TTB's Trade Investigations Division (TID) Tax Audits

When it comes to alcohol and tobacco regulation, most industry members are familiar with the TTB's Trade Investigations Division (TID) and their work enforcing trade practice laws. However, there's another crucial player in the regulatory landscape: the Tax Audit Division (TAD). While they might fly under the radar, TAD's role in ensuring proper excise tax payments and regulatory compliance has become increasingly important over the past year.

In 2023, TAD's enforcement actions led to approximately $11 million in settlements through offer-in-compromise agreements. Let's look at what's been catching their attention and why it matters for industry members.

The most common issue by far has been late filings and payments, accounting for about 70% of all violations. What's surprising is just how strict these deadlines are – even being one day late can result in a violation. We've seen companies run into trouble not just for missing deadlines entirely, but also for seemingly minor issues like filing returns without simultaneous payment or getting caught up in processing delays.

Tax rate violations have also been a significant focus. Many of these stem from confusion around the Craft Beverage Modernization Act and its reduced rates. We've seen particular challenges when companies go through acquisitions, as these changes can affect their eligibility for reduced rates as part of a controlled group. Wine producers have faced additional scrutiny over product categorization and tax classifications.

Operating without proper permits continues to be a serious concern for the TTB. Whether it's manufacturing, aging, warehousing, or importing, having the right permits in place is crucial. Record-keeping has also been under the microscope – particularly regarding movement of products from bonded premises.

One trend that's particularly worth noting is the increased enforcement around ownership changes. The TTB has been cracking down on companies that fail to report changes in ownership or management within the required 30-day window. This might seem like a minor administrative detail, but it can actually result in automatic termination of federal basic permits.

Looking ahead to 2024, all signs point to continued strong enforcement in these areas. The TTB shows no signs of relaxing their standards, particularly around tax payments and proper rate applications. For industry members, this means staying vigilant about compliance isn't just good practice – it's essential for avoiding costly penalties and administrative headaches that could disrupt business operations.

The good news is that most of these issues are preventable with proper attention and planning. Whether you're facing an audit, considering operational changes, or just want to ensure you're on the right track, getting professional guidance can help navigate these complex regulatory waters. The cost of compliance is always less than the cost of violations, especially as the TTB continues to maintain its strong focus on tax audits.