Rev. Rul. 57-427

Advice has been requested whether a rectifier, who is also qualified as a wholesale and retail liquor dealer and who makes sales at the rectifying plant premises, must pay special tax as a rectifier during a period in which no rectifying operations are carried on.

Section 5082 of the Internal Revenue Code of 1954 and section 235.35 of the Regulations relating to the Rectification of Spirits and Wines, provide, in part, that every wholesale or retail dealer who has in his possession any still or leach tub, or who keeps any other apparatus for the purpose of refining in any manner distilled spirits, is a rectifier and must qualify as such.

In the instant case, no actual rectifying operations were carried on during the first three months of a fiscal year (July, August, and September) due to a strike by plant employees. During this period the rectifier was qualified as a wholesale and retail dealer in liquors, consummated sales at the rectifying plant and made delivery therefrom. The question presented is whether special tax liability as a rectifier was incurred only for the period beginning with the month of October or whether liability was incurred for the entire fiscal year.

During the period in which no rectifying operations were conducted, the rectifier possessed processing tanks, activated carbon, and filters at his plant. The rectifier's status as a wholesale and retail liquor dealer extends to the rectifying premises, as to his liability under the provisions of section 5082 of the Code, especially since his wholesale and retail sales were made from the liquors at the rectifying plant. The possession at the rectifying plant of processing tanks, activated carbon, and filters is equivalent to possession of a `leach tub' and constitutes possession of `other apparatus for the purpose of refining in any manner distilled spirits.' Accordingly, special tax liability as a rectifier was incurred for the entire fiscal year.