Industry Topics for Distillers and Distributors of Distilled Spirits

The Basics

Sales and Use Taxes in General

All retail sales of tangible personal property in California are subject to sales tax, unless the law provides a specific exemption or exclusion. The law defines a retail sale as a sale for a purpose other than resale in the regular course of business in the form of tangible personal property.

For distillers and distributors, most sales of distilled spirits are for resale to other licensees who are authorized to sell distilled spirits. Distillers or distributors that do make retail sales in California of distilled spirits or other items, such as new or used equipment, gift items, glassware, and accessories, generally owe sales tax on their sales. Sales of food intended for consumption on their premises are also taxable.

Use tax is a companion to California's sales tax, which applies to the use of property in California purchased from a retailer. For example, you may owe tax when you purchase tangible personal property from an out-of-state or foreign vendor for use in California without payment of tax. You also owe use tax on property you purchased for resale without payment of tax but then remove from your resale inventory to use in California. To pay the use tax, report the purchase price of the taxable items under "Purchases Subject to Use Tax" on your sales and use tax return. Those purchases become part of the total amount that is subject to tax.

The statewide sales and use tax rate is 7.25 percent. In many areas of California, local jurisdictions have added district taxes that increase the applicable tax rate. To find the tax rate for an address or location, please visit our Find a Sales and Use Tax Rate webpage and enter the address as prompted.

Alcoholic Beverage Tax in General

The alcoholic beverage tax is a per-gallon excise tax collected on the sale, distribution, or importation of alcoholic beverages in California. The alcoholic beverage tax is in lieu of all county, municipal, and district taxes on the sale of beer, wine, and distilled spirits.

Generally, the distilled spirits wholesalers pay the alcoholic beverage tax based on the gallons sold to in-state retailers. If the alcoholic beverage tax is not paid by the wholesaler, the tax is due from the seller or retailer of distilled spirits.

The current alcoholic beverage tax rate on distilled spirits, based on "per wine gallon" is:

• Distilled Spirits, 100 proof or less: $3.30 per wine gallon
• Distilled Spirits over 100 proof: $6.60 per wine gallon

See Tax Rates – Alcoholic Beverage Tax for all alcoholic beverage tax rates.

Conversion of Liters to Wine Gallons

You are required to file California returns and reports for distilled spirits in "wine gallons." A wine gallon is the same as a regular gallon = 231 cubic inches or 128 ounces.

The Federal Alcohol and Tobacco Tax and Trade Bureau (TTB) authorizes the bottling of wine and distilled spirits in standard metric sizes; however, you must file all California returns and reports in wine gallons. A “wine gallon” is the same as a regular gallon, meaning 231 cubic inches or 128 ounces. To convert liters to wine gallons for reporting purposes, you must use the standards established by TTB.

To convert liters to wine gallons, multiply the quantity in liters by 0.264172, rounded to the nearest one-hundredth (second decimal) of a gallon.

See Revenue and Taxation Code section 32452.1 and Regulation 2544, Conversion of Liters to Gallons, for more information.

Responsibility for Alcoholic Beverage Tax

Distilled spirits are presumed to be sold and the excise tax is due when they are sold to in-state retailers or to consumers if sold by licensed craft distillers.

The presumption that the alcoholic beverage tax is due may be rebutted if you can show that the distilled spirits:

• Are still in the possession of the licensee.
• Have been sold or delivered to another licensed distilled spirits manufacturer, rectifier, importer, or wholesaler.
• Have been exported outside California or sold for export by the licensee and actually exported from California within 90 days from the date of the sale.
• Have been lost through unintentional destruction prior to the termination of possession.
• Have been lost through an unaccounted-for loss prior to the termination of possession. The unaccounted-for loss shall not exceed the allowable tolerance set forth in subdivision (b) of Regulation 2550, Destruction and Unaccounted For Losses of Distilled Spirits.
• Are otherwise exempt from taxation. See Transactions Exempt from the Alcoholic Beverage Tax below.

Transactions Exempt from the Alcoholic Beverage Tax

The law provides certain exemptions from the alcoholic beverage tax.

The following are exempt from the alcoholic beverage tax:

• Distilled spirits sold to instrumentalities of the armed forces of the United States organized under Army, Air Force, Navy, Marine Corps, or Coast Guard that include exchanges and officers', noncommissioned officers', and enlisted person's clubs or messes (Revenue and Taxation Code section 32177.5)
• Alcoholic beverages in continuous transit through California in the possession or custody of common carriers (Revenue and Taxation Code section 32051).
• Certain sales of alcohol or distilled spirits for use in trades, professions, or for industrial purposes, and not for beverage purposes (Revenue and Taxation Code section 32052).
• Alcohol or other distilled spirits sold in packages of a capacity of larger than one gallon for the following uses (Revenue and Taxation Code section 32053):
  • By any state or federal governmental agency, or by any scientific university or college of learning or any laboratory for use exclusively in scientific research, or by any hospital or sanitarium.
  • The manufacture of any of the following products, if the products are unfit for beverage use:
    • Medicinal, pharmaceutical, or antiseptic products, including prescriptions compounded by registered pharmacists
    • Toilet products
    • Flavoring extracts
    • Sirups (syrups)
    • Food products
    • Scientific, chemical, or industrial products
• Sales of alcoholic beverages to certain commercial carriers of persons when beverages will be used on their facilities outside California (Revenue and Taxation Code section 32054).
• Alcoholic beverages sold for export and actually exported (Revenue and Taxation Code section 32211). Distilled spirits must be exported from California within 90 days from the date of sale.
• Brandy sold to a licensee of another state pursuant to the provisions of section 23108 of the Business and Professions Code (Revenue and Taxation Code section 32212).
• Distilled spirits sold by manufacturers, rectifiers, importers, or wholesalers to passenger common carriers engaged in interstate or foreign passenger service (Revenue and Taxation Code section 32213).

You must maintain records to adequately document the above exemptions.

Tax Credits

A distilled spirits taxpayer may claim a credit for alcoholic beverage tax paid on distilled spirits when sold to certain persons who use the distilled spirits in the manufacture of food products.

For more information, please see Revenue and Taxation Code section 32214.

Agricultural Topics

If you operate a farm that grows hops, barley, grains, potatoes, or fruits, among others, or processes these products for distilleries, make sure you know about the tax-saving opportunities that may be available to you. This section explains how sales and use tax and exemptions generally apply to farm equipment and machinery, diesel fuel used in farming or food processing, seeds and plants, fertilizer, soil amendments, pesticides, insecticides, and manufacturing equipment.

Partial Exemption for Farm Equipment and Machinery

In general, the sale of farm equipment and machinery is subject to sales and use tax. However, certain sales and purchases of farm equipment and machinery (including repair and replacement parts) are partially exempt from sales and use tax. As a farmer, you may qualify for this partial exemption.

The partial exemption applies only to the state’s General Fund and Local Revenue Fund 2011 portions of the sales tax, currently 5 percent.

Three requirements must be met for the partial exemption from sales and use tax to apply. The item must be:

1. Purchased by a qualified person,
2. Used exclusively or primarily (depending on the type of item) in producing and harvesting agricultural products. Primarily means at least 50 percent of the time, and
3. Defined as farm equipment and machinery, which includes any tool, machine, equipment, appliance, device, or apparatus used in the conduct of agricultural operations.

If any of these three requirements are not met, the partial exemption from sales and use tax will not apply.

Examples of farm equipment and machinery that may qualify include:

• Planting and seeding equipment
• Crop-spraying equipment
• Harvesting equipment
• Tractors
• Balers
• Trimming tools
• Solar power systems, under certain circumstances
• Irrigation equipment

If you lease rather than purchase farm equipment, you may still qualify for the partial sales and use tax exemption. For more information about leases, please see publication 46, Leasing Tangible Personal Property.

Mobile transportation equipment generally does not qualify for the partial exemption unless it is used exclusively in the conduct of agricultural operations and qualifies as an implement of husbandry under the California Vehicle Code. For a list of items that generally do not qualify for the farm equipment and machinery partial exemption, please see our special notice, Auto Part Retailers' Sales Generally Do Not Qualify for the Farm Equipment and Machinery Partial Exemption.

For more about this partial exemption and other exemptions available for farming, please see our Tax Guide for Agricultural Industry and look under the Farming Exemptions tab.

Diesel Fuel Used in Farming or Food Processing

Most sales and/or purchases of diesel fuel are subject to sales and use tax. However, there is a partial exemption from the sales and use tax for certain sales and purchases of diesel fuel used in farming activities or food processing.

For information on when the partial exemption applies to the sale or purchase of diesel fuel used in farming activities or food processing, please see our Tax Guide for Agricultural Industry, look under the Farming Exemptions tab, and go to the Diesel Fuel Used in Farming or Food Processing topic.

In addition to the partial sales and use tax exemption, there is an exemption from the diesel fuel tax for sales of dyed diesel fuel. For more information on the diesel fuel tax exemptions, please see our Tax Guide for Motor Fuel Taxes and select the Diesel Fuel Tax option under the Industry Topics tab.

Seeds and Plants (rootlings, rootings, and root stock)

Retail sales of seeds and landscaping plants are generally subject to sales and use tax.

However, there is an exemption from the sales and use tax for the sales and purchases of seeds and plants when:

• The seeds, or the products grown from them will be used as food for human consumption.
• The plants will produce food for human consumption, such as fruits, grains, berries, or nuts.

For more information, please see Regulation 1588, Seeds, Plants and Fertilizer.

Fertilizer, Soil Amendments, Pesticides, and Insecticides

Sales and use tax does not apply to the sale of fertilizer to be applied to land or used in foliar application to plants, provided the land and plants are used to produce food products (grains, hops, berries).

The term fertilizer includes all the following:

• Commercial fertilizers (as defined in section 14522 of the California Food and Agricultural Code)
• Agricultural minerals (as defined in section 14512 of the California Food and Agricultural Code)
• Cover crops that will be planted on the land and plowed underneath to fertilize that land
• Carbon dioxide
• Manure, which is:
  1. Waste from any domestic animal or fowl that is not artificially mixed with any material; or
  2. Domestic animal or fowl waste mixed only with materials used for preservation of the manure, or with materials used for bedding, sanitary, or feeding purposes for the animal or fowl.

Other retail sales of fertilizer and packaged soil amendments (as defined in section 14552 of the California Food and Agricultural Code, other than manures sold without guarantees for plant nutrients) and auxiliary soils and plant substances (as defined in section 14513 of the California Food and Agricultural Code other than carbon dioxide) are taxable.

Sales of pesticides and insecticides are taxable; however, when those materials are mixed with fertilizer, the portion of the sales price representing the price of the fertilizer is not taxable if the fertilizer is used in a tax-exempt manner.

For more information, please see Regulation 1588, Seeds, Plants and Fertilizer

Manufacturing and Research & Development Topics

Manufacturers and certain research and developers may qualify for a partial exemption from sales and use tax on certain manufacturing and research and development equipment purchases and leases.

Manufacturing and Research & Development Partial Exemption

Manufacturers, certain researchers and developers, and certain electric power generators and distributors may qualify for a partial exemption from sales and use tax on the purchase or lease of qualified machinery and equipment primarily used in manufacturing, research and development, and electric power generation or production, storage, or distribution.

In general, to be eligible, you must meet all these conditions:

• You must be engaged in certain types of business, also known as a "qualified person,"
• You must purchase "qualified tangible personal property," and
• You must use the property in a qualified manner.

As a distiller, some of your purchases may qualify for a partial manufacturing exemption. Some examples of machinery and equipment that may qualify include distillation systems, bottling equipment, and fermentation tanks.

For more specific information on the partial manufacturing exemption, please visit our Tax Guide for Manufacturing and Research & Development Equipment Exemption.

Oak Barrels

New or used oak barrels and oak chips purchased for the purpose of incorporating flavoring elements derived from the oak into brandy may be purchased for resale by manufacturers of alcoholic beverages.

As the manufacturer of distilled spirits, you can provide a CDTFA-230, General Resale Certificate, to your vendor when purchasing oak barrels and/or oak chips.

Sales and Distribution Topics

If you sell, ship, distribute, import, or export distilled spirits, you need to know your sales and use tax and alcoholic beverage tax obligations. This section contains information that may be helpful to you.

Distilled Spirits Labels

Sales and use tax generally does not apply to the sale of labels when sold to persons who affix them to nonreturnable containers of property to be sold (spirits) or to returnable containers when a new label is affixed to the container each time it is refilled.

Examples are sales of labels to be affixed to fruit boxes, cans, bottles, and packing cases, to growers, packers, bottlers, and others who place the contents in the containers.

Packaging Material

Sales and use tax does not apply to the sale of packaging materials when sold to persons who place the contents (spirits) in the containers and sell the contents together with the containers.

Examples of packaging materials are bottles, cans, wrapping materials, twines, bags, cardboard or plastic carriers, cartons, and pallets.

Distilled Spirits Tastings and Self-Consumption

If you charge a fee for distilled spirits tasting, you are considered the retailer of the distilled spirits and sales tax applies to the tasting charges. The alcoholic beverage tax is owed on all distilled spirits provided to customers at tasting events, even if there is no charge to the customers attending the event.

If you also sell food during distilled spirits tastings, such as bread, crackers, cheeses, and other snacks, sales tax also applies to these sales. You may collect sales tax reimbursement from your customers on your distilled spirits and food sales as a separately stated charge, or you can include the tax in your distilled spirits or food charges; however, you must post a sign notifying your customers that the fee charged for distilled spirits tasting or food includes sales tax reimbursement. For more detailed information on sales tax reimbursement, please see Regulation 1700, Reimbursement for Sales Tax.

If you do not charge a fee for distilled spirits tasting or food served to your customers, you are considered the consumer of the products used. You owe use tax on the cost of the taxable items that you purchased for resale and used to produce the distilled spirits that you let customers taste without charge. For example, if you are a distilled spirits manufacturer, you owe use tax on items purchased for resale such as bottles, labels, and certain chemicals incorporated into the distilled spirits. If you purchased distilled spirits for resale, you owe use tax measured by the cost of the distilled spirits that you give away or self-consume. Use tax does not apply to the purchase price of the grains or hops because they are food products, the sales of which are exempt from tax. For more information regarding components of distilled spirits manufactured, please see the Ingredients tab.

Facility Fees for Events at a Distillery

If you contract to provide and serve food or beverages at your distillery for a customer's event, such as a wedding, birthday party, or retirement party, in general, your charge for use of the distillery (facility) is subject to tax.

In general, when you contract to provide and serve food or beverages for an event at the distillery and the primary purpose of the distillery is to serve the food or beverages at the event, your charge for use of the distillery is subject to tax, even if separately stated. You are considered to be functioning as a restaurant, and the charge for the use of the distillery is part of the sale of food or beverages.

Example:

A distillery has a courtyard area designed for wedding receptions and contracts to furnish and serve food and beverages for a customer's wedding reception (event) under a lump sum charge. The distillery's courtyard has tables and chairs for the wedding reception and the distillery provides all tableware, linens, and glasses, among others, in addition to the food and beverages. In this case, the distillery is functioning as a restaurant and the distillery's facility charge for use of the courtyard is subject to tax, even if the charge is separately stated.

However, if you contract to provide and serve food or beverages at the distillery, but also rent a separate area of the distillery to your customer for a use other than serving food or beverages, the charge for the use of the separate area unrelated to the serving of food or beverages is not subject to tax if the charge is separately stated on the invoice. A nontaxable facility charge could include a charge for a location for the couple to prepare for the wedding or a charge for a room for the couple to spend their wedding night.

Example:

Same scenario as the above example (for example, distillery contracts to provide and serve food or beverages for a customer's wedding reception), except in this case the distillery also rents the wedding party a separate area to hold the wedding ceremony. This area is separate from the courtyard and no food or beverages will be served in the area where the wedding ceremony occurs. The distillery separately states the charge for the use of this area that is unrelated to the serving of the food or beverages. Because the primary purpose of the area for the wedding ceremony is not to serve food or beverages, the separately stated charge is not subject to tax. Under these circumstances, only the charge for the facilities where food or beverages are served is subject to tax.

Your charge for the use of the distillery for an event where the primary purpose of the distillery at the event is to serve food or beverages is subject to tax even if you only provide either the food or the beverages at the event.

Example:

A distillery has a courtyard area designed for wedding receptions and contracts to serve its wine at the wedding reception. However, the customer contracts directly with a caterer, unrelated to the distillery, to provide and serve the food at the reception. The distillery’s facility charge for the use of its courtyard area is subject to tax because the distillery is providing and serving the distilled spirits at the event, even though the food is provided and served by an outside caterer. The facility charges are subject to tax even if the charges are separately stated.

It makes no difference that the facilities are not primarily used for serving food or beverages in the normal course of business, such as a barn, cellar, or garden. When you contract to furnish and serve food or beverages for an event and provide facilities whose primary purpose at the event is to serve food or beverages, the charge for those facilities is subject to tax, even if separately stated.

Example:

A distillery operates a catering service and has a cellar that can be used for private parties. The distillery contracts to furnish and serve food or beverages using its catering service for a retirement party in the cellar. In such cases, even though the cellar is generally used for making and storing distilled spirits, since the primary purpose of the event is to serve food and beverages, the facility charge for the cellar is subject to tax.

However, in some instances, you may rent or lease the distillery for an event without furnishing and serving food or beverages. Instead, the customer provides the food and beverages, including the distilled spirits, for the event. For example, the customer hires a caterer unrelated to you to furnish and serve meals at the event. Under these circumstances, you are not considered to be acting as a restaurant because you are not responsible for furnishing and serving the food or beverages at the event. You are merely leasing the premises and the separately stated charge for the use of the distillery is not subject to tax.

For more information, please see publication 22, Dining and Beverage Industry, under the Facility fees charged by retailers other than restaurants or hotels section.

Samples and Donations

Samples and donations of distilled spirits shall be reported as sales and are subject to California's alcoholic beverage tax.

Each transfer of samples between licensees authorized to possess alcoholic beverages on which the California alcoholic beverages taxes have not been paid, should be on an ex-tax basis, and recorded on an invoice marked "Samples."

Distilled spirits picked up at the licensed premises of a distilled spirits rectifier or wholesaler by a representative of a manufacturer or manufacturer's agent for sampling purposes are subject to the alcoholic beverage tax and shall be reported as taxable sales by the rectifier or wholesaler. (Alcoholic Beverage Tax Regulation 2560, Treated as Sales)

For sales and use tax purposes, if you do not charge a fee for your samples, you are considered the consumer of the products used. You owe use tax on the cost of the taxable items that you purchased for resale and used to produce the distilled spirits that you let customers taste without charge. For example, if you are a distilled spirits manufacturer, you owe use tax on items purchased for resale such as bottles, labels, and certain chemicals incorporated into the distilled spirits. If you purchased distilled spirits for resale, you owe use tax measured by the cost of the distilled spirits that you give away or self-consume. Use tax does not apply to the purchase price of the grains or hops because they are food products, the sales of which are exempt from tax. For more information regarding components of distilled spirits manufactured, please see the Ingredients tab.

Importing Distilled Spirits

As a distilled spirits importer, you must keep purchase invoices and a record of all shipments of distilled spirits received from a point outside of California.

You must document your records on CDTFA-242-A, Distilled Spirits Imported into California. Importation of distilled spirits in California must be reported at the time of importation and not at the time of withdrawal from bond. Total amount reported on this report must be reported on the Distilled Spirits Tax Return, on the Inventory Reconciliation 100 Proof and Under, and the Inventory Reconciliation Over 100 Proof screens.

Distilled spirits imported into California that are sold by the importer to a licensed manufacturer, wholesaler, rectifier, or importer are not subject to the alcoholic beverage tax. However, imported distilled spirits sold by a wholesaler or rectifier to a California retailer are subject to the alcoholic beverage tax.

Personal Use

Adults who bring alcoholic beverages into California for personal or household use do not need an alcoholic beverage license; however, some restrictions do apply. For specific information on importing alcoholic beverages for personal use and the allowable amounts, please visit ABC's website and review their Importing Alcoholic Beverages for Personal or Household Use webpage.

If you purchase alcoholic beverages from outside California for personal use, you are required to report and pay use tax directly to us. For information regarding California use tax, please visit our California Use Tax Information webpage.

Exporting Distilled Spirits

Distilled spirits sold for export and actually exported are exempt from the alcoholic beverage tax. Distilled spirits must be exported from California within 90 days from the date of sale.

To qualify for the exemption from the alcoholic beverage tax, one or more of the following conditions must be met:

• The beverages are delivered to an armed force of the United States, at a depot of the armed force in California, for transport out of California, and the taxpayer's record of the sale is supported by a copy of the official purchase order and the documented evidence of export.
• The beverages are shipped to a point in a foreign country, and the federal tax on alcoholic beverages is not imposed or is refunded.
• The beverages are shipped to a point outside California by a carrier who is independent of the buyer and the seller, and the claim for tax exemption is supported by a copy of the shipping documents receipted by the carrier. "Carrier" means a person or firm regularly engaged in the business of transporting for compensation property owned by other persons.
• The beverages are shipped to or delivered to a point outside California by any means, and the claim for tax exemption is supported by documentation signed by the purchaser. Documentation must include the certificate of the appropriate liquor control or tax authority of the state in which the beverages have been delivered, showing that receipt of the delivery of the beverages has been reported to such authority by the purchaser.

Sales of distilled spirits by licensed retailers to customers outside of California are generally considered exempt sales in interstate and foreign commerce and are not subject to sales tax. You must keep documentation, such as a bill of lading, to show that the distilled spirits were shipped out of California directly to your customer.

Sales Which Are Not Exports

Alcoholic beverages on which federal excise taxes have been paid, and which are sold to persons operating commercial fishing boats or private carrier freight vessels, for use as ships' stores outside California, upon the high seas, are not exports and are subject to the alcoholic beverage tax.

Records

You are required by law to keep business records to properly report and pay the applicable taxes. This section will explain what type of records you need to keep, as well as how long you must keep them for sales, use, and alcoholic beverage tax purposes.

Accurate record keeping will help you to keep track of your sales and purchases and assist you when preparing your required tax returns and reports. Records must be kept for at least four years, unless otherwise directed by us. If you do not maintain records, it may be considered evidence of negligence or intent to evade the tax and may result in penalties.

Examples of records you must keep include:

• Sales invoices
• Cash register tapes
• Sales journals
• Resale certificates
• Shipping documents
• Purchase invoices
• Bank records
• Purchase orders
• Purchase journals
• Tax returns

Every distilled spirit manufacturer, importer, and wholesaler must keep records of all beer produced, received by bottling, canning, or cooperage departments, packaged, purchased, or sold.

Invoices

Every sale or delivery of distilled spirits or brandy from one licensee to another licensee must be recorded on a sales invoice, whether or not consideration is involved.

Each invoice covering the sale or purchase of alcoholic beverages:

• Must not be commingled with invoices covering commodities other than alcoholic beverages;
• Must be marked or stamped "Sold for export" if sold for export;
• Must be marked or stamped "No state tax–not for beverage use" if sold for use in trades, professions, or industries, and not for beverage use;
• Sales by a licensee to another licensee must show the number of wine gallons sold, and
• Must show all of the following:
  • The name and address of the seller;
  • The name and address of the purchaser;
  • Date of sale or purchase and invoice number;
  • The kind, quantity, size, and capacity of packages of alcoholic beverage sold;
  • The cost to the purchaser together with any discount which at any time is to be given on or from the price as shown on the invoice; and
  • The place from which delivery of the alcoholic beverages was made, unless delivery was made from the premises of the licensee or from a public warehouse located in the same county.

In addition to the general requirements described above, the following records must be kept:

For more detailed information on books and records, please see our publication 116, Sales and Use Tax Records.

Inventories

If you are a distilled spirits taxpayer, you must provide a statement of your gallonage of finished package distilled spirits on hand at the end of the month or reporting period.

You must report it on the Distilled Spirits Tax Return. In general, at least two of the statements of gallonage shall be prepared from semi-annual physical inventories.

You should keep all records used in preparing inventories for certification at your premises to be readily accessible for examination by our team members.

For more information, please see Regulation 2530, Inventories.

Losses and Allowances

If you are a licensed business and incur any of the following described losses, we will refund you an amount equal to the state alcoholic beverage taxes included in the sales price of beverages.

Losses Resulting from Disaster, Vandalism, Malicious Mischief, or Insurrection

A refund may be obtained from us for the alcoholic beverage tax paid after losses resulting from disaster, vandalism, malicious mischief, or insurrection.

To obtain a refund from us for the alcoholic beverage tax paid, all the following conditions must be met:

• The beverages are lost, rendered unmarketable, or condemned by a duly authorized official by reason of fire, flood, casualty, or other disaster, or by reason of breakage, destruction, or other damage resulting from vandalism, malicious mischief, or insurrection.
• The beverages were held and intended for sale at the time of the disaster or other damage.
• The disaster or damage occurred in California.
• The licensee has not, and will not, be compensated by insurance, or otherwise, for the loss in the amount of the tax included in the purchase price paid for the beverages.
• The amount to be refunded with respect to a single disaster or other loss is $250 or more.
• A claim for refund is filed with us within six months after the date on which the beverages were lost, rendered unmarketable, or condemned by a duly authorized official.

We will not pay interest on the amount of alcoholic beverage taxes refunded. Losses resulting from theft do not qualify for a refund of the alcoholic beverage tax (see Regulation 2553, Losses Resulting from Disaster, Vandalism, Malicious Mischief, or Insurrection).

Losses resulting from theft do not qualify for a refund of any sales tax because the products were not sold at retail, and therefore, no sales tax was imposed.

Unintentional Destruction of Distilled Spirits

Unintentional destruction means destruction of distilled spirits by fire, earthquake, floods, breakage in transit, accident, or by any other cause when the exact quantity destroyed is known.

Claims for loss of inventory by reason of unintentional destruction are to be submitted via email to unintentionaldestruction@cdtfa.ca.gov and must be submitted to us immediately following the close of business on the last day of the month in which the loss is discovered. The claim must state under oath of the licensee that the distilled spirits were so damaged that they could not be used for any purpose. Proof of loss satisfactory to us in the form of paid insurance or carrier claims must be retained on the taxpayer's premises for verification.

For more information, please see Regulation 2550, Destruction and Unaccounted For Losses of Distilled Spirits.

Unaccounted-For Losses of Distilled Spirits

Unaccounted-for losses shall include all other losses disclosed by physical inventory due to pilferage, handling, or other causes.

The allowable tolerance for unaccounted for losses of distilled spirits acquired by any distilled spirits taxpayer shall not exceed one-tenth of one percent of the total sales of the distilled spirits. In the case of a distilled spirits taxpayer who holds licenses for two or more premises, the tolerance allowed by this rule shall be computed and applied separately to the transactions for each premises, unless we have granted the taxpayer permission to file a consolidated tax return.

For more information, please see Regulation 2550, Destruction and Unaccounted for Losses of Distilled Spirits.

Distilled Spirits Sold for Industrial Uses

Sale of distilled spirits by distilled spirits manufacturers, brandy manufacturers, rectifiers, or industrial alcohol dealers for industrial (non-beverage) uses is exempt from the alcoholic beverage tax, but only when sold in packages with a capacity larger than one gallon (Revenue and Taxation Code section 32052 and Revenue and Taxation Code section 32053).

The use of distilled spirits in the manufacture of any of the following products is considered for industrial uses, if the products are unfit for consumption as a beverage (Business and Professions Code section 23112):

• Medicinal, pharmaceutical, or antiseptic products (such as hand sanitizer), including prescriptions compounded by registered pharmacists
• Toilet products
• Flavoring extracts
• Sirups (syrups)
• Food products
• Scientific, chemical, or industrial products

For more information, please visit the Industry Topics tab of our Tax Guide for Alcoholic Beverage.