Accounting for Strip Stamps
All bottlers of distilled spirits:
1. Effective September 1, 1954, Treasury Decision 6097 was issued
to permit greater flexibility in the operations of bottling plants and
to afford bottlers an opportunity to conduct their activities with as
little delay as possible, while at the same time permitting Government
supervision to be exercised efficiently and economically. One change
made at that time was the transfer of custody of red strip stamps from
the storekeeper-gauger to the proprietor; this transfer of custody
carried with it full responsibility and accountability for such stamps.
2. Pursuant to the provisions of sections 5008 and 5009 of the
Internal Revenue Code of 1954, regulations were issued, effective
January 1, 1955, enabling bottlers of distilled spirits to obtain strip
stamps without charge. On that same date custody of stamps to be affixed
to distilled spirits bottled in bond was transferred to proprietors.
3. The procedures implemented by Treasury Decision 6097 have now
been in effect for more than 8 months. Generally, the period of transition
passed smoothly and the changes have proved beneficial. Perhaps it is
now appropriate that we appraise any areas where further improvement
Might be indicated.
4. Representations have been made that proprietors have not properly
safeguarded the control of strip stamps and that practices have developed
which have resulted in the careless handling of the stamps. Our review
of the statistical data available from Forms 182, "Proprietor's Monthly
Record and Report of Red Strip Stamps" has not confirmed such representations.
Nevertheless, inquiry concerning these allegations is being made.
5. This circular is intended to point out that the custody of strip
stamps is a major obligation and demands the personal attention of
management. The arrangements for proper security, usage and accounting
must be made the function of responsible supervisory officials. The
unnecessary mutilation, wastage or loss of stamps adds to the cost of
Government supervision, an expense which you as taxpayers must share.
However, there is a more immediate and more significant cause for concern
which emphasizes the need for high standards in the custodial care of
stamps. Any representation that you are not properly handling strip
stamps is a reflection upon the integrity of your industry, and, if true,
would constitute a threat both to the revenue and to your business,
particularly if loose accounting should result in the diversion of stamps
to illicit channels.
6. The importance of this matter is stressed in order to enlist
your full cooperation in insuring that the advantages, both financial
and operational, which have accrued to you through the delivery of stamps
(without charge) into your custody may not be impaired. Regulations
require that the storekeeper-gauger verify the receipt of stamps by you,
the destruction of mutilated and unused stamps, and the month-end
inventories of stamps. It is your responsibility to assure the Government
that stamps are properly secured, used and accounted for. Stamp
inventories must be retained by management officials who will issue daily
only such number of stamps as are needed for bottling and will demand at
the close of each bottling day an accounting from bottling employees of all
stamps used, mutilated and returned for re-issue. Mutilated or unusable
stamps must be returned promptly to the storekeeper-gauger for verification
of the quantity and supervision of their destruction. Such stamps shall
be so arranged that the quantity can be quickly and accurately verified
by the storekeeper-gauger. Any unaccounted for shortage or loss of stamps
must be investigated and every effort made to determine the facts and
report such facts to the proper Government officers.
7. As a trial procedure, beginning on June 1, 1955, it is requested
that each proprietor of a distilled spirits bottling house furnish to the
storekeeper-gauger during the morning of the business day next succeeding
that on which bottling occurred a report of bottling production. This
report shall show
(a) the number of cases bottled,
(b) the serial numbers
of such cases,
(c) the size of the bottles,
(d) the brand labels affixed
to the bottles and
(e) a summary setting out the total number of strip
stamps of each denomination received, used, mutilated, unaccounted for,
and on hand at the end of the day.
Many of you now prepare reports for
your own use which contain this information. If so, a copy of such report
may be furnished to the storekeeper-gauger. If not, your report may be
in simple memorandum form prepared in accordance with your usual commercial practices. It is believed that the furnishing of this report will enable storekeeper-gaugers to verify quickly the status of your strip stamp accounts
and may serve as an incentive to your own employees to maintain the stamp
account properly. In the event that this report serves the purpose desired,
and there are no serious disadvantages, it is planned to include the
procedure in the next revision of the regulations.
8. Any suggestions or comments which you may have concerning the
subject matter of this circular will be welcomed. It is only through the
intelligent and sympathetic cooperation of industry and Government that
effective and efficient supervision of the distilled spirits industry
can be maintained.
Correspondence in regard to this industry circular should refer to
the number thereof and to the symbols, O:AT:PP.
Dwight E. Avis
Director, Alcohol and Tobacco Tax Division