Rev. Rul. 57-289

Under the provisions of section 197.117 of the Regulations relating to Drawback on Distilled Spirits Used in Manufacturing Nonbeverage Products, distilled spirits may be recovered from dregs or marc of percolation or extraction in the manufacture of a nonbeverage product and such spirits may be reused in the manufacture of a nonbeverage product of the kind in which originally used. Such recovered distilled spirits are not eligible for drawback. Under the provisions of section 197.118 of the regulations, distilled spirits recovered from an intermediate product may be used in the manufacture of a nonbeverage product and, when so used, are eligible for drawback. The use of recovered distilled spirits must be reported by the nonbeverage manufacturer in the manner provided in sections 197.117 and 197.118 of the regulations. Such operations would not subject the user to special tax as a rectifier or to the rectification tax. A manufacturer who recovers distilled spirits from a finished nonbeverage product, by distillation or otherwise, is liable for special tax as a rectifier. He is also liable for rectification tax on all such distilled spirits recovered. The formula for each product in which recovered distilled spirits are to be used must be submitted to the Director, Alcohol and Tobacco Tax Division, Washington 25, D.C., even though no new distilled spirits are used.