You are launching a new craft alcoholic beverage manufacturing business. There is so much to do, paperwork is at the bottom of your list. It is important, however, to create a record keeping system that keeps your operations in compliance with state and federal regulations. Fines can be $1,000 or up to 1 year in prison for each offense. Each day can be considered a separate offense, so liability can be substantial.

Records must be maintained for at least 3 years. Computerized software can be a good investment to help you with your regulatory responsibilities. The TTB website has a good seminar that can explain your responsibilities (Google “TTB Compliance Seminar.”)

Recordkeeping: Distillery Daily Records That Must be Maintained

• Processing Records
  • §19.597 – Manufacturing records
  • §19.598 – Dump/batch records
  • §19.599 – Bottling and packaging records
  • §19.600 – Alcohol content and fill test records
  • §19.601 – Finished products records
  • §19.602 – Redistillation records
  • §19.603 – Liquor bottle records
  • §19.604 – Rebottling, relabeling, and reclosing records

• Production records
  • §19.584 – Materials for the production of distilled spirits
  • §19.585 – Production and withdrawal records
  • §19.586 – Byproduct spirits production records

• Storage records
  • §19.590 – Storage operations
  • §19.591 – Package summary records
  • §19.592 – Tank record of wine and spirits of less than 190º of proof
  • §19.593 – Tank summary record for spirits of 190ºor more of proof

The TTB reports its most commonly found violations when distilleries are audited:

• Failure to take inventory:
  • CFR 19.333 requires a physical inventory must be taken at the end of each quarter.
  • Destruction:
    • Must report product destruction on monthly report of storage operations
    • Must maintain records showing:
      • Date
      • Time
      • Space
      • Manner of destruction
      • Person who supervised the destruction

Reporting and tax payment:

• Required Monthly Reports not filed :
  • Monthly report of production operation (TTB F 5110.40)
  • Monthly report of storage operation (TTB F 5110.11)
  • Monthly report of processing operations (TTB F 5110.28)
  • Monthly report of processing (denaturing) operations (TTB F 5110.43)

• Excise Tax Returns not filed:
  • TTB F 5000.24
  • Semi-monthly/quarterly
    • Quarterly if not more than $50,000 annually in tax expected. §19.235(b)
• Due 14 days after close of period
• Consistent late returns is a reason for an audit

Recordkeeping Requirements for Breweries

• Daily Records: 27 CFR 292
  • 19 separate types of records that must be maintained daily

Examples:

• All material received and used in production
• Beer bottled
• Beer racked
• Beer consumed
• Packed beer used for lab samples
• Beer lost to breakage, theft, etc.
• Records of test or measuring devices
• Brewing material, beer in process and finished beer on hand
• Also record stock go bad during process

The TTB reports these common inventory issues discovered during audits:

• Loss v. Shortage – misclasifying these on reports
  • Loss: Known reasons like breakage, theft, etc. There is no tax liability for inventory losses.
  • Shortage: an unexplained missing amount of beer. Must be able to ensure there is a true loss and not a recordkeeping mistake before the brewery can be relieved of tax liability.

• Removal for consumption or sale
  • Except for the following, all removals of alcohol form inventory will be presumed for consumption or sale and are taxed:
    • Transfer to a related brewery
    • Beer unfit for beverage use
    • Research/Testing
    • Used as distilling material
    • For destruction
    • Exportation
    • Personal or family use

• Tanks: Must be marked with serial number and capacity
  • Typically: F-1, H-1, K-1, etc.
  • Must be equipped with a measuring device (can use portable equipment)
  • Testing and measuring devices
  • Must periodically test and calibrate measuring devices like flow meters and site glasses
  • Must maintain records showing:
    • Date of test
    • Identity of device tested
    • Results
    • Corrective action, if needed

Frequency of reporting and tax payment for breweries

• Report of operations
  • Under 10,000 – quarterly
  • Over 10,000 – monthly
  • Excise Returns
    • Under $50,000 in yearly taxes – quarterly
    • Over $50,000 – semi-monthly (September has three periods)
    • Production v. Consumption/Sale
      • Taxes are not paid until beer is removed for sale or consumption