Operations (Adjacent Wine Cellar) Bond - Distilled Spirits in All States
Table of Contents
Brief Summary
If you run a distilled spirits plant and a bonded wine cellar next to it, TTB lets you cover both with one operations bond instead of two. The amount depends on which DSP operations you conduct, so pick the right row of the federal table before you order and the bond goes in with your registration.
Under 27 CFR 19.162, a proprietor with a bonded wine cellar adjacent to its own distilled spirits plant may file a single operations bond on TTB F 5110.56 covering both. The penal sum is tiered by operation type under 27 CFR 19.166. It runs from a $6,000 minimum and $150,000 cap for a distiller, up to a $16,000 minimum and $300,000 cap for a distiller, warehouseman and processor. The Alcohol and Tobacco Tax and Trade Bureau is the obligee.
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How to Apply for an Operations (Adjacent Wine Cellar) Bond:
- Confirm the plant is qualified to produce spirits and that you also operate the adjacent bonded wine cellar.
- Identify your operation type: distiller, distiller and warehouseman, distiller and processor, or all three.
- Calculate the penal sum under 27 CFR 19.166 within that tier's minimum and maximum.
- Check whether a separate supplemental bond is needed for deferred wine tax under 26 U.S.C. 5354.
- Have the surety issue the bond on TTB F 5110.56 with a power of attorney.
- File the bond with TTB. Registration is not approved until the required bonds are in place.
Detailed Information About the All States Operations (Adjacent Wine Cellar) Bond:
Who can use the combined bond
27 CFR 19.162 allows one operations bond for a distilled spirits plant and an adjacent bonded wine cellar only when two things are true. The plant must be qualified under subpart D of part 19 to produce distilled spirits, and the wine cellar and the plant must be run by the same person, or by a corporation and its controlled subsidiaries. A plant that only warehouses or processes, with no production, does not qualify.
The single bond satisfies the operations bond requirement of 26 U.S.C. 5173 for the plant and the bond requirement of 26 U.S.C. 5354 for wine and spirits held at or in transit to the wine cellar. The bond must carry the same terms as the two separate bonds would, and the penal sum cannot be split between the two facilities. The full amount stands behind liabilities at either one.
How much
The penal sum covers the tax on spirits produced in a 15 day period, plus tax on spirits, wines and other products held at or in transit to the plant where those operations apply, plus the tax on wines and wine spirits possessed at and in transit to the adjacent wine cellar. 27 CFR 19.166 sets these limits:
- Distiller with adjacent bonded wine cellar: not less than $6,000, need not be more than $150,000.
- Distiller and warehouseman with adjacent bonded wine cellar: $11,000 to $250,000.
- Distiller and processor with adjacent bonded wine cellar: $11,000 to $250,000.
- Distiller, warehouseman and processor with adjacent bonded wine cellar: $16,000 to $300,000.
The supplemental bond many proprietors miss
TTB notes in 19.162 that the proprietor may still need a supplemental bond for the wine cellar to cover liabilities from deferred payment of tax, under the second sentence of 26 U.S.C. 5354. The combined operations bond does not automatically take care of that.
Small taxpayer exemption
Under 27 CFR 19.151(d), a proprietor paying tax on a deferred basis who is eligible for annual or quarterly returns under 19.235 does not need a bond for operations and withdrawals of spirits for nonindustrial use. Quarterly returns are open to taxpayers who expect not more than $50,000 in distilled spirits tax for the year and owed not more than $50,000 the year before. The exemption does not apply to spirits for industrial use.
What the bond guarantees
The proprietor will follow the laws and regulations covering bonded activities and pay all taxes under 26 U.S.C. chapter 51, including tax on unexplained shortages of bottled spirits, plus penalties and fines. TTB can collect from the proprietor, the surety or both. If tax liability grows beyond the bond, 27 CFR 19.167 requires added coverage.
Cost
Premium depends on the penal sum and on the owners' credit and the financial condition of the business.
Eligibility and Requirements for an All States Operations (Adjacent Wine Cellar) Bond:
- Surety on Treasury Circular 570, or a bond secured by deposited securities or cash.
- TTB named as obligee on TTB F 5110.56.
- Same proprietor, or a corporation and its controlled subsidiaries, operating both facilities.
- Penal sum within the 27 CFR 19.166 limits for the operation type.
- Additional coverage under 27 CFR 19.167 when tax liability rises.
All States Operations (Adjacent Wine Cellar) Bond FAQs:
No. 27 CFR 19.162 bars allocating the penal sum. The full amount must be available for liabilities at either facility.
Distiller with adjacent wine cellar, $6,000 to $150,000. Distiller and warehouseman, $11,000 to $250,000. Distiller and processor, $11,000 to $250,000. Distiller, warehouseman and processor, $16,000 to $300,000.
Not necessarily. TTB says a supplemental wine cellar bond may still be needed for deferred tax payment liabilities under 26 U.S.C. 5354.
No. The plant must be qualified to produce distilled spirits.
A proprietor eligible for annual or quarterly tax returns and paying on a deferred basis needs no bond for nonindustrial spirits under 27 CFR 19.151(d). Industrial use spirits still require a bond.
