§ 170.51 Default in payment of taxes.

The provisions of Part 201 of this chapter relating to default in deferred payment of taxes shall be applicable to default in deferred payment of taxes under this subpart. In addition, if a proprietor of bottling premises has defaulted in payment of any tax under this subpart, he shall not remove any controlled stock from his control premises until he has filed a return on Form 2521 (appropriately modified), with remittance, in En amount not less than the product of the number of proof gallons of the controlled stock proposed to be removed and the rate of tax prescribed by section 5001(a) (1), I.R.C.; however, notwithstanding that the tax is paid pursuant to return on Form 2521 under the provisions of this section, a return on Form 4077 shall be filed for each return period as provided in § 170.46. The proprietor

shall retain with his copy of each return on Form 2521 (showing receipt of the remittance by the internal revenue officer or district director, as the case may be) a record showing the kind of spirits, type, size, and serial numbers of the containers and the proof gallons of the spirits removed, or to be removed, pursuant to such return. Where a proprietor of bottling premises has defaulted in any payment of tax under this subpart, during the period of such default and thereafter until the assistant regional commissioner finds that the revenue will not be jeopardized by payment of tax pursuant to return on Form 4077, tax shall be paid by such proprietor in accordance with the provisions of this section.

The bottling premises of the distilled spirits plant shall constitute the control premises: Provided, That a proprietor who desires to establish additional control premises on his general plant premises may submit to the assistant regional commissioner an application for amended registration, Form 2607, and an amended plat delineating such additional premises. Approval of the Form 2607 by the assistant regional commissioner shall constitute approval of the additional control premises, and the control premises shall then consist of the bottling premises and the additional premises depicted on the amended plat. Each plat submitted under this section shall be prepared in accordance with the applicable

provisions of §§ 201.154 and 201.155 of this chapter, and shall depict the relative location of the bottling premises and the proposed additional control premises. The provisions of § 201.174(a) of this chapter shall be applicable to operation by alternating proprietors of additional control premises established under the provisions of this subpart.

§ 170.53 Segregation of stocks.

Proprietors of bottling premises shall keep all controlled stock physically separated from other stock on their control premises. Such separation shall be effectuated by use of separate tanks, rooms, or buildings, or by partitioning, or by such other manner or method satisfactory to the assistant regional commissioner as will clearly and readily distinguish controlled stock from other stock on the control premises and as will facilitate verification of the inventory. All stock on control premises shall be so identified as to enable internal revenue officers to readily ascertain whether the stock is controlled stock or other stock. BONDS AND CONSENTS OF SURETY

§ 170.54 Bonds.

(a) Form 2613, 2614, or 2615. A proprietor whose bond on Form 2613, 2614, or 2615, covering the deferred payment of taxes on distilled spirits withdrawn from bonded premises on determination of tax, is in a sufficient penal sum shall give either a new bond on Form 2613, 2614, or 2615, as applicable, or a consent of surety on Form 1533 to extend the terms of his bond then in force to cover the deferred payment of tax on distilled spirits under the provisions of this subpart. A proprietor whose bond on Form 2613, 2614, or 2615 is not in a sufficient penal sum, shall give either a new bond in a sufficient penal sum on Form 2613, 2614, or 2615, as applicable, or a strengthening bond to increase the total penal sum of the bonds in force to a sufficient penal sum. Each proprietor giving a strengthening bond shall also file a consent of surety on Form 1533 to extend the terms of his bond, Form 2613, 2614, or 2615, then in force to cover the payment of taxes on distilled spirits under the provisions of this subpart.

(b) Form 2601. A proprietor of bottling premises who files returns on Form 2527 shall give either a new bond on Form 2601 or a consent of surety on Form 1533 to extend the terms of his

bond, Form 2601, then in force, to cover the payment of taxes on rectified products and wines under the provisions of this subpart.

(c) Exception. Notwithstanding the provisions of paragraphs (a) and (b) of this section, a proprietor whose bond is in a sufficient penal sum and who is qualified under the provisions of Subpart W of this part (as added by Treasury Decision 6848, effective September 24, 1965) for extended deferral of payment of taxes (1) on spirits withdrawn from bond in his capacity as a proprietor of bonded premises, or (2) on rectified products and wines, shall be deemed to be qualified for deferral of payment of taxes on spirits so withdrawn or on rectified products and wines, as the case may be, under the provisions of this subpart.

(72 Stat. 1349, 1352; 26 U.S.C. 5173, 5174) § 170.55 Consents of surety.

Each consent of surety on Form 1533 required under the provisions of § 170.54 shall identify the particular bond to which it applies and shall contain a statement of purpose as follows

(a) With respect to bond, Form 2613, 2614, or 2615:

To continue in effect said bond (including all extensions or limitations of terms and conditions previously consented to and approved), notwithstanding that the deferred payment of taxes on distilled spirits withdrawn from bond on determination of tax will be made as provided for by regulations in Subpart C of 26 CFR Part 170.

(b) With respect to bond, Form 2601: To continue in effect said bond (including all extensions or limitations of terms and conditions previously consented to and approved), notwithstanding that the deferred payment of taxes on rectified products and wines will be made as provided for by regulations in Subpart C of 26 CFR Part 170. OPERATIONS BY ALTERNATING PROPRIETORS $ 170.56 Procedures for alternating pro

prietors.

(a) General. Where bottling premises are operated by alternating proprietors under § 201.174 of this chapter, the outgoing proprietor may transfer any or all of his controlled stock to the incoming proprietor, and such transfer shall constitute a removal of controlled stock from control premises by the outgoing proprietor. The outgoing proprietor may retain on the bottling premises any of his controlled stock

which has not been packaged or cased for removal, and he may retain on any portion of his control premises which is not to be operated by the incoming proprietor any of his controlled stock which has been packaged or cased for removal. Any controlled stock not transferred to the incoming proprietor and not retained by the outgoing proprietor as provided in this section shall be considered to have been removed from the control premises by him at the time the premises are alternated to the incoming proprietor.

(b) Procedure for outgoing proprietor. The outgoing proprietor shall file a return on Form 4077 (with remittance, if payment is due) for the return period in which the change in proprietorship is made and for each subsequent return period during which the alternate proprietor operates the bottling premises. If the outgoing proprietor is in default, a return on Form 2521, with remittance, must be filed as provided in § 170.51 before the removal or transfer of any controlled stock, as provided in paragraph (a) of this section.

(c) Procedure for incoming proprietor. If the outgoing proprietor transfers any of his controlled stock to the incoming proprietor, all stock so transferred which has not been packaged or cased for removal shall become a part of the incoming proprietor's inventory of controlled stock when received by him, and he shall include the quantity of such controlled stock in his record required by § 170.61(a).

DISCONTINUANCE OF BUSINESS

Where the proprietor of bottling premises permanently discontinues business, he shall comply with the provisions of § 201.176 of this chapter, and shall include for payment with his return on Form 4077, for the period in which such discontinuance becomes effective, the full amount of any unpaid tax for which liability was assumed by him under section 5174(a) (2), I.R.C.: Provided, That where such proprietor is required to pay tax pursuant to return on Form 2521 as provided in § 170.51, he shall, before filing Form 2607 as provided in § 201.176 of this chapter, file a return on Form 2521 with remittance in the full amount of any unpaid tax for which liability was assumed by him under section 5174(a) (2), I.R.C.

INVENTORIES AND RECORDS

§ 170.58 Establishment of controlled stock inventory.

Each proprietor of bottling premises shall, before commencing business on or after the effective date of this subpart, take a physical inventory of his controlled stock. Such inventory shall show all quantities in proof gallons and shall be taken under such supervision, or verified in such manner, as the assistant regional commissioner may require.

§ 170.59 Inventories of controlled stock.

Each proprietor of bottling premises shall establish an inventory, in proof gallons, of his controlled stock on hand as of the close of each return period. The inventory shall differentiate between stocks of mixtures and products which derive less than half of their proof gallon content from tax-determined spirits and other controlled stocks. For the return periods ending June 30 and December 31 of each year, and for such other return periods as may be required by the assistant regional commissioner, physical inventories shall be taken. Physical inventories required under the provisions of this section shall be taken under such supervision, or verified in such manner, as the assistant regional commissioner may require. Whenever a physical inventory of controlled stock is to be taken, the proprietor shall, at least 5 business days in advance, advise the assistant regional commissioner of the date and time he will take such inventory.

§ 170.60 Record of inventories.

Each proprietor of bottling premises shall prepare a record of each required physical inventory of controlled stock taken by him under the provisions of this subpart. The record of each such inventory shall show the following:

(a) As to containers (including uncased bottles), the kind, size, and serial number where applicable, of each container, and the kind, and quantity in proof gallons, of spirits contained

therein;

(b) As to cases of bottled spirits, the kind of spirits therein, the number and size of bottles per case, the proof gallons per case, and the number of such cases; and

(c) The total proof gallons of the inventory.

The provisions of §.201.627 of this chapter relating to the signing and retention

Each proprietor of bottling premises qualified to defer payment of tax under the provisions of this subpart shall, in addition to the records required under the provisions of 26 CFR Part 201, prepare summaries, in proof gallons, of additions to and removals from controlled stock as follows:

(a) Daily summary of additions to controlled stock. Additions to controlled stock shall be summarized daily, showing separately (1) spirits received on withdrawal from internal revenue bond under section 5174(a) (2), I.R.C., and (2) all other additions to controlled stock. Each summary shall be supported, as applicable, by copies of Forms 179 covering spirits withdrawn from internal revenue bond on determination of tax; by invoices or other commercial documents covering other tax-determined domestic spirits received for rectification or bottling; by batch records, Forms 122, reporting imported spirits (other than those received from internal revenue bond), alcoholic flavoring materials, wines, and products made with wine, dumped for use in rectified distilled spirits products; and by Forms 122 covering returned distilled spirits products dumped for reprocessing or rebottling.

(b) Daily summary of removals from controlled stock. In addition to the daily summary of removals required under $201.623 (h) of this chapter, removals from controlled stock shall be summarized daily, showing separately (1) removals, (2) spirits voluntarily destroyed, (3) determined breakage after completion, and determined casualty losses, and (4) losses or gains disclosed by inventories: Provided, That removals in cases may, in lieu of being reported in the proof gallon total of removals, be recorded in the summary by number of cases, wine gallons per case, and proof of the contents but, if that is done, the proprietor shall, on request by an internal revenue officer, promptly convert the quantities of such removals to proof gallons. Each summary shall be supported, where applicable, by records showing the name and address of each consignee.

(c) Summary of controlled stock operations for return period. At the close of each return period, a summary shall be

(3) Removals of controlled stock (total proof gallons of items required by paragraph (b) of this section to be summarized daily).

A copy of each return period summary required by this paragraph shall be delivered to the assigned officer on or before the third business day preceding the due date for filing the return for that period. § 170.62 Record of tax liability.

Each proprietor of bottling premises qualified to defer payment of tax under the provisions of this subpart shall maintain a record of the tax-determined liability assumed by him on spirits withdrawn from internal revenue bond under the provisions of section 5174(a)(2), I.R.C. Such record shall show, in chronological order, the tax liability on each lot of such spirits received on the bottling premises (unless previously entered therein as required by this section), the amount of tax paid and credited with each return, and the daily balance of outstanding liability on spirits received on the bottling premises. Each entry on the record shall show, as to each receipt of spirits, the date of receipt, the serial number of the withdrawal Form 179, and the liability assumed; and as to each tax return on Form 4077, the period covered by the return, the date filed, and the amount credited and paid. Where an entire lot of spirits withdrawn from internal revenue bond under the provisions of section 5174(a) (2), I.R.C., is lost prior to receipt on the bottling premises, the proprietor shall, at the time he makes the report required by § 201.484 of this chapter, enter the total tax liability on such spirits in his tax liability accounting; and where any lot of spirits so withdrawn has been in transit for two return periods following the return period in which falls the 21st day after the date of the certificate of tax determination on the withdrawal form, the liability thereon, if not previously entered into the tax liability accounting, shall, at the beginning of the third return period next succeeding that in which fell the said 21st day, be en

tered by the proprietor in his tax liability accounting. The record shall also show, as of the close of each return period, but not as a part of the tax liability accounting, the serial numbers of the Forms 179 and the tax liability assumed thereon, for those spirits which were in transit at the close of each return period, showing separately those which were in transit less than 21 days and those which were in transit 21 days or more.

§ 170.63 Credits against assumed liability.

Notwithstanding any provisions of this subpart with respect to the method of computing the tax to be paid with the return on Form 4077, or of maintaining records of tax liability, amounts paid or credited on returns filed under the provisions of § 170.46 shall be considered to be in satisfaction of the oldest outstanding liability in respect of taxdetermined spirits withdrawn under the provisions of section 5174(a) (2), I.R.C.

Subpart D-[Reserved]

Subpart E-Application of Section 6423, Internal Revenue Code of 1954, as Amended, to Refund or Credit of Tax on Distilled Spirits, Wines, and Beer

SOURCE: The provisions of this Subpart E contained in T.D. 6323, 23 F.R. 7886, Oct. 11, 1958, unless otherwise noted.

GENERAL

§ 170.85 Scope of regulations in this subpart.

The regulations in this subpart relate to the limitations imposed by section 6423, I. R. C., on the refund or credit of tax paid or collected in respect to any article of a kind subject to a tax imposed by part I, subchapter A of chapter 51, I. R. C., or by any corresponding provision of prior internal revenue laws.

§ 170.86 Meaning of terms.

When used in this subpart, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof, terms shall have the meaning ascribed in this section.

Article. The commodity in respect to which the amount claimed was paid or collected as a tax.

Assistant regional commissioner. An assistant regional commissioner (alcohol,

tobacco and firearms) who is responsible to, and functions under the direction and supervision of, a regional commissioner of internal revenue.

Claimant. Any person who files a claim for a refund or credit of tax under this subpart.

Director. The Director, Alcohol, Tobacco and Firearms Division, Internal Revenue Service, Treasury Department, Washington, D.C. 20224.

Director of customs. The officer who has jurisdiction over all customs activities of a customs district, including district directors of customs at headquarters ports other than the Port of New York, N.Y., the regional commissioner of customs, the deputy and assistant regional commissioners of toms for Customs Region II at the Port of New York, N.Y., and, as applicable, port directors at ports not designated as headquarters ports.

cus

1. R. C. Internal Revenue Code of 1954, as amended.

Owner. A person who, by reason of a proprietary interest in the article, furnished the amount claimed to the claimant for the purpose of paying the tax. Person. An individual, a trust, estate, partnership, association, company, or corporation.

Regional commissioner. The regional commissioner in a region.

Tax. Any tax imposed by part I, subchapter A of chapter 51, I. R. C., or by any corresponding provision of prior internal revenue laws, and in the case of any commodity of a kind subject to a tax under such part, any tax equal to any such tax, any additional tax, or any floor stocks tax. The term includes an exaction denominated a "tax", and any penalty, addition to tax, additional amount, or interest applicable to any such tax.

[T.D. 6323, 23 F.R. 7886, Oct. 11, 1958, as amended by T.D. 7005, 34 F.R. 2248, Feb. 15, 1969]

§ 170.87 Applicability to certain credits or refunds.

The provisions of this subpart apply only where the credit or refund is claimed on the grounds that an amount of tax was assessed or collected erroneously, illegally, without authority, or in any manner wrongfully, or on the grounds that such amount was excessive. This subpart does not apply to:

(a) Any claim for drawback,

(b) Any claim made in accordance

with any law expressly providing for credit or refund where an article is withdrawn from the market, returned to bond, or lost or destroyed,

(c) Any amount claimed with respect to an article which has been lost, where a suit or proceeding was instituted before June 15, 1957, and

(d) Any claim based solely on errors in computation of the quantity of an article subject to tax or on mathematical errors in computation of the amount of the tax due, or to any claim in respect of tax collected or paid on an article seized and forfeited, or destroyed, as contraband.

Any suit or proceeding, with respect to any amount to which the provisions of this subpart would apply, which was barred on April 30, 1958, shall remain barred, and no claim for credit or refund of any such amount which was barred from allowance on April 30, 1958, shall be allowed after such date in any amount.

§ 170.88 Ultimate burden.

For the purposes of this subpart, the claimant, or owner, shall be treated as having borne the ultimate burden of an amount of tax only if:

(a) He has not, directly or indirectly, been relieved of such burden or shifted such burden to any other person.

(b) No understanding or agreement exists for any such relief or shiftingand

(c) If he has neither sold nor contracted to sell the articles involved in such claim, he agrees that there will be no such relief or shifting, and furnishes bond as provided in § 170.94.

§ 170.89 Conditions to allowance of credit or refund.

No credit or refund to which this subpart is applicable shall be allowed or made, pursuant to a court decision or otherwise, of any amount paid or collected as a tax unless a claim therefor has been filed, as provided in this subpart, by the person who paid the tax and the claimant, in addition to establishing that he is otherwise legally entitled to credit or refund of the amount claimed, establishes:

(a) That he bore the ultimate burden of the amount claimed, or

(b) That he has unconditionally repaid the amount claimed to the person who bore the ultimate burden of such amount, or