Record Keeping for Craft Beverage Producers

Published On - August 15, 2014

[email protected] Brewery & Cidery, Craft Beverage Branding, Distillery, General Business, Retail Liquor License, Wineries

You are launching a new craft alcoholic beverage manufacturing business. There is so much to do, paperwork is at the bottom of your list. It is important, however, to create a record keeping system that keeps your operations in compliance with state and federal regulations. Fines can be $1,000 or up to 1 year in prison for each offense. Each day can be considered a separate offense, so liability can be substantial.

Records must be maintained for at least 3 years. Computerized software can be a good investment to help you with your regulatory responsibilities. The TTB website has a good seminar that can explain your responsibilities (Google “TTB Compliance Seminar.”)

Recordkeeping: Distillery Daily Records That Must be Maintained

  • Processing Records
    • §19.597 – Manufacturing records
    • §19.598 – Dump/batch records
    • §19.599 – Bottling and packaging records
    • §19.600 – Alcohol content and fill test records
    • §19.601 – Finished products records
    • §19.602 – Redistillation records
    • §19.603 – Liquor bottle records
    • §19.604 – Rebottling, relabeling, and reclosing records
  • Production records
    • §19.584 – Materials for the production of distilled spirits
    • §19.585 – Production and withdrawal records
    • §19.586 – Byproduct spirits production records
  • Storage records
    • §19.590 – Storage operations
    • §19.591 – Package summary records
    • §19.592 – Tank record of wine and spirits of less than 190º of proof
    • §19.593 – Tank summary record for spirits of 190ºor more of proof

The TTB reports its most commonly found violations when distilleries are audited:

  • Failure to take inventory:
    • CFR 19.333 requires a physical inventory must be taken at the end of each quarter.
    • Destruction:
      • Must report product destruction on monthly report of storage operations
      • Must maintain records showing:
        • Date
        • Time
        • Space
        • Manner of destruction
        • Person who supervised the destruction

Reporting and tax payment:

  • Required Monthly Reports not filed :
    • Monthly report of production operation (TTB F 5110.40)
    • Monthly report of storage operation (TTB F 5110.11)
    • Monthly report of processing operations (TTB F 5110.28)
    • Monthly report of processing (denaturing) operations (TTB F 5110.43)
  • Excise Tax Returns not filed:
    • TTB F 5000.24
    • Semi-monthly/quarterly
      • Quarterly if not more than $50,000 annually in tax expected. §19.235(b)
  • Due 14 days after close of period
  • Consistent late returns is a reason for an audit

Recordkeeping Requirements for Breweries

  • Daily Records: 27 CFR 292
    • 19 separate types of records that must be maintained daily

Examples:

  • All material received and used in production
  • Beer bottled
  • Beer racked
  • Beer consumed
  • Packed beer used for lab samples
  • Beer lost to breakage, theft, etc.
  • Records of test or measuring devices
  • Brewing material, beer in process and finished beer on hand
  • Also record stock go bad during process

The TTB reports these common inventory issues discovered during audits:

  • Loss v. Shortage – misclasifying these on reports
    • Loss: Known reasons like breakage, theft, etc. There is no tax liability for inventory losses.
    • Shortage: an unexplained missing amount of beer. Must be able to ensure there is a true loss and not a recordkeeping mistake before the brewery can be relieved of tax liability.
  • Removal for consumption or sale
    • Except for the following, all removals of alcohol form inventory will be presumed for consumption or sale and are taxed:
      • Transfer to a related brewery
      • Beer unfit for beverage use
      • Research/Testing
      • Used as distilling material
      • For destruction
      • Exportation
      • Personal or family use
  • Tanks: Must be marked with serial number and capacity
    • Typically: F-1, H-1, K-1, etc.
    • Must be equipped with a measuring device (can use portable equipment)
    • Testing and measuring devices
    • Must periodically test and calibrate measuring devices like flow meters and site glasses
    • Must maintain records showing:
      • Date of test
      • Identity of device tested
      • Results
      • Corrective action, if needed

Frequency of reporting and tax payment for breweries

  • Report of operations
    • Under 10,000 – quarterly
    • Over 10,000 – monthly
    • Excise Returns
      • Under $50,000 in yearly taxes – quarterly
      • Over $50,000 – semi-monthly (September has three periods)
      • Production v. Consumption/Sale
        • Taxes are not paid until beer is removed for sale or consumption