Alcohol & Tobacco Tax & Trade Bureau will reduce its investigators and support staff dedicated to Trade Practice Enforcement under President Trump’s proposed fiscal 202` budget, released yesterday.
The agency’s budget justification notes that TTB had bulked up its staffing to the point where it currently has about 50 active trade practice cases. That’s a dramatic increase from 2017, when TTB had just one trade practice case.
At the same time that TTB is trimming its “protect the public” mission, it will add six more investigators and support staff to ensure taxes are collected.
The Trump Administration is proposing to consolidate Federal alcohol and tobacco tax jurisdiction within TTB. Particular focus will be cigarette smuggling, but alcohol will also be impacted.
The agency plans to maintain improve service times for permit, label and formula approvals as well as to increase the number of first-time approvals and reduce delays.
In fiscal 2019, TTB collected $339 for every dollar spent on tax collection. The year-to-year decline represents continued decreases in tobacco tax collections since peaking in 2010. Those declines are a result of a significant tobacco tax-rate increase that led to a steady decline in consumption patterns, the agency says.
Alcohol tax collections are also trending down, likely a result of recent tax reform legislation.
In terms of compliance, in FY 2019, large taxpayers (those with tax bills of $50,000 or more) achieved a compliance rrate of 69% in filing required tax returns and payments and a compliance rate of 76% in filing operational reports, both of which were lower than TTB’s target of 95%.
TTB’s budget justification says it intends to address this problem. It also intends to promote use of pay.gov to file tax returns and operational reports. Use of the electronic system helps TTB detect noncompliance as well as reducing costs.
TTB intends to continue its focus on imported alcohol and tobacco products and importers, seeking to detect importers operating without a TTB permit and importers misclassigying or under-reporting entries of alcohol and tobacco products to Customs & Border Protection to evade excise taxes.
Trade Practice Enforcement
The agency notes that approval times for permits has fallen to 75 days, but thanks to the partial government shutdown TTB issued 58% of its permit applications within its 75-day standard. The backlog was trimmed to 1,500 applications at year-end from nearly 3,000 in February 2019.
In the last two years there has been a 20% increase in COLA applications and a 40% increase for formulas.
“Innovation in the craft beer and spirits sectors continues to drive growth in label applications, with an increase of approximately 10% for malt beverage and distilled spirits applications in FY 2019.
“Although all alcohol beverage commodities contributed to the increase in formula submissions, wine and malt beverage submissions increased at the fastest rate, up roughly 35% compared to last year, based on the use of innovative ingredients and market trends toward flavored products including cider,
mead, and malt beverages,” the budget justification says, adding thanks to the partial government shutdown, just 45% of applications met TTB’s goal of a 15-day turnaround.