26 U.S.C. § 5041: Imposition and rate of tax

Cases: K Vintners v. United States, 85 F. Supp. 3d 1225 (E.D. Wash. 2015)

(a) Imposition There is hereby imposed on all wines (including imitation, substandard, or artificial wine, and compounds sold as wine) having not in excess of 24 percent of alcohol by volume, in bond in, produced in, or imported into, the United States, taxes at the rates shown in subsection (b), such taxes to be determined as of the time of removal for consumption or sale. All wines containing more than 24 percent of alcohol by volume shall be classed as distilled spirits and taxed accordingly. Subject to subsection (h), still wines shall include those wines containing not more than 0.392 gram of carbon dioxide per hundred milliliters of wine; except that the Secretary may by regulations prescribe such tolerances to this maximum limitation as may be reasonably necessary in good commercial practice.

Amended 1965, 1974, 1976, 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 13806(a)(1), substituted “Subject to subsection (h), still wines” for “Still wines”.
1976 Pub. L. 94-455 Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
1974 Pub. L. 93-490 Pub. L. 93–490 substituted “0.392” for “0.277”.
1965 Pub. L. 89-44 Pub. L. 89–44, § 806(a), substituted “0.277” for “0.256”.

Cases: Ravelo Escandon v. Commissioner, T.C. Memo. 2007-128

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(b) Rates of tax

Amended 1959, 1960, 1961, 1962, 1963, 1964, 1965

1965 Pub. L. 89-44 Pub. L. 89–44, § 501(c)(1)–(5), struck out provisions at end of each par. setting out a specified reduced rate to be applied on and after July 1, 1965.
1964 Pub. L. 88-348 Pub. L. 88–348 substituted “July 1, 1965” for “July 1, 1964” in five places.
1963 Pub. L. 88-52 Pub. L. 88–52 substituted “July 1, 1964” for “July 1, 1963” in five places.
1962 Pub. L. 87-508 Pub. L. 87–508 substituted “July 1, 1963” for “July 1, 1962” in five places.
1961 Pub. L. 87-72 Pub. L. 87–72 substituted “July 1, 1962” for “July 1, 1961” in five places.
1960 Pub. L. 86-564 Pub. L. 86–564 substituted “July 1, 1961” for “July 1, 1960” in five places.
1959 Pub. L. 86-75 Pub. L. 86–75 substituted “July 1, 1960” for “July 1, 1959” in five places.

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(1) On still wines containing not more than 16 percent of alcohol by volume, $1.07 per wine gallon;

Amended 1990, 2017, 2019, 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(e)(1), substituted “16 percent” for “14 percent (16 percent in the case of wine removed after December 31, 2017, and before January 1, 2021”.
2019 Pub. L. 116-94 Pub. L. 116–94, § 144(e)(1), substituted “January 1, 2021” for “January 1, 2020”.
2017 Pub. L. 115-97 Pub. L. 115–97, § 13805(a), inserted “(16 percent in the case of wine removed after December 31, 2017, and before January 1, 2020” after “14 percent”.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11201(b)(1)(A), substituted “$1.07” for “17 cents”.

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(2) On still wines containing more than 16 percent and not exceeding 21 percent of alcohol by volume, $1.57 per wine gallon;

Amended 1990, 2017, 2019, 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(e)(1), substituted “16 percent” for “14 percent (16 percent in the case of wine removed after December 31, 2017, and before January 1, 2021”.
2019 Pub. L. 116-94 Pub. L. 116–94, § 144(e)(1), substituted “January 1, 2021” for “January 1, 2020”.
2017 Pub. L. 115-97 Pub. L. 115–97, § 13805(a), inserted “(16 percent in the case of wine removed after December 31, 2017, and before January 1, 2020” after “14 percent”.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11201(b)(1)(B), substituted “$1.57” for “67 cents”.

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(3) On still wines containing more than 21 percent and not exceeding 24 percent of alcohol by volume, $3.15 per wine gallon;

Amended 1990

1990 Pub. L. 101-508 Pub. L. 101–508, § 11201(b)(1)(C), substituted “$3.15” for “$2.25”.

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(4) On champagne and other sparkling wines, $3.40 per wine gallon;

(5) On artificially carbonated wines, $3.30 per wine gallon; and

Amended 1990

1990 Pub. L. 101-508 Pub. L. 101–508, § 11201(b)(1)(D), substituted “$3.30” for “$2.40”.

(6) On hard cider, 22.6 cents per wine gallon.

Amended 1997, 1998, 2015

2015 Pub. L. 114-113 Pub. L. 114–113, § 335(a)(1), struck out “which is a still wine derived primarily from apples or apple concentrate and water, containing no other fruit product, and containing at least one-half of 1 percent and less than 7 percent alcohol by volume” after “hard cider”.
1998 Pub. L. 105-206 Pub. L. 105–206 inserted “which is a still wine” after “hard cider”.
1997 Pub. L. 105-34 Pub. L. 105–34, § 908(a), added par. (6).

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Amended 1990, 2017, 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(1)(A), struck out “for small domestic producers” after “Credit” in heading.
2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(1)(E), redesignated par. (9) as (6).
2017 Pub. L. 115-97 Pub. L. 115–97, § 13804(c)(2), added par. (9).
1990 Pub. L. 101-508 Pub. L. 101–508, § 11201(b)(2), added subsec. (c) and redesignated former subsecs. (c) to (e) as (d) to (f), respectively.

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(1) Allowance of credit

Amended 1997, 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(1)(B), amended par. (1) generally. Prior to amendment, text read as follows: “Except as provided in paragraph (2), in the case of a person who produces not more than 250,000 wine gallons of wine during the calendar year, there shall be allowed as a credit against any tax imposed by this title (other than chapters 2, 21, and 22) of 90 cents per wine gallon on the 1st 100,000 wine gallons of wine (other than wine described in subsection (b)(4)) which are removed during such year for consumption or sale and which have been produced at qualified facilities in the United States. In the case of wine described in subsection (b)(6), the preceding sentence shall be applied by substituting ‘5.6 cents’ for ‘90 cents’.”
1997 Pub. L. 105-34 Pub. L. 105–34, § 908(b), inserted at end “In the case of wine described in subsection (b)(6), the preceding sentence shall be applied by substituting ‘5.6 cents’ for ‘90 cents’.”

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(A) In general There shall be allowed as a credit against any tax imposed by this title (other than chapters 2, 21, and 22) an amount equal to the sum of—

Amended 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(2)(A), inserted “but only if the importer is an electing importer under paragraph (6) and the wine gallons of wine have been assigned to the importer pursuant to such paragraph” after “into the United States during the calendar year” in concluding provisions.

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(i) $1 per wine gallon on the first 30,000 wine gallons of wine, plus

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(ii) 90 cents per wine gallon on the first 100,000 wine gallons of wine to which clause (i) does not apply, plus

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(iii) 53.5 cents per wine gallon on the first 620,000 wine gallons of wine to which clauses (i) and (ii) do not apply,

which are produced by the producer and removed during the calendar year for consumption or sale, or which are imported by the importer into the United States during the calendar year but only if the importer is an electing importer under paragraph (6) and the wine gallons of wine have been assigned to the importer pursuant to such paragraph.

(B) Adjustment of credit for hard cider In the case of wine described in subsection (b)(6), subparagraph (A) of this paragraph shall be applied—

(i) in clause (i) of such subparagraph, by substituting “6.2 cents” for “$1”,

(ii) in clause (ii) of such subparagraph, by substituting “5.6 cents” for “90 cents”, and

(iii) in clause (iii) of such subparagraph, by substituting “3.3 cents” for “53.5 cents”.

(2) Time for determining and allowing credit The credit allowable by paragraph (1)—

Amended 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(1)(C), (D), redesignated pars. (3) to (6) as (2) to (5), respectively, and struck out former par. (2). Prior to amendment, text of par. (2) read as follows: “The credit allowable by paragraph (1) shall be reduced (but not below zero) by 1 percent for each 1,000 wine gallons of wine produced in excess of 150,000 wine gallons of wine during the calendar year.”

(A) shall be determined at the same time the tax is determined under subsection (a) of this section, and

(B) shall be allowable at the time any tax described in paragraph (1) is payable as if the credit allowable by this subsection constituted a reduction in the rate of such tax.

(3) 11 See Codification note below. Controlled groups Rules similar to rules of section 5051(a)(5) shall apply for purposes of this subsection.

Amended 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(1)(C), (D), redesignated pars. (3) to (6) as (2) to (5), respectively, and struck out former par. (2). Prior to amendment, text of par. (2) read as follows: “The credit allowable by paragraph (1) shall be reduced (but not below zero) by 1 percent for each 1,000 wine gallons of wine produced in excess of 150,000 wine gallons of wine during the calendar year.”

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(4) Denial of deduction Any deduction under subtitle A with respect to any tax against which a credit is allowed under this subsection shall only be for the amount of such tax as reduced by such credit.

Amended 2017, 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(1)(C), (D), redesignated pars. (3) to (6) as (2) to (5), respectively, and struck out former par. (2). Prior to amendment, text of par. (2) read as follows: “The credit allowable by paragraph (1) shall be reduced (but not below zero) by 1 percent for each 1,000 wine gallons of wine produced in excess of 150,000 wine gallons of wine during the calendar year.”
2017 Pub. L. 115-97 Pub. L. 115–97, § 13804(b), substituted “section 5051(a)(5)” for “section 5051(a)(2)(B)”.

(5) Credit for transferee in bond If—

Amended 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(1)(C), (D), redesignated pars. (3) to (6) as (2) to (5), respectively, and struck out former par. (2). Prior to amendment, text of par. (2) read as follows: “The credit allowable by paragraph (1) shall be reduced (but not below zero) by 1 percent for each 1,000 wine gallons of wine produced in excess of 150,000 wine gallons of wine during the calendar year.”

(A) wine produced by any person would be eligible for any credit under paragraph (1) if removed by such person during the calendar year,

(B) wine produced by such person is removed during such calendar year by any other person (hereafter in this paragraph referred to as the “transferee”) to whom such wine was transferred in bond and who is liable for the tax imposed by this section with respect to such wine, and

(C) such producer holds title to such wine at the time of its removal and provides to the transferee such information as is necessary to properly determine the transferee’s credit under this paragraph,

then, the transferee (and not the producer) shall be allowed the credit under paragraph (1) which would be allowed to the producer if the wine removed by the transferee had been removed by the producer on that date.

(6) Allowance of credit for foreign manufacturers and importers

Amended 1996, 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(1)(E), which directed only the redesignation of par. (9) as (6), was executed by redesignating par. (9) as (6) and transferring it so as to appear after par. (5), to reflect the probable intent of Congress. Former par. (6) redesignated (5).
1996 Pub. L. 104-188 Pub. L. 104–188 added pars. (6) and (7) and struck out former par. (6) which read as follows:
1996 “(6) Regulations.—The Secretary may prescribe such regulations as may be necessary to prevent the credit provided in this subsection from benefiting any person who produces more than 250,000 wine gallons of wine during a calendar year and to assure proper reduction of such credit for persons producing more than 150,000 wine gallons of wine during a calendar year.”

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(A) In general In the case of any wine gallons of wine which have been produced outside of the United States and imported into the United States, the credit allowable under paragraph (1) (referred to in this paragraph as the “tax credit”) may be assigned by the person who produced such wine (referred to in this paragraph as the “foreign producer”), provided that such person makes an election described in subparagraph (B)(ii), to any electing importer of such wine gallons pursuant to the requirements established by the Secretary under subparagraph (B).

“to any electing importer of such wine gallons pursuant to the requirements established by the Secretary under subparagraph (B)” Opening words

Textual readingALL OF= tax credit may be assigned

“have been produced outside of the United States”

“imported into the United States”

“such person makes an election described in subparagraph (B)(ii)”

Amended 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(2)(B)(i), substituted “paragraph (1)” for “paragraph (8)”.

(B) Assignment The Secretary of the Treasury, after consultation with the Secretary of the Department of Homeland Security, shall, through such rules, regulations, and procedures as are determined appropriate, establish procedures for assignment of the tax credit provided under this paragraph, which shall include—

Amended 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(2)(B)(ii), substituted “The Secretary of the Treasury, after consultation with the Secretary of the Department of Homeland Security,” for “The Secretary” in introductory provisions.

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(i) a limitation to ensure that the number of wine gallons of wine for which the tax credit has been assigned by a foreign producer—

(I) to any importer does not exceed the number of wine gallons of wine produced by such foreign producer during the calendar year which were imported into the United States by such importer, and

(II) to all importers does not exceed the 750,000 wine gallons of wine to which the tax credit applies,

(ii) procedures that allow the election of a foreign producer to assign and an importer to receive the tax credit provided under this paragraph,

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(iii) requirements that the foreign producer provide any information as the Secretary determines necessary and appropriate for purposes of carrying out this paragraph, and

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(iv) procedures that allow for revocation of eligibility of the foreign producer and the importer for the tax credit provided under this paragraph in the case of any erroneous or fraudulent information provided under clause (iii) which the Secretary deems to be material to qualifying for such credit.

(C) Controlled group For purposes of this section, any importer making an election described in subparagraph (B)(ii) shall be deemed to be a member of the controlled group of the foreign producer, as described under paragraph (3).

Amended 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(2)(B)(iii), substituted “paragraph (3)” for “paragraph (4)”.

(7) Refunds in lieu of tax credits for foreign production removed after December 31, 2022

Amended 1996, 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 107(c)(1), added par. (7). Former par. (7) redesignated (8).
2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(1)(F), amended par. (7) generally. Prior to amendment, text read as follows: “The Secretary may prescribe such regulations as may be necessary to carry out the purposes of this subsection, including regulations—
“(A) to prevent the credit provided in this subsection from benefiting any person who produces more than 250,000 wine gallons of wine during a calendar year, and
“(B) to assure proper reduction of such credit for persons producing more than 150,000 wine gallons of wine during a calendar year.”
1996 Pub. L. 104-188 Pub. L. 104–188 added pars. (6) and (7) and struck out former par. (6) which read as follows:
1996 “(6) Regulations.—The Secretary may prescribe such regulations as may be necessary to prevent the credit provided in this subsection from benefiting any person who produces more than 250,000 wine gallons of wine during a calendar year and to assure proper reduction of such credit for persons producing more than 150,000 wine gallons of wine during a calendar year.”

(A) In general In the case of any wine gallons of wine which have been produced outside the United States and imported into the United States, if such wine gallons are removed after December 31, 2022—

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(i) paragraph (1) shall not apply, and

(ii) the amount determined under subparagraph (B) shall be allowed as a refund, determined for periods not less frequently than quarterly, to the importer in the same manner as if such amount were an overpayment of tax imposed by this section.

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(B) Amount of refund The amount determined under this subparagraph with respect to any importer for any period is an amount equal to the sum of—

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(i) excess (if any) of—

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(I) the amount of tax imposed under this section on wine gallons of wine referred to in subparagraph (A) which were removed during such period, over

(II) the amount of tax which would have been imposed under this section (including any allowable credits) on such gallons of wine if this section were applied without regard to this paragraph, plus

(ii) the amount of interest which would be allowed and paid on an overpayment of tax at the overpayment rate established under section 6621(a)(1) (without regard to the second sentence thereof) were such rate applied to the excess (if any) determined under clause (i) for the number of days in the filing period for which the refund under this paragraph is being determined.

(C) Application of rules related to elections and assignments Subparagraph (A)(ii) shall apply only if the importer is an electing importer under paragraph (6) and the wine gallons of wine have been assigned to the importer pursuant to such paragraph.

Textual readingALL OF= subparagraph (A)(ii) applies

“the importer is an electing importer under paragraph (6)”

“the wine gallons of wine have been assigned to the importer pursuant to such paragraph”

(D) Rules for refunds within 90 days For purposes of refunds allowed under this paragraph, section 6611(e) shall be applied by substituting “90 days” for “45 days” each place it appears.

(8) Regulations The Secretary may prescribe such regulations as may be necessary to carry out the purposes of this subsection, including regulations to ensure proper calculation of the credit provided in this subsection.

Amended 2017, 2019, 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 107(c)(1), redesignated par. (7) as (8).
2020 Pub. L. 116-260 Pub. L. 116–260, § 106(d)(1)(C), struck out par. (8) which related to a special rule for wine and hard cider removed between Dec. 31, 2017, and Jan. 1, 2021.
2019 Pub. L. 116-94 Pub. L. 116–94, § 144(d)(2), substituted “Temporary special rule” for “Special rule for 2018 and 2019” in heading.
2019 Pub. L. 116-94 Pub. L. 116–94, § 144(d)(1), substituted “January 1, 2021” for “January 1, 2020” in introductory provisions.
2019 Pub. L. 116-94 Pub. L. 116–94, § 144(j)(1), added subpar. (C).
2017 Pub. L. 115-97 Pub. L. 115–97, § 13804(a), added par. (8).
2017 Pub. L. 115-97 Pub. L. 115–97, § 13804(c)(1), inserted “but only if the importer is an electing importer under paragraph (9) and the wine gallons of wine have been assigned to the importer pursuant to such paragraph” after “into the United States during the calendar year” in concluding provisions.

(d) Wine gallon For the purpose of this chapter, the term “wine gallon” means a United States gallon of liquid measure equivalent to the volume of 231 cubic inches. On lesser quantities the tax shall be paid proportionately (fractions of less than one-tenth gallon being converted to the nearest one-tenth gallon, and five-hundredths gallon being converted to the next full one-tenth gallon).

Amended 1988, 1990

1990 Pub. L. 101-508 Pub. L. 101–508, § 11201(b)(2), added subsec. (c) and redesignated former subsecs. (c) to (e) as (d) to (f), respectively.
1988 Pub. L. 100-647 Pub. L. 100–647 added subsec. (d) and redesignated former subsec. (d) as (e).

(e) Tolerances Where the Secretary finds that the revenue will not be endangered thereby, he may by regulation prescribe tolerances (but not greater than ½ of 1 percent) for bottles and other containers, and, if such tolerances are prescribed, no assessment shall be made and no tax shall be collected for any excess in any case where the contents of a bottle or other container are within the limit of the applicable tolerance prescribed.

“Where the Secretary finds that the revenue will not be endangered thereby, he may by regulation prescribe tolerances (but not greater than ½ of 1 percent) for bottles and other containers, and,” Opening words

Textual readingALL OF= no assessment made and no tax collected for any excess

“if such tolerances are prescribed”

“where the contents of a bottle or other container are within the limit of the applicable tolerance prescribed.”

Amended 1988, 1990

1990 Pub. L. 101-508 Pub. L. 101–508, § 11201(b)(2), added subsec. (c) and redesignated former subsecs. (c) to (e) as (d) to (f), respectively.
1988 Pub. L. 100-647 Pub. L. 100–647 added subsec. (d) and redesignated former subsec. (d) as (e).

(f) Illegally produced wine Notwithstanding subsection (a), any wine produced in the United States at any place other than the bonded premises provided for in this chapter shall (except as provided in section 5042 in the case of tax-free production) be subject to tax at the rate prescribed in subsection (b) at the time of production and whether or not removed for consumption or sale.

Amended 1990

1990 Pub. L. 101-508 Pub. L. 101–508, § 11201(b)(2), added subsec. (c) and redesignated former subsecs. (c) to (e) as (d) to (f), respectively.

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(g) Hard cider For purposes of subsection (b)(6), the term “hard cider” means a wine—

“a wine—” Opening words

Textual readingALL OF= hard cider

(1) containing not more than 0.64 gram of carbon dioxide per hundred milliliters of wine, except that the Secretary may by regulations prescribe such tolerances to this limitation as may be reasonably necessary in good commercial practice,

“Reasonably” implies facts and circumstances. No regulation cites this provision (eCFR, Oct 19, 2026)

(2) which is derived primarily—

“which is derived primarily—” Opening words

Textual readingANY OF= derived primarily as hard cider requires

(A) from apples or pears, or

(B) from—

(i) apple juice concentrate or pear juice concentrate, and

(ii) water,

(3) which contains no fruit product or fruit flavoring other than apple or pear, and

(4) which contains at least one-half of 1 percent and less than 8.5 percent alcohol by volume.

Amended 2015

2015 Pub. L. 114-113 Pub. L. 114–113, § 335(a)(2), added subsec. (g).