Rev. Proc. 59-19

SECTION 1. PURPOSE.

In order for users of tax-free spirits to continue to procure and use spirits free of tax (formerly called tax-free alcohol) on and after July 1, 1959, such users are required to make application on Form 2600, Application For Permit to Use Spirits Free of Tax, for an industrial use permit (formerly called a basic permit) to use spirits free of tax and an application on Form 1450 (Revised April 1959), Application and Withdrawal Permit To Procure Spirits Free of Tax, for a permit to procure spirits free of tax.

SEC. 2. BACKGROUND.

Section 5271 of the Internal Revenue Code of 1954, as amended by the Excise Tax Technical Changes Act of 1958, Public Law 85-859, C.B. 1958-3, 92, provides that no person shall procure or use spirits free of tax on or after July 1, 1959, until he has filed an application and received a permit to do so.

SEC. 3. QUANTITIES TO BE SHOWN ON THE APPLICATION.

.01 The application for an industrial use permit, Form 2600, requires that the user state the quantity of tax-free spirits, including recovered tax-free spirits, that will be on hand, in transit, and unaccounted for at any one time. This quantity will determine the penal sum of the tax-free spirits user's bond. The bond may be large enough to authorize the user to order containers of the size usually purchased, to permit him to have spirits in transit, and, at the same time, to allow him to have a sufficient quantity on hand to care for present needs.

.02 The application on Form 1450 requires that the user of tax-free spirits state the total quantity to be withdrawn during the term of the permit, considered to be one year. The proposed regulations state that the quantity to be withdrawn during any calendar month should not be more than one-twelth of the annual requirements but provides that where the user desires to withdraw more than one-twelfth of his annual quota during any month, he should state his needs and furnish sufficient information for the appropriate Assistant Regional Commissioner, Alcohol and Tobacco Tax, to determine whether such withdrawals should be authorized. If one-twelfth of the tax-free user's annual quota is less than a 55 gallon drum and sufficient reasons exist for purchasing a 55 gallon container, he should enter 55 gallons as the quantity to be withdrawn per calendar month and furnish sufficient information for the Assistant Regional Commissioner to determine whether that portion of the application should be approved. The same procedure would hold true if the user has a seasonal business that requires the use of tax-free spirits in only a few months during the year. The user of tax-free spirits should determine his annual quota and the need for each of the few months that he expects to use the material and adequately explain his desires.

SEC. 4. PERIOD TO BE ENTERED ON FORM 1450.

The entry for the beginning of the period should be July 1, 1959, but the ending date should be left blank at this time.

SEC. 5. BOND.

Each user of tax-free spirits should file a new bond, Form 1448, Tax-Free Spirits User's Bond, or he may continue his current bond in effect by filing Form 1533, Consent of Surety, extending the terms of the bond to cover tax-free spirits on hand, in transit, and unaccounted for on and after July 1, 1959. Where a strengthening bond has been submitted, such bond should also be covered by a separate consent of surety. Where the quantity is increased, the user of tax-free spirits should submit a strengthening bond or a new bond.

SEC. 6. FILING OF QUALIFYING DOCUMENTS.

The above described applications and bond or consent of surety with the necessary supporting documents outlined in the proposed regulations should be filed in duplicate with the Assistant Regional Commissioner. They should be filed as soon as possible to expedite handling in the office of the Assistant Regional Commissioner.

SEC. 7. RESULT IF APPLICATIONS ARE NOT FILED PRIOR TO JULY 1, 1959.

If the two applications and bond or the consent of surety on the bond or bonds are not filed prior to July 1, 1959, the user of tax-free spirits will not be entitled to use spirits free of tax on and after July 1, 1959, and the vendor named on the user's current withdrawal permit will be notified by the Assistant Regional Commissioner that the user may not continue to withdraw spirits free of tax.

SEC. 8. CONTINUATION OF PERMITS ON AND AFTER JULY 1, 1959.

The proposed regulations provide that if one holds a permit as a user and has filed a valid withdrawal permit on Form 1450 on June 30, 1959, and also has filed the required applications, he may continue to use and withdraw specially denatured spirits on and after July 1, 1959, under such permits until final action is taken on his applications.

SEC. 9. INQUIRIES.

Inquiries in regard to this Revenue Procedure should refer to its number and be addressed to the office of the appropriate Assistant Regional Commissioner, Alcohol and Tobacco Tax.