Rev. Rul. 63-88

Advice has been requested as to the conditions under which a proprietor of a distilled spirits plant, who imports distilled spirits in bulk containers, may utilize the gauging facilities on the bottling premises of his plant for the gauging of the imported spirits, which are still in Customs custody, for the purpose of determining the internal revenue tax.

Section 201.103 of the Distilled Spirits Plants Regulations provides as follows:

`Spirits in Customs custody. Spirits in Customs custody may be conveyed, when necessary, across distilled spirits plant premises: Provided , That (a) such spirits are not stored or allowed to remain on the premises of such plant, (b) such spirits are kept separate and apart from other spirits on such premises and are moved expeditiously, (c) a description of the means and route of conveyance of such spirits across the plant premises has been submitted to and approved by the assistant regional commissioner, and (d) consent of surety on bond, Form 2601, has been furnished by the proprietor, on Form 1533, extending the terms of such bond to cover such conveyance of such spirits.'

Section 201.168 of the regulations provides, in part, that where bottling premises are to be extended or curtailed, the proprietor shall file an application to amend the registration of his plant (including amended plat and plans). Facilities to be included by extension or to be excluded by curtailment shall not, prior to approval of the amended registration, be used for other than previously approved purposes.

Except for the purpose of uninterrupted movement across the premises, as authorized in section 201.103 of the regulations, spirits in Customs custody may not be brought on or allowed to remain on distilled spirits plant premises. However, under the provisions of section 201.168 of the regulations, a proprietor may curtail a part of his distilled spirits plant so that the area and equipment so curtailed will no longer be a part of his distilled spirits plant. Thus, insofar as internal revenue regulations are concerned, the curtailed area and equipment will be eligible for use in the gauge and tax determination of imported distilled spirits while in Customs custody.

Accordingly, it is held that a proprietor of a distilled spirits plant may amend the registration of his plant to curtail so much of his bottling premises and equipment as he needs for the gauge and tax determination of imported distilled spirits while such spirits are in Customs custody. Following the Customs gauge and tax determination of the imported spirits, the proprietor may again amend the registration of his plant to extend the premises to include the previously curtailed area and gauging equipment, thereby effecting `receipt' of the imported spirits on the bottling premises of his distilled spirits plant.

Where the use of areas and equipment which have been curtailed from the distilled spirits plant premises is strictly limited to the gauging of imported distilled spirits by, or under the supervision of, a Customs officer, for determination of internal revenue tax and Customs duties, such curtailed area may, if necessary, be an `island' within the boundaries of the distilled spirits plant. Under these circumstances, it is necessary for the proprietor of the plant to obtain approval, under section 201.103 of the regulations, for conveyance of the imported spirits across the distilled spirits plant premises, enroute to the curtailed `island.'

Moreover, where the use of curtailed areas of the bottling premises is limited as above, and where such areas are alternately curtailed and extended, under section 201.168 of the regulations, physical separation is not required between such areas and the remainder of the distilled spirits plant premises, provided there is continuous, immediate Customs supervision of all spirits received in such areas prior to tax payment or tax determination to prevent any mixing of such spirits with taxpaid spirits, and provided a consent of surety is filed.

Distilled spirits plant proprietors desiring to curtail and extend certain portions of their bottling premises, alternately, for the above purposes, should submit their `master plan' on an amended plat and plans and Form 2607, Registration of Distilled Spirits Plant, to the Assistant Regional Commissioner, Alcohol and Tobacco Tax. The areas which will be subject to extension and curtailment should be clearly described and the purposes indicated therefor. Upon approval of the `master plan,' the Assistant Regional Commissioner may delegate authority to Supervisors in Charge at district offices, or to the assigned officers at particular plants, to approve subsequent Forms 2607 whose purposes are limited to the extensions or curtailments necessary to permit use of the affected portions of the plant for gauging spirits in Customs custody. Each such subsequent Form 2607 should be filed in quadruplicate and the distribution of all copies thereof should be in accordance with current procedure, except that Supervisors in Charge at district offices, or the assigned officer at particular plants may deliver the proprietor's copy and retain the assigned officer's copy at the plant, following approval thereof.