The levels of adverse action include a “Warning Letter” that reiterates the citations and acknowledges the responses, and cautions that further similar citations may result in a higher level of adverse action. Second level is a “Warning Conference,” where the government official attending may review the citations verbally with the distiller and caution that future similar non-compliance will result in action against the permit. At the conference, if the government feels it is warranted by the extent and nature of the violations, the official may advise that the government intends to take action to suspend or revoke the permit. In such cases, the meeting may be followed by receipt of a Notice of Contemplated Denial or Revocation, as provided in the procedural rules pertaining to permit actions in 27 CF Part 71. If significant tax liability is involved, a “Notice and Demand” for taxes is issued, which must be addressed promptly. What this means is that the government has put the stated liability on their receivables and they expect payment. If any of the liability is disputable, or you have additional information/documentation that developed after the audit which may reduce the liability, that can be presented in response, and you can advise as to whether you can pay the amount shown, whether you need time to pay it, or whether you wish to propose a settlement (an offer-in-compromise) concerning the tax liability. In any tax matter, the government is obligated to respect the taxpayer’s rights as provided in federal laws and regulations. Alternatives to immediate
If you have doubts about how you do things, what records you keep, and how accurate your records are, the best response is to make a list and get working to be compliant. full payment are available and negotiable if the taxpayer demonstrates a need or can present a reasonable case as to why the settlement proposal should be considered. In working out a settlement with the government, the compromise may be structured to settle tax liability, violations of law and regulations, or both. In some cases, an offer may be accepted for the tax, but the government may wish to suspend the permit to resolve the cited violations. A suspension requires that no permitted operations (distilling, processing, bottling, removals of product from bond) may occur during the days enumerated. An offer-in-compromise can be based on doubt as to liability (the taxpayer poses to the government a reasonable argument asserting doubt) or, doubt as to collectibility (the taxpayer does not have the resources to reasonably be expected to pay). In collectibility cases, the taxpayer is expected to provide a package of financial details proving inability to pay. An alternative is an installment agreement or extension of time to pay. Also, note that TTB publishes on its website any accepted offers and suspensions of permitted businesses. Over the past two years, they list 52 accepted offers and 29 permit suspensions. Five years
ago, in 2014-2015, a total of 25 offers were recorded. You can review the terms of the offers posted and see what items are commonly cited to illustrate where to focus your internal reviews. The above information is solely from my knowledge and experience. Of course, the government adjusts its procedures from time to time, and may or may not announce any changes. The bottom line is that the prudent thing to do is take a look at where your distillery is in respect to federal compliance. Ask the tough questions: If you have doubts about how you do things, what records you keep, and how accurate your records are, the best response is to make a list and get working to be compliant. If the audit finds that you had problems and already fixed them, that shows in your favor to resolve those now fixed issues. If you are faced with the process briefed above, work it through with a positive attitude that you can make things right and move on.
Jim McCoy operates J. McCoy Alcohol & Tobacco Compliance Consultants LLC, and since 2010 has assisted alcohol and tobacco businesses in their efforts to meet Federal regulatory and tax requirements. For more information email Jim at jmccoy@ jmccoyconsultants.com.
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