Breweries may eventually encounter beer that can no longer be sold or distributed. There are many reasons for removing products from the supermarket shelves or out of stock once they reach their freshness end date, including, but not limited to, overstock, sub-par sales performance, production runs, or delays in the supply chain.
At the end of its official life, beer must be destroyed in an adequate manner. Also, record-keeping is vital with regard to handling of the product, and disposal of the product should comply with all relevant requirements. The expired and unsaleable beer disposal process is complex, but waste management companies can assist to ensure minimal disruption.
Even with the right partner, however, companies should still consider how the destruction is documented and whether federal excise tax can be adjusted or recovered. We cover this in our article.
Can Breweries Recover Federal Excise Tax on Destroyed Beer?
The key point is that breweries may be able to reclaim federal excise tax on beer that has been destroyed. However, having beer that is past its code date does not automatically qualify every brewery for a tax recovery. Breweries must meet the relevant requirements established by the TTB and follow the applicable procedures.
When a brewer chooses to destroy beer voluntarily, the business may, in certain circumstances, qualify for a tax refund, an adjustment to its tax obligation, or relief from the associated liability. Which option applies depends on factors such as whether the federal tax has already been paid or merely established as due, as well as whether the beer was destroyed within the United States or outside the country.
Brewers seeking a refund or credit can file TTB Form 5620.8. According to TTB, “Form 5620.8 allows businesses to request a refund or tax credit for federal excise taxes paid on alcohol or tobacco products that have been lost, become unmarketable, or been condemned by an authorized official under qualifying circumstances.”
Why Destruction Location Matters for TTB Compliance
The TTB rules that apply to beer disposal can vary depending on whether the destruction takes place at the brewery or at another location. Knowing which requirements apply in each situation allows breweries to choose the proper disposal method and remain compliant with federal regulations.
Below, we compare the two.
Beer Destroyed at the Brewery
Breweries can dispose of certain out-of-code beer on their own premises, although doing so may require specialized equipment and established procedures. Because of the infrastructure involved, handling the destruction process at the brewery can be more demanding than it may initially appear.
For instance, a brewer may be permitted to destroy beer on-site when the applicable tax has neither been assessed nor paid. For taxpaid or tax-determined beer, a brewer running a tavern at the brewery may destroy qualifying beer that remained at the brewery the entire time, subject to applicable recordkeeping and TTB requirements.
If a TTB officer requires advance notice, the brewery must inform the officer before disposing of the beer. The brewer is also responsible for carrying out the destruction according to any instructions or procedures specified by the TTB officer.
For beer that meets the applicable requirements, the brewer can submit a tax refund or credit claim within six months after the destruction occurs. The claim should include relevant information such as when the beer was destroyed, why it was destroyed, and the method used for its disposal.
Beer Destroyed Off Brewery Premises
Destroying beer off brewery premises can be a practical option when the brewery does not have the infrastructure needed for on-site destruction. Even when beer is destroyed away from the brewery, businesses still need to meet certain regulatory conditions. If the beer has already been taxed or its tax liability has been established, the brewer must send written notification to the TTB stating that the product will be destroyed at an off-site location. The planned destruction date must be no sooner than 12 days after the notice is filed.
The destruction may proceed without a TTB representative present if the responsible officer does not provide further instructions before the date listed in the notice. However, the officer can require the brewer to provide additional verification, allow the destruction to be witnessed, postpone the scheduled date, or move the destruction to another location.
These procedures can also affect federal excise tax treatment. When all applicable conditions are satisfied, brewers may be able to claim a tax adjustment or recover federal excise tax associated with qualifying beer destroyed away from the brewery.
What Documentation Should Breweries Maintain?
Even if you work with an external partner or destroy the out-of-code beer on-site, your company should always maintain up-to-date information on the products, tax application, and destruction process. Depending on the situation and the specific TTB rules that apply, breweries may need to maintain records covering details such as:
- The kind and volume of beer involved
- The reason the beer is being withdrawn from sale or distribution
- The date and place where the destruction occurred
- Any required TTB notifications, approvals, or authorization details
- Evidence confirming the destruction and documenting the product’s chain of custody
When submitting a claim through TTB Form 5620.8, breweries may also need to provide supporting information, including:
- Employer Identification Number (EIN)
- Brewery registry or permit number
- The amount of tax being claimed, including its calculation
- Records and other documentation that substantiate the claim and any related tax adjustments
- Information required under 27 CFR § 25.283, such as the quantity of beer, amount of tax claimed, and reason for destruction
Tips for Preparing for Tax Refunds, Adjustments, or Relief
The breweries that believe they’ll never have out-of-code beer or don’t think it’s necessary to prepare are the ones that may end up scrambling at the last minute to comply with regulations. By having a strategy in place, companies can reduce the stress of handling everything at the last minute while ensuring their fresh beer inventory is properly managed, and they remain better prepared to comply with tax requirements.
Here are some tips to prepare:
- Establish internal procedures for out-of-code inventory
- Provide workers with training
- Ensure protocols are standardized across the company and different locations.
- Determine where the beer should be destroyed
- Check applicable TTB requirements
- Always keep documentation up to date
- Coordinate with a waste management partner for assistance with the destruction process and related documentation.
Managing Out-of-Code Beer Responsibly
Beer has a long history and is here to stay. But for breweries, not every beer produced will make it to the consumer. Navigating out-of-code beer waste and how it affects your brewery’s federal excise tax obligations can be challenging without a plan.
By taking the time to evaluate your current strategy and what that means for federal excise tax considerations, you can be better prepared to manage waste in a way that’s compliant, environmentally friendly, and protects your business.
Take a moment to consider: Is your brewery prepared with a clear disposal plan? What steps could you take across the business to improve how you handle beer that has gone out of code?
