CLAIMS FOR LOSSES OF SPIRITS WITHDRAWN FOR
RECTIFICATION OR BOTTLING
Proprietors of distilled spirits plants
and others concerned:
Purpose. This circular is issued to inform proprietors who conduct
"custom" bottling operations of the provisions of Revenue Ruling 62-37,
which will be published in Internal Revenue Bulletin No. 12 , of
March 19, 1962. The ruling concerns refund or credit of tax under
section 5008(c), Internal Revenue Code.
Background. Section 5008(c)(2)(A) of the Code provides that no
abatement, remission, credit, or refund of taxes shall be made for loss
of spirits withdrawn from bond for rectification or bottling where the
claimant is indemnified or recompensed for the tax.
Also, section 201.482 of the Distilled Spirits Plants regulations
provides that no abatement, remission, credit, or refund of tax shall
be made in respect of such losses to the extent that the claimant is
indemnified or recompensed for the tax.
In a somewhat similar case, Revenue Ruling 60-201, C.B. 1960-1,
712, precludes the allowance of a claim for refund or credit of tax
to a brewer who does not give a credit allowance to his customer for
beer removed from the market. The brewer is considered indemnified
by the customer through payment for the beer.
Effect of Ruling. Under Revenue Ruling 62-37, if a bottler of
distilled spirits collects from his customer the full amount of tax
determined at the time of regauge and allows the customer no credit for
losses incurred in bottling operations, the bottler is considered
recompensed for the tax, and allowance of the bottler's claim for
credit is precluded by section 5008(c)(2)(A) of the Code. If a bottler
of distilled spirits does not make a practice of repaying or crediting
to the persons who advance money to pay the tax on the distilled
spirits withdrawn from bond an appropriate amount for the allowable
loss, he must bear the burden of establishing the amount of allowable
loss for which he was not recompensed.
However, if the bottler has a systematic and regular procedure
for crediting or refunding an appropriate amount in respect of
allowable loss to persons who advanced the money to pay the tax, such
practice or procedure may be accepted by the Revenue Service as meeting
the requirements of section 5008(c)(2)(A) of the Code if the claimant
states in the claim that he has followed (or, in the case of a tentative
claim, that he will follow) such practice or procedure with respect to
the particular claim.
Applicability. This revenue ruling is applicable only to "custom"
bottling operations, and not to the ordinary bottling operation in
which the customer does not furnish the money for the tax.
Inquiries. Inquiries concerning this circular should refer to its
number and be addressed to your Assistant Regional Commissioner,
Alcohol and Tobacco Tax.
Dwight E. Avis
Director, Alcohol and Tobacco Tax Division