Withdrawal Bond - Distilled Spirits in All States
Table of Contents
Brief Summary
A withdrawal bond lets a distilled spirits plant move tax determined spirits off bonded premises now and pay the federal excise tax later. Without it, the tax is due at the time of withdrawal. The bond is sized to the unpaid tax you carry at any one time, from $1,000 up to $1,000,000 per plant, so you can match coverage to your real cash flow.
A withdrawal bond is a federal TTB bond required under 27 CFR 19.164 for a distilled spirits plant that withdraws spirits after the tax is determined but before it is paid. For one plant the penal sum equals the unpaid tax chargeable against the bond at any one time, not less than $1,000 and need not be more than $1,000,000. It is filed on TTB F 5110.56 in addition to the plant's operations bond.
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How to Apply for a Withdrawal Bond:
- Estimate the most unpaid tax you will carry on withdrawn spirits at any one time.
- Set the penal sum between $1,000 and $1,000,000 per plant under 27 CFR 19.166(c).
- For several plants, show each plant's allocation and the total on the bond.
- Have a Circular 570 surety execute TTB F 5110.56 with a power of attorney for the signing agent.
- Submit the bond to TTB and wait for approval before withdrawing on a deferred basis.
Detailed Information About the All States Withdrawal Bond:
What it does
Under 27 CFR 19.164, a proprietor who wants to withdraw spirits from bonded premises on a tax deferred basis must give TTB a withdrawal bond. It guarantees the tax on those spirits up to the bond amount. It sits on top of the operations bond, not in place of it. Once spirits leave under the withdrawal bond, the operations bond no longer covers the tax on them.
How much it has to be
The penal sums come from 27 CFR 19.166(c).
- One plant: the amount of tax chargeable against the bond at any one time but not yet paid. Not less than $1,000 and need not be more than $1,000,000.
- Two or more plants on one bond: the per plant figures added together, so at least $1,000 times the number of plants and no more than $1,000,000 times the number of plants.
If you set the bond below the maximum, your unpaid withdrawals cannot exceed it. On a multi plant bond, each plant's allocation must be shown, and withdrawals from a plant cannot exceed its allocation. The full penal sum still backs tax on withdrawals from every covered plant.
Who is exempt
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 needs no bond for withdrawals of spirits for nonindustrial use. Spirits for industrial use still need coverage. When tax due in a calendar year passes $50,000, the exemption ends. Operations bonds get a 30 day grace period under 19.168(b), but withdrawal bonds do not. Tax deferred withdrawals must stop until TTB approves the new withdrawal bond.
Termination
A surety may end a withdrawal bond by notifying TTB at least 10 days ahead under 27 CFR 19.171. The proprietor may also end it by telling TTB it has stopped making covered withdrawals. Operations and withdrawals can be combined in a single unit bond under 19.165.
Eligibility and Requirements for an All States Withdrawal Bond:
- An operations bond already in place for the plant, or a unit bond covering both.
- Surety listed in Treasury Department Circular 570, or a deposit of U.S. Treasury securities or cash under 27 CFR 19.154.
- Penal sum of at least $1,000 per plant.
- All covered plants operated by the same person, which includes a corporation and its controlled subsidiaries.
- Bond filed on TTB F 5110.56 as a two sided document.
All States Withdrawal Bond FAQs:
No. The withdrawal bond is only for spirits removed after the tax is determined but before it is paid. If you pay at withdrawal, the requirement in 27 CFR 19.164 does not apply.
Enough to cover the unpaid tax chargeable against the bond at any one time. The floor is $1,000 and the bond need not exceed $1,000,000 per plant. If the bond is smaller, your unpaid withdrawals must stay under it.
Not for withdrawals. Under 27 CFR 19.168(b)(3), you cannot withdraw on a tax deferred basis until TTB approves the withdrawal bond. The 30 day grace period applies only to operations bonds.
No. Once spirits are withdrawn under a withdrawal bond, the operations bond no longer covers the tax on them. You can combine both in one unit bond if you prefer.
The surety bases it on the penal sum, the proprietor's credit and financial statements, and its record of paying federal excise tax on time.
