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As a rule, the Alcohol & Tobacco Tax & Trade Bureau (TTB) would prefer to work with industry members to guide them into compliance, rather than levying large fines or shutting businesses down. In fact, TTB even has a Voluntary Disclosure program that can help you minimize business disruption and cost, should you find yourself in a non-compliant position.
But if you break the law big enough, large TTB fines are levied and they can even prosecute individuals. Here’s a few examples of these rarer but fascinating cases.
1. Pick a Lane
In 2022, five men plead guilty to charges stemming from a North Carolina investigation of illicit liquor production. These individuals allegedly produced 9,000 gallons of moonshine from 2018-2020 and sold it across state lines and to law enforcement personnel. One of the accused is employed as the Master Distiller of a legitimate distillery, and the complaint alleges that this individual sold illicit liquor to undercover federal agents in the parking lot of the legal distillery. The same individual had been sentenced for violating federal liquor laws 50 years ago. See TTB Press Release, News Article & Federal Case.
2. A Payment, By Any Other Name…
Cutwater Spirits, which is owned by Anheuser-Busch, recently found themselves the subject of a $169,850 “offer in compromise” (OIC), settling violations that occurred in 2021-2022. The cause? Paying excise tax via paper check instead of electronic transfer. They paid their taxes correctly, on time and in full, but they did not use the payment method specified by 27 CFR 19.240. That regulation requires payors with over $5 million in annual liability to pay via electronic means. See Offer in Compromise.
3. LeVecke Me Out of It
LeVecke Corporation, (in)famous producer of Kirkland Signature Vodka, found itself accused of a laundry list of excise and recordkeeping/tax determination violations back in 2021. From miscalculating flavor credits to failing to file/pay excise returns, this particular Offer in Compromise really runs the gamut and totals out at over $40 million in alleged unpaid excise tax.
TTB examined LeVecke’s books and concluded that there was some doubt as to LeVecke’s ability to pay the full amount, and so the government settled for a “mere” $28 million to be paid over 6 years. By this author’s quick math, they should have paid about $18.5 million out of the $28 million by now (September 2023).
4. Sponsorship Gone Awry
While this OIC involves a beer producer instead of a spirits producer, the regulation that was allegedly violated applies to distilleries, too. In 2020, TTB accused Anheuser-Busch of violating “tied house” trade practice violations, stemming from their sponsorship of “various entities in the sports and entertainment industries”. A-B is accused of using certain tactics to increase share and exclude competition. Without admitting fault, A-B offered to put the accusations to bed with a $5 million lump sum payment, which the TTB accepted.
