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Regulatory and Distribution Law Updates for the Alcohol Industry
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Regulatory and Distribution Law Updates for the Alcohol Industry
Alcohol Excise Taxes
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Join Marc Sorini and Art DeCelle at the Wine, Beer & Spirits Law Conference – September 18-19, 2014

by | Jul 21, 2014 | , , , , , , ,

Wine, Beer & Spirits Law 19th Annual National Conference
The Mayflower Renaissance Hotel
Washington, D.C.
September 18-19, 2014
Click here to register.
View the conference brochure.

McDermott Speakers
Marc E. Sorini, Partner, Program Co-chair
Arthur J. DeCelle, Counsel

Please join McDermott partner and program co-chair, Marc Sorini, at the Wine, Beer & Spirits Law 19th Annual National Conference on September 18-19, 2014.  This year’s program will bring direct access to experts in the alcohol beverage industry, including speakers from the Alcohol and Tobacco Tax and Trade Bureau, Beam Suntory, BLDS, the California Department of Alcohol Beverage Control, Diago North America, Dogfish Head Craft Brewery, E&J Gallo Winery, the Federal Trade Commission, Ippolito Christon & Co., New Belgium Brewing Company, New Jersey Office of the Attorney General, Department of Law and Public, Safety, Division of Alcoholic Beverage Control, Precision Economics, Virginia Department of Alcoholic Beverage Control, Washington State Liquor Control Board, and the Wine Institute, as well as speakers from many of the nation’s leading law firms.

Of particular note, Marc Sorini will make a  presentation titled, Federal Excise Tax Strategies and Tactics.  McDermott counsel Art DeCelle will be moderating a panel of representatives from the industry’s leading national trade associations to discuss “The Future of Federal Regulation of Alcohol.”

To view the full conference brochure, click here.  For more information and to register, please visit: https://cle.com/WashingtonDC.



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Distilling 101 for Brewers

by and | Jul 3, 2014 | , , ,

The craft distilling movement is growing rapidly. Indeed, the tor­rid pace of new distillery openings and the boundless enthusiasm of new entrants seem strangely reminiscent of craft brewing (then “microbrewing”) in the late 1980s and early 1990s.  Craft dis­tillers even have a simmering product in­tegrity issue (the use of purchased neutral spirits) that splits the new industry like contract brewing divided craft brewers 20 years ago.  There are, no doubt, signifi­cant differences, but craft distilling today seems poised for a period of growth like the one craft brewers have been (mostly) enjoying for the past 25 years.  Not surprisingly, then, a growing num­ber of craft brewers have followed the path of Anchor Brewing (or should I say Anchor Distilling) and expanded their offerings to include distilled spirits.  But as brewers quickly discover, there are numerous legal, regulatory, and tax differences between these related, but distinct, businesses.  While a full exploration of those differences could fill a rather thick book, this article briefly highlights the most important.

This article was originally published in the March/April 2014 issue of The New Brewer.



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Legal Considerations of Warehousing Spirits

by | Jun 27, 2014 | , ,

Warehouses aren’t exciting or sexy.  In fact, they are usually boring to look at and think about.  But a surprising amount of specialized alcohol beverage law surrounds the use of warehouses for the storage of distilled spirits.

This article, originally published in the Spring 2014 issue of Artisan Spirit, will briefly explore some of the basics.



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Choice of Forum in Federal Excise Tax Refund Cases

by and | Apr 1, 2014 |

To challenge an administrative determination and assessment of federal excise tax, taxpayers in refund cases have a choice of two different federal courts to bring an action:  the U.S. federal district court and the U.S. Court of Federal Claims.  This installment to our regular column describes these fora and provides some practice points.  The choice of forum is one of the most significant decisions that must be made when tax litigation is imminent.

In deciding whether to seek a refund in the District Court or the Court of Federal Claims, a taxpayer should consider several issues in determining the most advantageous forum.  The most important consideration in choosing a forum is the controlling case law.  When the case presents an issue of first impression, the taxpayer should look more generally to the recent tax decisions in these courts as well as other factors, including the potential for a jury trial, whether the cases will be decided on motions for summary judgment and potential for government offsets.

Is There Any Controlling Judicial Precedent?

One of the primary considerations in determining which court to litigate your refund case is the existence of any controlling legal authority.  All courts must follow a controlling decision of the U. S. Supreme Court.  Similarly, each federal district court must follow the legal precedent announced by the U.S. Circuit Court of Appeals to which an appeal would lie.

Can You Litigate By Paying Only Part of the Tax?

Generally, a federal district court or the U.S. Court of Federal Claims does not have jurisdiction over a tax refund suit unless the taxpayer has fully paid the amount of the tax assessment.  Importantly, a different rule applies to a divisible tax.  The taxpayer with a divisible tax is considered to make full payment for purposes of the court’s jurisdiction if the taxpayer pays the tax for a single transaction during the applicable period.

Can the Government Assert Additional Tax Liability?

Once the period for assessment has expired, the government cannot assess additional amounts of tax, but if the taxpayer has filed a refund suit for the same tax period, the government can assert an offset up to the amount of the taxpayer’s refund claim.

What Are the Settlement Procedures?

The Tax Division of the Department of Justice has settlement authority in cases litigated in the Court of Federal Claims and federal district courts.  There is, however, a required additional level of review by the Joint Committee on Taxation for any settlement providing for a refund in excess of $2,000,000.

How Do District Courts and Court of Federal Claims Differ? 

In a suit filed in the federal district court, the taxpayer or the government may ask for a trial by jury.  Juries are not available in suits filed in the Court of Federal Claims.

1.      Place of Trial

A federal district court may present a more convenient forum for the taxpayer because the taxpayer’s principal place of business is located in proximity to the [...]

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Towards Liquor Control: A Critical Analysis

by | Oct 7, 2013 | , , ,

First published in 1933, shortly before passage of the 21st Amendment repealing Prohibition, Raymond Fosdick and Albert Scott’s Toward Liquor Control is still used by many in the industry to support various positions of current alcohol policy.  In his September 19 presentation for CLE International’s Wine, Beer & Spirits Law Conference,  Marc Sorini provides an overview and critical analysis of the impact of this work on alcohol law and regulatory policy, licensing, distribution, taxation, advertising and education.

To view the presentation, click here.



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TTB Can Assert a Plethora of Penalties That Are Stated In the Internal Revenue Code

by and | Sep 9, 2013 |

As part of its audit of taxpayers’ excise tax compliance, the Alcohol and Tobacco Tax and Trade Bureau (TTB) may impose several different types of financial penalties stated in the Internal Revenue Code (IRC).  Indeed, TTB can impose more than one penalty with respect to the same excise tax liability, and the total combined effect can reach a maximum exposure of 65 percent of the amount of tax due.

Failure to File, Failure to Pay and Failure to Deposit Penalties

1.  Delinquency Penalty

Generally, if a taxpayer files a late excise tax return or fails to file the return at all, the IRC imposes a delinquency penalty under IRC section 6651(a)(1) that is based on the net amount due on the return.  For any failure to file a return, the penalty is 5 percent of the amount of such tax for the first month of the failure, with an additional 5 percent for each additional month or fraction thereof during which such failure continues, up to a maximum of 25 percent of the amount of such tax.  For purposes of calculating the penalty, the “mailbox rule” does not apply, and instead, the penalty runs from the due date of the return until the date TTB actually receives the late return, and not the date of the return was mailed by the taxpayer.  If TTB deems the failure to file timely or not file at all was the result of taxpayer fraud, the penalty is increased to 15 percent for each month or fraction thereof, with a maximum penalty equal to 75 percent of the amount of tax due.

2.  Failure to Pay Tax Penalty

Additionally, if a taxpayer fails to pay the amount shown as tax on an excise tax return, on or before the date prescribed for payment of such tax IRC section 6651(a)(2) imposes a penalty of 0.5 percent of the amount of tax shown on the return for each month or fraction thereof during which the taxpayer fails to pay the amount due.  The failure to pay penalty, however, may not exceed 25 percent of the amount of tax due.

A taxpayer can also be subject to a failure to pay penalty under IRC section 6651(a)(3) if the taxpayer does not pay the amount of assessed tax, within 21 calendar days from the date of notice and demand.  This period is shortened to 10 business days if the amount assessed and shown on the notice and demand equals or exceeds $100,000.  The amount of the penalty is 0.5 percent of the amount stated in the notice and demand for each month or fraction thereof during which the tax remains unpaid.  This penalty may not exceed 25 percent of the amount of tax due.

3.  Failure to Deposit Penalty

Generally, taxpayers must make timely deposits of excise taxes when they reach a certain dollar amount.   IRC section 6656 imposes a penalty for a taxpayer’s failure to make timely deposits of excise taxes.  [...]

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