Rev. Rul. 55-40

Advice has been requested whether it is permissible to receive neutral grain spirits at an internal revenue bonded warehouse at 190 degrees of proof, dump such spirits into bulk gauging tanks in the regauge room in order to reduce the proof thereof to 111 degrees and draw the spirits off into reused wooden barrels, and, if so, what serial numbers should be placed on the packages.

Section 225.415 to section 225.417, regulations relating to the warehousing of distilled spirits, make provision for the transfer of spirits from one kind of cooperate to another and establish the procedure to be followed relative thereto. Section 225.408 provides in part that spirits in warehouse storage tanks which were produced at 190 degrees or more of proof may be reduced in such storage tanks to not less than 111 degrees of proof prior to being drawn into packages. Section 225.411 of the regulations provides that all packages filled from warehouse storage or gauging tanks shall be serially numbered, separately from packages filled at the distillery, beginning with number 1, preceded by the letter `T,' as T-1, T-2, etc.

While the regulations do not specifically provide for the proposed procedure, it is held that the use of bulk gauging tanks for such transfer, dumping, reducing in proof and filling of packages with distilled spirits, in accordance with the applicable provisions of Regulations 10, as indicated above, constitutes substantial compliance therewith and may be permitted, upon proper request, by the Assistant Regional Commissioner, Alcohol and Tobacco Tax. Such operations may be performed only at such times as there are no regauge activities being conducted and when the services of a storekeeper-gauger are available for necessary supervision. The packages in which the spirits are placed after reduction in proof should be serially numbered in accordance with Section 225.411