All US wineries are required to file two primary reports with the TTB, the Alcohol & Tobacco Tax & Trade Bureau. One of those reports, which must always be filed by wineries regardless of their activities, drives whether wineries are required to also file the second report. Essentially what that comes down to is if a winery lists gallons on a specific line of the first report, the 5120.17 they then are required to file the second report, the Excise tax report. The gallon amount on a winery’s 5120.17 report from the line titled “removed taxpaid” must match what they then report on their Excise tax report. And whether the winery also deducts any CBMA tax credits, (Craft Beverage Modernization Act) on their Excise tax reports are tied directly to whether they listed gallons on other lines of their 5120.17 reports. For example if a winery submits a 5120.17 report for a quarterly period, and on that report they list 5,000 gallons on the “removed taxpaid” line that would mean they would owe an Excise tax report for that same quarterly period reporting and paying excise taxes to the TTB for 5,000 gallons. And if they deducted tax credits on that Excise tax report, the 5,000 gallons would have to qualify for them.
Not surprisingly the TTB regularly sees Excise tax reports submitted by wineries which do not match the gallons reported as “removed taxpaid” on their 5120.17 reports. This is generally not the fault of the wineries, primarily due to (1) lack of training that these two reports are directly connected and (2) lack of understanding for how to complete the excise tax report.
The TTB is now launching a pilot project which they are calling a “tax simplification project”, appropriately enough. What they are proposing is creating a new report which would combine these two reports into one. (the 5120.17 & the Excise tax)
Here is some of the text from their federal register proposed information collections; comment request posted early last month:
As part of TTB’s efforts to lower respondent burden, the Bureau is developing a combined tax return and simplified operations report and intends to pilot the use of it with alcohol excise taxpayers. The collected information will allow TTB to identify the excise taxpayer, the amount of taxes due, and the amount of payments made. Additionally, the collected information will allow TTB to identify the amount of distilled spirits, wine, or beer the taxpayer produced, removed, transferred, and disposed of during the reporting period, which effects the amount of alcohol excise tax due, while reducing the overall burden of filing separate tax returns and operations reports.
The TTB is inviting interested wineries to submit a letterhead application to join this pilot program, and if accepted they would then have access to the “combined alcohol excise return and simplified operations report”. This pilot version of the “two in one” report would be filed electronically through the pilot system the TTB creates for it.
In theory, this exploration by the TTB to potentially combine these two reports into one sounds like a smart idea that could make things easier for both the wineries and for TTB. Additional training would still be required though. It is a very small group of people in the winery world who truly understand and can explain the term “removed taxpaid”, what happens at a winery for them to then list gallons on that line of the report, and then fully understand how to report those gallon on an excise tax report AND accurately apply any tax credits off taxes due. If this pilot program does eventually lead to the “two in one” version of a report I would expect to see the TTB offer webinars and other forms of training to follow it up.
Readers of this blog and those on our newsletter can also expect training offerings from our Winery Compliance Training Academy to follow as well, because you know it helps to have training that isn’t entirely in government speak!