Rev. Rul. 54-216

Still wine may be removed from bonded wineries and bonded wine storerooms free of tax for use in the manufacture of vinegar in accordance with the provisions of section 178.319 to section 178.328, inclusive, of Regulations 7. It is the responsibility of the proprietor of the vinegar plant to see that the amount of tax on the quantity of wine shipped to him and which may be in transit to, or on hand at the vinegar plant at any one time does not exceed the penal sum of the bond, Form 1676, `Bond Covering Removal to and Use of Wine at Vinegar Plant.' The sufficiency of the bond may be checked by the Assistant Regional Commissioner, Alcohol and Tobacco Tax, of the region in which the vinegar plant is located from copies of Forms 1415, `Application to Procure Wine Tax Free for Manufacture of Vinegar,' and from the records maintained by the proprietor in accordance with the provisions of section 178.327 of Regulations 7.

It is not imperative that the entire quantity of wine covered by an approved Form 1415 be shipped to the vinegar plant at one time. However, in order to avoid difficulty in determining the penal sum of the bond to be filed by the proprietor of the vinegar factory, the total quantity of wine which may be shipped pursuant thereto should be exhausted before a new Form 1415 is approved for the removal of the same kind of wine from the same vendor. If there are outstanding approved Forms 1415 under which removals have not been made, the quantity of wine covered thereby must be taken into consideration in determining the penal sum of the bond, unless no shipments are to be made thereunder and such Forms 1415 are surrendered for cancellation.

Grapes rejected by fruit packers because of size and/or color may be used in the manufacture of wine and such wine, whether or not fortified and regardless of alcoholic content, may be removed free of tax for use in the manufacture of vinegar.

Still wine which has acetified into vinegar and contains not less than 4 percent of acetic acid and not less than 6 percent of alcohol and acids combined may be removed free of tax for use as vinegar, pursuant to approved application Form 1415 under sections 178.329 and 178.332 of Regulations 7.

No restrictions have been imposed on vinegar plants with respect to the use of wine removed from a bonded winery pursuant to section 178.322 of Regulations 7 other than to keep the prescribed records and premises available for inspection, as required by sections 178.327 and 178.328 of Regulations 7.