Section 5051 IRC: The Federal Excise Tax on Beer
Navigate federal beer excise tax compliance under IRC 5051. Understand how tax rates and operational removals determine your final liability and reporting.
Internal Revenue Code Section 5051 establishes the federal excise tax levied on all beer that is either produced within or imported into the United States. The legal obligation for the payment of this tax rests directly with the brewers and importers of the beer. These entities are responsible for accurately calculating, reporting, and remitting the tax to the appropriate federal agency. This ensures every barrel of beer entering the U.S. market contributes to this tax.
Applicable Tax Rates on Beer
The federal excise tax on beer is structured in tiers. For tax purposes, the Alcohol and Tobacco Tax and Trade Bureau (TTB) defines one barrel as a quantity of 31 U.S. gallons. The standard tax rate is $16 per barrel on the first 6 million barrels produced or imported annually. For production exceeding 6 million barrels, the rate increases to $18 per barrel.
A provision made permanent by the Craft Beverage Modernization Act (CBMA) offers tax relief for smaller domestic brewers. Domestic brewers who produce no more than 2 million barrels annually are eligible for a reduced rate of $3.50 per barrel on their first 60,000 barrels. After the first 60,000 barrels, the standard tax rate of $16 per barrel applies until the 6 million barrel threshold is reached.
Calculating Total Tax Liability
A brewer’s federal excise tax liability is based on the volume of beer “removed” for consumption or sale, which is the point the tax is determined. This event occurs when beer leaves the bonded brewery facility for distribution into the marketplace. The tax is not levied on production itself, but on the beer that enters commerce.
Brewers can make certain adjustments to their total barrel count. These adjustments account for beer that does not end up being sold to consumers. For instance, beer that is properly destroyed on the brewery premises before it can be sold is not included in the taxable barrel count, which often applies to products that do not meet quality standards or have expired.
Other common adjustments include beer used for laboratory testing or analysis within the brewery. Another exemption involves the transfer of beer “in bond” between two breweries that are under the same ownership. In this scenario, the tax liability is deferred until the beer is finally removed for sale from the receiving brewery’s premises.
Reporting and Paying the Excise Tax
Brewers are required to file reports detailing their operations with the Alcohol and Tobacco Tax and Trade Bureau (TTB). These operational reports, such as the Brewer’s Report of Operations (TTB Form 5130.9) or the Quarterly Brewer’s Report of Operations (TTB Form 5130.26), document production, inventory changes, and the quantity of beer removed for sale.
The frequency of filing depends on the brewer’s annual excise tax liability. Brewers who expect their annual tax liability to exceed $50,000 are required to file on a monthly basis. Those whose liability was not more than $50,000 in the previous year and who expect to remain under that threshold can file on a quarterly basis. For those filing quarterly, reports are due by the 15th day of the month following the end of the quarter.
After filing an operational report, brewers remit their tax payments using a separate form, the Excise Tax Return (TTB Form 5000.24). Payments can typically be made through the federal government’s Pay.gov system. Even if a brewery has no production or removals during a reporting period, it is still required to file its operational report showing zero activity.