Continuing my in-depth analysis of the excise tax from Part 1
TTB is not the IRS
Excise tax is managed by the Bureau of Alcohol, Tobacco and Tax and Trade Bureau (TTB), a division of the Department of Treasury. They are a separate division of the federal government. You can’t go to the IRS and obtain answers to your questions, you must direct your questions to them directly at www.ttb.gov (beer), or visit their site for field offices and auditors. The TTB maintains several field offices throughout the country. If you are lucky enough to live near one of these offices, you can receive assistance in person. If not, you can call the national revenue center at 877-882-3277, located in Cincinnati, Ohio.
Excise tax exists not only for beer, but also for any alcoholic beverage. There are separate forms for wine (cider is taxed as a wine), beer and distilled spirits. The law gets really interesting if you are producing more than one type of alcohol on premise. The bonding premise definition gets very complex if you are mixing types of alcohol under one roof.
State Excise Tax
Many states also impose an excise tax on the production of beer. Almost all of them start their calculation with the numbers generated by the federal brewer’s report of operations. Most states have a minimum volume where the tax isn’t applied. Be careful, you may need to file a zero dollar return to show that you aren’t subject to the state tax. Some states exempt exported beer to another state. The important thing to note is that you should check with your state to see if an excise tax exists. Sometimes other state agencies administer the excise tax so you may need to ask around before receiving the final answer on state excise tax.
History of Excise Tax
The excise tax is a very old tax. In fact, it funded the federal government until just before prohibition. In order for prohibition to work, there needed to be a new tax to fund the government once alcohol was illegal. So the prohibition forces worked with legislatures to pass the income tax. Once prohibition was in place, the wealthy worked to repeal prohibition on the belief that once alcohol was legalized, the income tax would be repealed and everything would get back to normal. After prohibition, President Roosevelt kept the income tax in place and reinstituted the excise tax, to the surprise of many.
Brewer’s Report of Operations
You must file two forms to correctly file federal excise taxes. Depending on your level of production, you will file Form 5130.9, the brewer’s report of operations, or the quarterly report of operations Form 5130.26. After the report of operations is completed, you will need to file the excise tax return on Form 5000.24. This form is probably the easiest form that you’ll ever complete. It asks for the amount of tax by type of alcohol. Enter the amount on the correct line and you are ready to file (and pay) the return.
You must file monthly and use Form 5130.9 if your tax receipts were $50,000 or greater in the last calendar year. You can file quarterly on Form 5130.26 if your tax receipts were less than $50,000 last year AND you reasonably expect to owe less than $50,000 in the current year. Since excise tax rates were lowered this year, you may be able to switch from monthly to quarterly reports, saving time and energy. The quarterly return is simpler and easier to complete. Be careful however, the excise tax reduction is only good until 2020. Let’s hope that Congress extends the tax relief beyond 2020.