The type of disposition; (2) The date of disposition; and (3) The quantity of each product so disposed of. (c) Exception. § 17.167 Inventories. (a) Distilled spirits. (b) Raw ingredients and nonbeverage products. § 17.168 Recovered spirits. (a) Each manufacturer intending to recover distilled spirits under the provisions of this part shall first notify the appropriate TTB officer. Any apparatus used to separate alcohol is subject to the registration requirements of 26 U.S.C. 5179 and subpart C of part 29 of this chapter. Recovery operations may only be conducted on the premises where the recovered spirits were used in the manufacture or production of nonbeverage or intermediate products. (b) The manufacturer shall keep a record of the distilled spirits recovered and the subsequent use to which such spirits are put. The record shall show— (1) The date of recovery; (2) The commodity or process from which the spirits were recovered; (3) The amount in proof gallons, or by weight and proof (or alcohol percentage by volume) of distilled spirits recovered; (4) The amount in proof gallons, or by weight and proof (or alcohol percentage by volume) of recovered distilled spirits reused; (5) The commodity in which the recovered distilled spirits were reused; and (6) The date of reuse. (c) Whenever recovered spirits are destroyed (see § 17.183), the record shall further show— (1) The reason for the destruction; (2) The date, time, location, and manner of destruction; (3) The number of proof gallons destroyed; and (4) The name of the individual who accomplished or supervised the destruction. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. ATF-462, 66 FR 42736, Aug. 15, 2001; T.D. TTB-79, 74 FR 37402, July 28, 2009] § 17.169 Transfer of intermediate products. When intermediate products are transferred as permitted by § 17.185(b), supporting records of such transfers shall be kept at the shipping and receiving plants, showing the date and quantity of each product transferred. § 17.170 Retention of records. Each manufacturer shall retain for a period of not less than 3 years all records required by this part, a copy of all claims and supporting data filed in support thereof, all commercial invoices or other documents evidencing taxpayment or tax-determination of domestic spirits, all documents evidencing taxpayment of imported spirits, and all bills of lading received which pertain to shipments of spirits. In addition, a copy of each formula submitted on TTB Form 5154.1 shall be retained at each factory where the formula is used, for not less than 3 years from the date of filing of the last claim for drawback under the formula. A copy of an approval to use an alternate method or procedure shall be retained as long as the manufacturer employs the method or procedure, and for 3 years thereafter. Further, the appropriate TTB officer may require these records, forms, and documents to be retained for an additional period of not more than 3 years in any case where he or she deems such retention to be necessary or advisable for protection of the revenue. § 17.171 Inspection of records. All of the records, forms, and documents required to be retained by § 17.170 shall be kept at the premises where distilled spirits are used in the manufacture or production of nonbeverage products and shall be readily available during the manufacturer's regular business hours for examination and copying by the appropriate TTB officers. At the same time, any other books, papers, records or memoranda in the possession of the manufacturer, which have a bearing upon the matters required to be alleged in a claim for drawback, shall be available for inspection by appropriate TTB officers. (26 U.S.C. 5113, 5123) [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-79, 74 FR 37402, July 28, 2009] Subpart I—Miscellaneous Provisions § 17.181 Exportation of medicinal preparations and flavoring extracts. Medicinal preparations and flavoring extracts, approved for drawback under the provisions of this part, may be exported subject to 19 U.S.C. 1313(d), which authorizes export drawback equal to the entire amount of internal revenue tax found to have been paid on the domestic alcohol used in the manufacture of such products. (Note: Export drawback is not allowed for imported alcohol under this provision of customs law.) Claims for such export drawback shall be filed in accordance with the applicable regulations of U.S. Customs and Border Protection. Such claims may cover either the full rate of tax which has been paid on the alcohol, if no nonbeverage drawback has been claimed thereon, or else the remainder of the tax if nonbeverage drawback under 26 U.S.C. 5114 has been or will be claimed. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-79, 74 FR 37402, July 28, 2009; T.D. TTB-196 89 FR 87937, Nov. 6, 2024] § 17.182 Drawback claims by druggists. Drawback of tax under 26 U.S.C. 5114 is allowable on taxpaid distilled spirits used by druggists in compounding prescriptions. The prescriptions so compounded shall be shown in the supporting data by listing the first and last serial numbers thereof. The amount of taxpaid spirits used in each prescription need not be shown, but such prescriptions shall be made available for examination by appropriate TTB officers. If refills have been made of prescriptions received in a previous claim period, their serial numbers shall be recorded separately. Druggists claiming drawback as authorized by this section are subject to all the applicable requirements of this part, except those requiring the filing of quantitative formulas. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-79, 74 FR 37402, July 28, 2009] § 17.183 Disposition of recovered alcohol and material from which alcohol can be recovered. (a) Recovered alcohol. (b) By-product material (general). (c) Spent vanilla beans. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-196, 89 FR 87937, Nov. 6, 2024] § 17.184 Distilled spirits container marks. All marks required by part 19 of this chapter shall remain on containers of taxpaid distilled spirits until the contents are emptied. Whenever such a container is emptied, such marks shall be completely obliterated. (Sec. 454, Pub. L. 98-369, 98 Stat. 820 (26 U.S.C. 5206(d))) § 17.185 Requirements for intermediate products and unfinished nonbeverage products. (a) General. (b) Intermediate products. (c) Unfinished nonbeverage products. § 17.186 Transfer of distilled spirits to other containers. A manufacturer may transfer taxpaid distilled spirits from the original package to other containers at any time for the purpose of facilitating the manufacture of products unfit for beverage use. Containers into which distilled spirits have been transferred under this section shall bear a label identifying their contents as taxpaid distilled spirits, and shall be marked with the serial number of the original package from which the spirits were withdrawn. § 17.187 Discontinuance of business. The manufacturer shall notify TTB when business is to be discontinued. Upon discontinuance of business, a manufacturer's entire stock of taxpaid distilled spirits on hand may be sold in a single sale without the necessity of qualifying as a wholesaler under part 1 of this chapter or registering and keeping records as a liquor dealer under part 31 of this chapter.The spirits likewise may be returned to the person from whom purchased, or they may be destroyed or given away. [T.D. ATF-379, 61 FR 31412, June 20, 1996, as amended by T.D. TTB-25, 70 FR 19882, Apr. 15, 2005; T.D. TTB-79, 74 FR 37402, July 28, 2009]