(a) Bond required. Except as provided in paragraph (d) of this section, any person who plans to establish and operate a distilled spirits plant must provide TTB with one or more bonds on form TTB F 5110.56, Distilled Spirits Bond. TTB will not approve a registration or allow a person to operate a distilled spirits plant until the applicant has provided the necessary bonds. If a proprietor fails to pay any liability covered by a bond, TTB may seek payment from the proprietor, from the surety (see §19.153) or from both the proprietor and the surety. The types and penal sums of bonds required will depend upon the type and size of the operations that the proprietor will conduct.

(b) Bond terms and conditions. The terms and conditions of a distilled spirits bond require that the proprietor comply with all provisions of law and regulations relating to activities covered by the bond, and to pay all taxes imposed by 26 U.S.C. chapter 51, including taxes on unexplained shortages of bottled distilled spirits. The bond will further specify that the proprietor will pay all penalties incurred, or fines imposed, for violations of law and regulations relating to activities covered by the bond. The specific terms of the required bond(s) are stated on TTB F 5110.56.

(c) Corporations and controlled subsidiaries. For purposes of this subpart, the term “corporation” includes a Limited Liability Company (LLC) or Limited Liability Partnership (LLP) in any jurisdiction where the law authorizes such a business organization to operate. Whenever used in this subpart, the term “controlled subsidiary” means a corporation (or LLC or LLP) in which more than 50 percent of the voting power is controlled by a parent corporation.

(d) Bonds covering distilled spirits for nonindustrial use and industrial use—

(1) Nonindustrial use. A proprietor who pays tax on a deferred basis under §19.235 is not required to provide a bond or bonds to cover operations and withdrawals of distilled spirits for nonindustrial use during any portion of a calendar year for which the proprietor is eligible to use an annual or quarterly return period under §19.235(b) or (c). For purposes of the preceding sentence, a proprietor is considered to be paying tax on a deferred basis even if the proprietor does not pay tax during every return period as long as the proprietor intends to pay tax in a future period. See §§19.73 and 19.136 for rules governing applying for this bond exemption. See §19.168(b) for rules governing when an existing proprietor who has not provided a bond under this paragraph must obtain bond coverage.

(2) Industrial use. A proprietor is required to provide one or more bonds to cover operations and withdrawals of distilled spirits for industrial use even if the proprietor pays tax on a deferred basis under §19.235 and is eligible to use an annual or quarterly return period under §19.235(b) or (c). In the case of a proprietor whose operations involve distilled spirits for both nonindustrial and industrial use, distilled spirits are considered to be for industrial use for purposes of this paragraph unless the proprietor designates the spirits as being solely for nonindustrial use either upon taking the production gauge (see §19.304) or upon receiving the spirits and, in either case, does not thereafter mix the spirits with any spirits for industrial use.

(3) Nonindustrial use and industrial use defined. See §19.472 for the provisions defining the nonindustrial and industrial uses of distilled spirits.

(26 U.S.C. 5173, 5551)

[T.D. TTB-92, 76 FR 9090, Feb. 16, 2011, as amended by T.D. TTB-146, 82 FR 1120, Jan. 4, 2017]