TAX LIABILITY ON UNEXPLAINED SHORTAGES OF BEER
Brewers and others concerned:
The purpose of this circular is to inform brewers of the Bureau's policy
on unexplained shortages of beer after it has been filled into bottles, cans,
Since achieving Bureau status, it has come to our attention that there
is a need for a more uniform policy in handling reported shortages of bottled
and kegged beer so as to be equitable throughout the brewing industry. ATF's
basic policy with respect to such shortages was stated in Industry Circular
Number 64-6 and is restated in pertinent part as follows:
".... beer in kegs and cases is subject to rather
precise accounting controls, in that quantities
produced, consumed, lost, removed, or otherwise
disposed of can be precisely determined by appropriate instruments and procedures which are
available and in use throughout industry generally.
It is the responsibility of each brewer to maintain complete and adequate records of his operations,
including quantities of keg and case beer on hand,
produced, removed, or otherwise disposed of. Any
shortage of finished products is an indication
that removals have occurred unlawfully without payment of tax and that an assessment to collect the
tax may be justified. The burden of proof to the
contrary rests upon the brewer."
To avoid misinterpretations of the above excerpts, brewers are advised
that when a shortage of bottled or kegged beer is disclosed, either by audit
or inspection, or by brewer's reports, and such shortage is not satisfactorily
explained, the brewer shall be held liable for the tax involved. The brewer
will be requested, in such instances, to include an appropriate adjustment in
Schedule B of his Beer Tax Return, or an assessment will be entered against
him. In all cases, the brewer will be given every reasonable opportunity to
explain and account for a, particular shortage and only after full consideration
of all the known facts will action be taken to require payment of tax. Brewers
are further advised that repetitive instances of apparent shortages being found
to result from inaccurate recordkeeping will result in action to impose or
compromise the penalties provided for in 26 U.S.C. 5672.
The Bureau recognizes that the nature and extent of brewery operations
make it extremely difficult for brewers to obtain counts of bottled and
kegged beer with 100% accuracy; but it is felt that all brewers can reduce
both the incidence and extent of shortages to a point where they may be
accepted as due to unavoidable discrepancies.
Inquiries concerning this Circular should refer to its number and be
addressed to the Director.
Rex D. Davis