Tips to stay compliant when adjusting Bottled Wine Inventory on your TTB 5120.17

Guest blog by Olivia Leigh from Compli, Paso Robles. Learn more about vintrace here or visit us at Booth 517 at UWGS Sacramento, CA Jan 30-31 2019.

At first glance, the TTB’s 5120.17 Report of Wine Premises Operations can seem overwhelming and complex, especially when it comes to the various options for bottled wine inventory movements. While standard taxpaid removals, receipts/transfers in bond and bottled inventory are commonplace, there are several options in Section B that are not so straightforward but very useful under certain circumstances.

Adjustments increasing inventory

Line 4 – Taxpaid Wine Returned to Bond

Reference Line 10 and Line 15 for instances when wine is commonly returned to bond.
A claim must be filed (TTB F 5620.8) per 27 CFR 24.66 to request a refund or credit of tax. Situations where a refund of tax credit is requested should be documented within Section X of the 5120.17 form for that reporting period.

Line 5 – Write In Entry: Inventory Gain

Like Section A, Line 9 – Inventory Gain, Section A, Line 30 – Inventory Losses and Section B, Line 19 – Inventory Shortage, this line is only to be used after a full physical inventory is conducted and documented. Should the proprietor determine that there is more bottled inventory on hand than the book record shows, a gain would be reported on this line to reconcile the report.

Helpful Tip: A complete physical inventory is required at least once per year and is typically set for June 30th or December 31st depending upon the proprietor’s filing frequency. It is also possible to have a variance on file with the TTB for another date entirely.
For Inventory Gains, use Section X to reference the physical inventory date and attach the inventory signed under penalty of perjury.

Adjustments Decreasing Inventory

Line 10 – Dumped to Bulk

Proprietors may dump bottled wine to bulk for several reasons:

• Wine Quality Issues

• Inaccurate ABV dumped back for blending

• Unwanted secondary fermentation

• Problems with the corks (leaking)

• Unfiltered wine dumped back for filtering

• Wine needs to be heat or cold stabilized

• Vessel cap failure (keg wine)

• Relabelling

• Altering the wine by creating a new blend

Dumping to bulk may be a three-step process if the inventory is taxpaid; bottled wine is returned to bond (Section B – Line 4), dumped to bulk (Section B – Line 10) and re-entered to the bulk wine section via Section A, Line 8 – Taxpaid Wine Returned to Bond.

Line 11 – Used for Tasting

When a proprietor’s tasting room is included within their bonded premise, they have the option of removing bottled wine as “Used for Tasting”.

Line 12 – Removed for Export

If the proprietor chooses to export bottled wine out of the United States, that wine is eligible for exemption from excise taxes. However, proprietors must submit TTB Export Form 5100.11 and proof of export for each shipment to receive approval to waive these taxes.
Reference your TTB f 5100.00 filing date and method of submission within Section X.

Line 13 – Removed for Family Use

Wine may be removed un-taxpaid for family use by individual owners and partnerships, up to 100 gallons per year for a single adult household or up to 200 gallons for a two-adult household. This privilege does not apply to corporations. In the case of Limited Liability Companies, the privilege applies if the company files taxes and conducts business as a partnership rather than a corporation, so additional research may be required to determine eligibility.

Line 14 – Used for Testing

The amount of wine used for testing may be un-taxpaid regardless of whether the testing occurs on premise or at an offsite laboratory facility. Proprietors will often send bottled wine for testing for:

• Additional testing required for export

• Microbial growth

• Quality control checks for Sulphur levels, Brettanomyces, high volatile acidity (VA), Trichloranisole (TCA), smoke taint, CO2, etc.

Line 15 – Write-In Entry: Destroyed

In some instances, it may be determined that a lot of bottled inventory is unfit for consumption and the only recourse is to have the inventory destroyed. The proprietor must first request approval from the TTB to destroy the inventory before proceeding and reporting the loss here. Some common reasons for this include:

• Tired wine or wine past its prime pulled from inventory

• Oxidized wine

• Corked wine

• Microbial growth

• High VA

• Brettanomyces

• Unsafe smoke taint levels

Destroying wine is generally a two-step process; bottled wine is returned to bond (Section B – Line 4) and then destroyed after approval (Section B – Line 15).

Helpful tip: It is highly recommended to reference the approval date when the TTB allowed for the destruction of wine in Section X of the 5120.17 form. This information must be included if the proprietor intends to file a claim for allowance of loss (TTB F 5620.8) for wine destroyed in bond.

Line 18 – Breakage

Any bottled, bonded wine destroyed by breakage is reported here. This most often covers general losses from dropped cases, for example.
For extraordinary or unusual losses such as fire, flood, earthquake, loss in transit or theft, the proprietor should document the loss in Section B, Line 15, 16 or 17 as a write-in. Claims for allowance of loss must be filed immediately in this instance, rather than with the proprietor’s annual inventory. Proprietors should take pictures to document extraordinary losses and reference the incident in Section X of the 5120.17 form for the reporting period in which the loss occurred.

Line 19 – Inventory Shortage

The partner line to Line 5 – Inventory Gain, this line item may only be used after a full physical inventory has been conducted and documented.
For Inventory Shortages, use Section X to reference the physical inventory date and attach the inventory signed under penalty of perjury.

A little about me

Olivia Leigh is a Paso Robles native with lifelong involvement in California wine and agriculture. Her first job at 16 was working at a Paso Robles winery (in the office, of course), followed by several work experiences with other local wineries in the area.

Her interest in the local agriculture industry led her to earn an Agricultural Communications degree from California Polytechnic State University, San Luis Obispo.

After several years working in the fresh produce industry, she returned to her Paso Robles wine roots last year by accepting the position of Director of Alcohol Beverage Licensing at Compli, the industry leader in compliance software and services for the beverage alcohol industry.