and (c) the times for filing such returns, with remittances. The requirements of this subpart with respect to control premises and controlled stock shall be applicable only to proprietors of bottling premises required to file returns on Form 4077 under the provisions of this subpart. § 170.42 Other regulations applicable.

All provisions of Part 201 of this chapter not inconsistent with the provisions of this subpart shall remain in full force and effect, and all such provisions applicable to returns, remittances, bonds, and consents of surety, operations by alternate proprietors, and inventories and records, shall be applicable to returns, remittances, bonds, and consents of surety, operations by alternate proprietors, and inventories and records under this subpart.

[T.D. 6895, 31 F.R. 11974, Sept. 13, 1966]

§ 170.43 Meaning of terms.

When used in this subpart, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof, terms shall have the meanings ascribed in Part 201 of this chapter and in this subpart.

Control premises. The premises, as provided in § 170.52, on which controlled stock is rectified, bottled, packaged, or stored.

Controlled stock. Stock on control premises, comprising:

(a) Tax-determined domestic spirits received for rectification or bottling;

(b) Tax-determined imported spirits received from internal revenue bond (as authorized by section 5232, I.R.C.) for rectification or bottling;

(c) Other tax-determined imported spirits dumped and reported on batch record Form 122 for use in production of rectified distilled spirits product;

(d) Alcoholic flavoring materials, wines, and products made with wine, dumped and reported on batch record Form 122 for use in production of a rectified distilled spirits product;

(e) Distilled spirits products received and dumped for reprocessing or rebottling;

(f) Any mixture of, or product made from, the preceding;

(g) Any of the preceding (1) on the control premises of a proprietor on the commencement of business under the provisions of this subpart, or (2) received from an outgoing proprietor as

controlled stock under the provisions of § 170.56.

PAYMENT OF TAXES ON DISTILLED SPIRITS AND RECTIFIED PRODUCTS

§ 170.44 General.

Nothwithstanding any provision of Part 201 of this chapter, or of Subpart W of this part, relating to (a) the periods to be covered by returns on Form 2522 for the deferred payment of taxes on distilled spirits, and on Form 2527 for the deferred payment of taxes on rectified products and wines, (b) the times for filing returns for the deferred payment of taxes, and (c) the amount of tax to be included for payment with such returns, proprietors of distilled spirits plants shall file returns for the deferred payment of taxes on distilled spirits, and on rectified products and wines, determined on and after the effective date of this subpart, on the forms, for the periods, by the times, and with remittances in the amounts, as provided in this subpart. § 170.45 Deferred payment of distilled spirits tax by proprietor of bonded premises.

A proprietor of bonded premises who has withdrawn spirits from such premises on determination and before payment of tax shall file a tax return covering such spirits on Form 2522, with remittance, for the periods and by the times provided in § 170.49. The proprietor of bonded premises shall include, for payment, on his return on Form 2522 the full amount of distilled spirits tax determined in respect of all spirits released for withdrawal from bonded premises on determination of tax during the period covered by the return (except spirits on which tax has been prepaid, and spirits withdrawn on determination of tax by proprietors of bottling premises). The proprietor of bonded premises who is qualified under bond, Form 2613 or 2615, to defer payment of distilled spirits tax, shall execute and file a return on Form 2522 to cover each return period, nothwithstanding that no tax is due for payment for such period. § 170.46 Deferred payment of distilled spirits tax by proprietor of bottling premises.

A proprietor of bottling premises who has assumed the liability for tax on spirits withdrawn from internal revenue bond under section 5174(a) (2), I.R.C., shall pay such tax pursuant to returns

multiplying the remainder of proof gallons by an amount equal to the rate of tax prescribed by section 5001(a)(1), I.R.C.

(c) Determine, and pay with the return for the period, the amount by which the balance of his outstanding liability (as determined in paragraph (a) of this section) exceeds the tax value (as determined in paragraph (b) of this section) of the controlled stock inventory: Provided, That in any case where the proof gallons to be deducted from the controlled stock inventory under the provisions of paragraph (b) (1) of this section equals or exceeds the total proof gallons in the end of the period inventory of controlled stock, the total liability remaining unpaid (as determined under the provisions of paragraph (a) of this section) shall be paid with the return for the period.

(d) Notwithstanding the provisions of paragraph (c) of this section, the amount to be paid with the return shall be increased by any amount necessary to comply with the requirements of paragraphs (e) and (f) of this section, and shall be reduced by the amount of any authorized credit taken on the return.

(e) Any tax for which liability for payment was assumed under the provisions of section 5174(a) (2), I.R.C., which has not been previously paid as provided in this subpart shall be paid with the return on Form 4077 for the twelfth return period next succeeding (1) the return period in which falls the date of receipt at the bottling premises of the spirits reported on the withdrawal form, or (2) the return period in which falls the twenty-first day after the date of the certificate of tax determination on the withdrawal form, whichever period occurs first.

(f) The outstanding liability which would remain after compliance with the provisions of paragraphs (a) through (e) of this section shall not exceed the tax value of the controlled stock removed by the proprietor during any six consecutive return periods within the thirty return periods preceding the period for which the return on Form 4077 is being prepared; such tax value to be computed by (1) determining (from the record prescribed by § 170.61 (c) (3)) the total proof gallons removed from controlled stock during the six consecutive return periods, and (2) multiplying that total by an amount equal to the rate of tax prescribed by section 5001(a) (1), I.R.C.

The six consecutive return periods shall be designated by the proprietor. The provisions of this paragraph shall not be applicable to the liability outstanding at the close of each of the first six return periods after the commencement of operations by the proprietor under this subpart.

§ 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 an 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.

CONTROL PREMISES

§ 170.52 Control premises.

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 offcers to readily ascertain whether the stock is controlled stock or other stock.

BONDS AND CONSENTS OF SURETY

(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 suficient 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. 1849, 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 recufed 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

§ 170.57 Permanent 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

66-058-67- 2

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