Not unlike the alcohol industry members affected by Hurricane Sandy, breweries affected by the recent Colorado flooding and any other natural disaster should be well advised of provisions that could benefit them in time of distress. The comments below apply to all business taxpayers including retailers, wholesalers, importers, export warehouse proprietors, and manufacturers of alcohol products.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) acknowledges that natural disasters like the floods in Colorado may cause taxpayers to not be able to timely file or timely make payment or deposit of excise taxes. Congress has passed laws that will allow taxpayers to obtain some relief when they are unable to follow the letter of the law because of these natural disasters. The relief that is available comes in two parts: (1) relief for those who need to report or pay taxes on products that were not destroyed, but they can’t do so timely, and (2) relief for those who have paid taxes on products that cannot be sold for a variety of reasons.
If the taxpayer is reporting late or paying tax late because of a natural disaster, TTB will entertain abatement requests for those in a Presidentially declared disaster area. As of the publication of this blog, President Obama had declared Boulder County a disaster area. The abatement request is done on a case by case basis, where the taxpayer must show that the issue was due to reasonable cause and not willful neglect. The taxpayer should not assume that relief from penalties will come simply because the taxpayer’s business is located in the disaster zone, but rather because the taxpayer was delayed in filing and/or paying because of the effect of the disaster on the taxpayer’s operations or some other circumstance that prevents timely paying or reporting.
Of great importance is that the Internal Revenue Code allows the TTB to reimburse federal excise taxes paid on alcoholic beverages lost, rendered unmarketable, or condemned by various authorized officials, including the President in the form of a major disaster declaration.
There are time restrictions for filing these claims and specific information to be provided at the time the claim is filed for reimbursement. You must file your claim with TTB within 6 months from the date of a disaster. If the President declares or determines a major disaster, claims must be filed no later than 6 months from the date the President declared the major disaster. Further, you must state whether taxes were included in the purchase price of the products. If your claim includes imported products, you must state whether duties were included in the purchase price. Claims for customs duties must be submitted separately to U.S. Customs, but can also be reimbursed.
When the Secretary of the Treasury has made payment for a claim, the statute requires that the products be destroyed. Further, the law indicates that the destruction must occur under the supervision of TTB. TTB has indicated that the taxpayer should contact them to inquire about whether or not the government would like to witness the destruction. This is an important step that should not be missed and should be properly documented.
Though not a direct result of a natural disaster, it is frequently the case that vandalism, looting and theft can occur shortly thereafter that may cause loss to the taxpayer. Technically, this type of loss is not reimbursable as part of a disaster claim, but under specific statutory provisions brewers can be relieved from paying excise taxes.
Should you require assistance with the claim process, or simply have questions about whether or not you qualify for relief, please don’t hesitate to contact us.