Distilled Spirits Council Working With Congress to Ease Tax Hurdles Hampering Efforts to Produce Hand Sanitizer to Combat COVID-19

-Without Congressional Action Distillers Must Pay Full Federal Excise Tax if Undenatured Alcohol Used-

 WASHINGTON —The Distilled Spirits Council of the United States is working with Congress and the Trump Administration to ease tax regulations that could force distillers producing desperately needed hand sanitizer to pay federal excise taxes on the alcohol used.

The Tax and Trade Bureau (TTB) eased regulations to permit distillers to make hand sanitizer, but were unable waive the federal excise tax for distillers using undenatured ethanol.  Under the new TTB guidance, “Hand sanitizer products are not subject to Federal excise tax if made with denatured ethanol. However, if made with undenatured ethanol, Federal excise tax applies.”

The Distilled Spirits Council of the United States (DISCUS) and members of its Technical Committee have been working with the Tax and Trade Bureau to clear regulatory hurdles and expedite federal guidance for distillers on the production of hand sanitizer.  TTB has eased regulations so that a distillery will not need a special permit to produce hand sanitizer as long as it holds a beverage producers permit.  Additionally, TTB will allow the production without formula approval as long as distilleries follow the WHO formula for hand sanitizer, which includes grain neutral spirits, glycerin and hydrogen peroxide.

DISCUS has asked Congress to make an emergency fix in upcoming COVID-19 relief legislation so that distillers can use the ethanol they have on hand—denatured or undenatured—to quickly make the hand sanitizer without having to expend additional resources and time.

“We want to thank our regulator partners at the Tax and Trade Bureau for working with us to cut through the red tape so we can quickly help fill this need in our country,” said Swonger.  “We appreciate Congress’ efforts to work with us and the Tax and Trade Bureau to make this important change regarding the federal excise tax and hand sanitizer production.  The distilled spirits industry is already facing difficult times with tariffs and the shutdown of bars and restaurants.  Distillers are members of the community and want to help, but forcing them to pay taxes on the hand sanitizer is just plain wrong.”

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