Voluntary Destruction Distilled Spirits Subject
to Force Out
Proprietors of internal revenue bonded
warehouses and others concerned:
1. Your attention is called to Revenue Ruling 54-290,
Internal Revenue Bulletin 1954-30, 34, providing that where
an application for voluntary destruction of distilled spirits
in an internal revenue bonded warehouse is timely filed before
the expiration of the 8-year storage period but the necessary
steps to effect the destruction thereof cannot be completed
within such period, the spirits may continue to remain in
the warehouse temporarily pending final action on the
application. While such revenue ruling was issued under
the 1939 Code, the principles expressed therein respecting
the timely filing of applications to destroy spirits and
the taxability of spirits remaining in warehouse at the
expiration of the 8-year storage period are of equal
application under the 1954 Code. The new code of course
does not require the spirits to be unfit for beverage
purposes in order to be eligible for destruction.
2. Representations have been made that controversies
arise in cases where the spirits are held pursuant to
warehouse receipts and the owner cannot be immediately
located and in cases where the owners are known but refuse
to allow the warehouseman to destroy the spirits.
3. Neither the Federal liquor laws, nor the regulations
deal specifically with the relations existing between the
warehouseman and the owner of spirits stored in internal
revenue bonded warehouses. The law does require withdrawal
of the spirits upon payment of the tax, or as otherwise
provided, within eight years from the date of original
entry. If the spirits are not so withdrawn, the tax
becomes due and payable on the basis of the regauge for
tax determination, without further loss allowance. This
obligation upon the warehouseman cannot be altered by
reason of his inability to collect the tax from the
owner, or to acquire title to abandoned spirits prior
to the eight-year force-out. If a warehouseman intends
to file an application for destruction, it is necessary
that such application be filed prior to the expiration
of the eighth anniversary of storage. Such an application
would be timely filed and would enable the warehouseman
to hold the spirits temporarily if necessary in order to
complete arrangements for the destruction of the spirits.
The filing of a timely application will, not preclude
taxpayment and withdrawal of the spirit covered by the
application if, before destruction is actually effected,
it is desired to taxpay and withdraw the spirits.
4. Failure to effect destruction of spirits covered
by a timely application within a reasonable time after
the expiration of the 8-year period, will result in
assessment of tax on the spirits and the consequent'
loss of the privilege of voluntary destruction without
payment of tax.
5. Inquiries in regard to this industry circular
should refer to the number thereof and be addressed to
the office of your Assistant Regional Commissioner,
Alcohol and Tobacco Tax.
Dwight E. Avis
Director, Alcohol and Tobacco Tax Division.