Record Keeping In General
Written by John P. Thomas, II
ATTACK ATT R ECORDS!
OF THE
TTB Record Keeping Compliance
D
92
istilling spirits can be a true form of art. Whether it be a large producer or a small craft distillery, the selection of ingredients, methods, and bottles reflects the physical embodiment of a passion for many distillers across the United States. However, this act of artistic expression may be slightly dampened by an array of record keeping regulations the federal government requires spirits producers of all sizes to follow. These record-keeping rules encompass nearly all aspects of the production, storage, and tax operations of the production business. They may seem daunting to many distillers, especially to craft operations with more limited resources. Nevertheless, careful attention to compliance with record keeping requirements is key to success in a heavily regulated industry. Incomplete or improper adherence to record rules can lead to reporting headaches at best and legal penalties at worst, including fines and even license suspensions. Keeping in mind basic rules and best practices can help spirits producers prevent interruptions to their distilling activities and assist them with their reporting requirements.
One of the most central responsibilities of distillers of all sizes is record keeping. Required by section 5207 of the Internal Revenue Code,1 and further supplemented by federal regulations, these records detail everything from production levels to inventory and taxes paid. Their maintenance of them is not just important for business reasons; They also serve as the basis of the regular reports required by the Alcohol and Tobacco Tax and Trade Bureau (TTB or the bureau). For distillers, the records may also serve as documentary evidence supporting statements made to the TTB or state regulatory agencies should the producer come under investigation. The TTB, for its part, is entitled to enter the premises of any distiller and examine these records at any time.2 From a high-level viewpoint, each distiller is required to maintain records related to the three primary functions of a distillery: production, storage, and processing. A producer’s records generally must show the receipt, movement, transfer, and withdrawal of spirits. This would encompass documents including transaction forms and summaries, and any other sources of data relating to these operations.3 Aside from certain forms required for mandated filings, distillers generally are not required to keep their records in any particular format (print or electronic), so long as TTB officers can readily retrieve them for review. The records may consist of documents created in the ordinary course of business if they contain all required information, are clear, and can be understood by any agent reviewing them. Additionally, distillers do not have to maintain the records at the location where distilling takes place as long as the bureau is notified beforehand.4 However, they must maintain the records in a way that will ensure their readability and availability for inspection. If a record is destroyed or damaged, the distiller may create a reproduction of the original record and 1
26 U.S.C.A. § 5207.
2
27 C.F.R. § 19.11.
3
27 C.F.R. § 19.571.
4
27 C.F.R. § 19.573. W W W . ARTISANSPIRITMAG . C O M