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Thread: Tax determining vessels?

  1. #1
    Join Date
    Feb 2006
    Posts
    73

    Tax determining vessels?

    I was reviewing my application for a brewer's license from the Feds, and I have a question about tax-determining vessels. The information I received wasn't terribly clear, but can you basically use any vessel for a tax determiner? I plan on keeping some high gravity beers on hand in kegs, and I was wondering if I have to move the beer into a tax determiner then into a keg or if I can just use a keg as a tax determiner?

    Thanks,

    Ben
    www.oldcrankybrewers.com

  2. #2
    Join Date
    Dec 2004
    Location
    Mukilteo, WA
    Posts
    304
    Hey Ben,

    This is going to sound like a cop out, but it depends on who inspects your Brewery prior to start-up. We have always used the kegged volume as tax determining because we don't have serving tanks on any of our premises. However, some of my colleagues haven't been so lucky. Even though they keg only, they still have to label their tanks as a "Tax Determination Tank".

    Pretty much any stainless vessel with a site glass that you can calibrate will work. I'ld recommend to at least have a vessel designed to hold beer (tri-clamp fitting, et al). Inspectors will generally as how you made the barrellage calibration along the site glass, and you should do this with a bonafide method, such as using a portable water meter. Be accurate, as you are paying tax on this volume and creating suspicion with the tax folks does none of us any good.

    If you can go directly to keg as a tax determination, that's the best route. However, you might be required to go to the TD tank prior to kegging. Looking back, I have predominantly seen TD tanks used in places where the beer has a direct supply from some portion of the Brewery or from a walk-in near the Brewery.

    Regards,

  3. #3
    Join Date
    Feb 2006
    Posts
    73
    Brian,

    Thanks for your reply. I

    On slightly different topic, I read up on your company a little, and one of the articles I read (old information) said your brewery is behind the pub you own. So, your brewery and pub are seperate entities? And you just keg your beer and roll your kegs next door instead of using serving tanks?

    How does that work from a legal standpoint? I appreciate that it's different from state to state, but I'm curious. Do you have to have a wholesaler's license? Here in Virginia, as I understand the law, breweries are not allowed to wholesale their own beer, nor are they allowed to own a controlling stake in a distributorship.

    Thanks!

  4. #4
    Join Date
    Dec 2004
    Location
    Mukilteo, WA
    Posts
    304
    Before we bought the tavern in 1999, we were a subleasing tenant of theirs for 5 years. The relationship strted to erode and we wanted to make more cashflow, so we purchased it and made it a genuine Alehouse. We made teh Brewery and Alehouse all one business, so our liquor license here in Washington reads us a "Brewery with Tavern Privileges", meaning we can sell other beers (in house and to go) as well as wine (in house and to go).
    There are loads of threads on whether or not to sell the beer of other Breweries so I won't belabor that point.

    Currently in Washington, Breweries have the right with their liquor license to self distribute their own products, so no wholesaler license is required. As part of the "3 Tier" system here, Breweries may own distributorships and vice versa. There are just some weird particularites that have to be observed in that relationship, though.

  5. #5
    Join Date
    Mar 2003
    Location
    Nashville
    Posts
    676
    One consideration on the tax side - you declare the taxes when you tap the vessel to begin selling it. For a 10 bbl serving tank, that may mean you begin paying taxes on it long before it is empty. For kegs, you only declare the taxes when you tap that keg - makes a difference on your cash flow. Even if we only had a brewpub, I would keg out all of our beer just for that reason.
    Linus Hall
    Yazoo Brewing
    Nashville, TN
    [url]www.yazoobrew.com[/url]

  6. #6
    Join Date
    Feb 2005
    Location
    Helena, Montana
    Posts
    292
    Linus,

    I always enjoy reading your posts because they are usually very informative, offer sound advice and good common sense. However, I have to disagree with your statement about kegging off product to be served on-premise for cash flow reasons. While excise taxes are significant, you do have to pay them at some point. And now under the new TTB regs, that means quarterly for most of us small breweries. I cannot believe that the interest savings of paying the excise taxes gradually (per keg) outweigh the cost savings of not having to clean and fill 15-30 kegs as compared to one serving tank. Not to mention that using a serving tank where appropriate frees up additional labor, space, and kegs to produce even more of your fine beers.

    This is just my opinion, based on our own experience. For the first five years of our operation, we did keg off all of our product, even that which we sold on-premise. Installing serving tanks for our premise beer was one of the best efficiency decisions we have ever made. Just my $.02.

  7. #7
    Join Date
    Mar 2003
    Location
    Nashville
    Posts
    676
    Beersmith,

    You're right, I had not considered the quarterly benefits of paying the federal taxes. However, remember that you have to adjust your bond upwards to cover your expected quarterly excise tax liability. For us, that would have meant getting a real bond instead of just the $1000 in cash we posted at the beginning, and realizing that turned me off from changing anything. We still have to pay our state taxes every month, $4.29/bbl and that was part of my reasoning as well.
    Linus Hall
    Yazoo Brewing
    Nashville, TN
    [url]www.yazoobrew.com[/url]

  8. #8
    Join Date
    Mar 2007
    Posts
    49
    This maybe a silly question but can you use bottles(cases) for tax determination as well as kegs?

  9. #9
    Join Date
    Jul 2010
    Posts
    287
    Quote Originally Posted by sdgbrew
    This maybe a silly question but can you use bottles(cases) for tax determination as well as kegs?
    See section 25.157
    Determination of tax on bottled beer.
    Shouldn't you be brewing beer?
    HK

  10. #10
    Join Date
    Sep 2007
    Location
    Roy Wa
    Posts
    50

    tax determination and brewers bond?

    I have a couple of questions that are along the samethread. I've read all the ttb regs, but I still don't understand the brewers bond and how that works. I guess what I'm asking is for someone to dumb it down for me. The excise tax return forms are bit confusing as well. How do you determine whether you are going to pay quarterly or monthly. I know that has to do with annual production, but who decides that, you or the ttb.

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