HQ 224790
WAR-1-03-CO:R:C:E 224790 CB
ENT-7-02
Paul V. Byrne, Jr., Esq.
O'Donnell, Byrne & Williams
20 North Wacker Drive
Suite 3710
Chicago, IL 60606
RE: Continental Distributing Co., Inc.; removal of merchandise
from bonded warehouse; 26 U.S.C. 5061(d)
Dear Mr. Byrne:
This is in response to your request for a ruling on behalf of
your client, Continental Distributing Co., Inc. ("Continental"),
dated June 16, 1993.
FACTS:
Continental operates a customs bonded champagne and spirits
warehouse which it intended to expand. As a result of this
construction, Continental will be required to transfer its bonded
merchandise from its bonded warehouse to another bonded warehouse.
Because of the expected time needed for the construction project,
and the current projection for its bonded sales, Continental will
not return any of the transferred bonded merchandise to its bonded
warehouse.
You state that your client believes that there is an apparent
disagreement between the Bonded Warehouse Manual ("the Manual") and
26 U.S.C. 5061(d). The statute requires that the internal revenue
tax be paid no later than the 14th day after the last day of the
semimonthly period during which the article is removed from the
first bonded warehouse. On the other hand, the Manual indicates
that payment is due within 14 days of the transfer.
You ask for a ruling that the tax is due and payable not later
than the 14th day after the last day of the semimonthly period
during which the bonded merchandise is removed.
ISSUE:
When is the internal revenue tax due on bonded merchandise
payable?
LAW AND ANALYSIS:
Section 5061(d), of Title 26, United States Code, provides for
the payment of Internal Revenue taxes on alcohol and tobacco
products upon withdrawal from the first Customs bonded warehouse in
which they are stored. Such imported articles may, however, be
transferred tax-free if the articles are "destined for export." 26
U.S.C. 5061(d)(2)(D). It is the Bureau of Alcohol, Tobacco and
Firearms' position that payment of the tax cannot be deferred
through the transfer of bottled imported spirits between Customs
bonded warehouses. Rather, under section 5061(d), the removal from
the first bonded warehouse triggers payment of the tax. Therefore,
you are correct in your assumption that Continental would be
required to pay the Internal Revenue tax upon withdrawal of the
bonded merchandise from its bonded warehouse.
There remains the question of when is the payment due. You
state that Continental believes that there is a disagreement
between the applicable statute and the Manual. In section 1.1
Purpose, the Manual clearly states that it "does not itself have
the force of law, and is intended only as a convenient compilation
of the reference material. . . ." Continental is correct in
concluding that the Manual sets forth a different time period than
the statute and, therefore, should be corrected. However, there is
no question that in case of a conflict, such as the one here, the
statutory language prevails. Thus, the Internal Revenue tax is due
and payable not later than the 14th day after the last day of the
semimonthly period during which the bonded merchandise is removed
from the first bonded warehouse.
HOLDING:
Payment of the Internal Revenue tax cannot be deferred through
the transfer of bottled imported spirits between Customs bonded
warehouses. Removal of the bonded merchandise from the first
bonded warehouse triggers payment of the tax provided under 26
U.S.C. 5061(d). The tax is payable not later than the 14th day
after the last day of the semimonthly period during which the
bonded merchandise is removed from the first bonded warehouse.
Sincerely,
JOHN DURANT, Director
Commercial Rulings Division