Rev. Ruling 62-143
Interest on Refund of MNBP Special Tax
Advice has been requested whether interest is allowable with respect to the refund of the special tax paid by a manufacturer of nonbeverage products imposed by section 5131 of the Internal Revenue Code of 1954.
A manufacturer of nonbeverage products paid special tax in the amount of $25. By the end of the fiscal year, the manufacturer had used more than his allowed 25 gallons of distilled spirits in nonbeverage products. The manufacturer then paid special tax in the amount of $50 and filed a claim for the $25 originally paid.
Section 5131 of the Code provides that any person using distilled spirits produced in a domestic registered distillery or industrial alcohol plant and withdrawn from bond, or using distilled spirits withdrawn from bond, or using distilled spirits withdrawn from the bonded premises of a distilled spirits plant, on which the tax had been determined, in the manufacture or production of medicines, medicinal preparations, food products, flavors, or flavoring extracts, which are unfit for beverage purposes, on payment of a special tax per annum, shall be eligible for drawback at the time when such distilled spirits are used in the manufacture of certain nonbeverage products. The special tax for total annual use not exceeding 25 proof gallons is $25 a year. For total annual use not exceeding 50 proof gallons, the tax is $50 a year. And for total annual use of more than 50 gallons, the tax is $100 a year.
The special tax is payable by return rather than by stamp. See section 194.21 of the Liquor Dealers Regulations and section 197.28 of the Drawback on Distilled Spirits Used In Manufacturing Nonbeverage Products Regulations.
Section 197.55 through 197.59 of the Nonbeverage Drawback Regulations were amended by T.D. 6549, C.B. 1961-1, 823, to provide for an adjustment or a refund of the special tax in lieu of a redemption of stamps.
Therefore, the special tax to be refunded to nonbeverage domestic drawback claimants does not come within the stamp tax redemption category of section 6805 of the Code, but is to be considered an overpayment of tax, refundable under section 6402 of the code, on which interest is allowable by section 6611 of the Code.
Section 301.6611-1 of the Regulations on Procedure and Administration provides in part that the dates of overpayment of any tax are the date of payment of the first amount which (when added to previous payments) is in excess of the tax liability (including any interest, addition to the tax, or additional amount) and the dates of payment of all amounts subsequently paid with respect to such liability.Accordingly, interest is allowable where the special tax of $25 is paid by a manufacturer of nonbeverage products who, at the end of the fiscal year, discovers that he has used more than 25 gallons of distilled spirits in nonbeverage products and applies for a refund of that amount after first paying the higher special tax of $50. The interest on the overpayment is computed from the date on which the second tax is paid. However, interest may not be assessed with respect to the payment of the $50 special tax since the manufacturer does not incur a liability for such tax until he has filed a claim for drawback for spirits used in excess of 25 gallons.
Accordingly, interest is also allowable where a claim for refund is made for the amount of the difference between the special tax paid and the special tax due, as in the instance where the manufacturer of nonbeverage products pays the tax in the amount of $100 at the beginning of a fiscal year but uses only 50 gallons or less during the year. Such interest is allowed from the date of the overpayment to a date determined by the District Director, which shall be not more than 30 days prior to the date of the refund check.
26 U.S.C. 5131; 27 CFR 197.55