Federal Excise Tax

The Federal Excise Tax Rate and Requirements to Attach Tax

Ethanol Extraction is considered pure alcohol and is therefore taxed at a rate of $13.50 per proof gallon by the Tax and Trade Bureau (TTB). This tax is levied on every drop of Ethanol Extraction that is withdrawn from the bonded area of our distilled spirits plant and is not eligible for tax exemption. The only way to not attach the Federal excise tax to Ethanol Extraction would be to initiate a “transfer in bond”.

Proof Gallon vs Wine Gallon vs Volumetric Gallon

1 Wine Gallon = 1 Volumetric Gallon = 128 fluid oz of liquid. In terms of familiar things, if your mother asked you to bring home a gallon of milk from the store, you would go to the grocery store and pick up 1 “wine gallon” of milk to bring home. To avoid confusion (believe it or not) whenever the TTB or 27CFR refers to a volumetric gallon of liquid, they use the term “wine gallon”.
As stated above however, the Federal government taxes alcohol on a basis of “proof gallons”. A proof gallon is equal to 1 wine gallon containing 100 proof alcohol. See below for explanation of the word “proof”. One proof gallon therefore holds 128 fluid oz of liquid at 50% Alcohol by volume or 100 proof. One wine gallon of liquid that is 200 proof (or 100% pure alcohol) would therefore be counted as 2 Proof Gallons.
While this may seem over complicated, the process of counting proof gallons makes sense when the alcohol content contained within the volume being measured are not round numbers. For example, one wine gallon of liquid at 190 proof is equal to 1.9 proof gallons. Another example, one 750 ML bottle of whiskey bottled at 80 proof contains 0.158 proof gallons. Understanding the amount of taxable alcohol present in a liquid regardless of volume allows the TTB to apply the appropriate amount of excise tax on only the alcohol portion of the liquid.

Calculating Excise Tax

Using the examples in the paragraph above, Federal excise tax can be calculated as follows: On the gallon of 190 proof liquid: $13.50 tax per proof gallon x 1.9 proof gallons = $25.65 Om the 750ML bottle of whiskey: $13.50 tax per proof gallon x 0.158 proof gallons = $2.14

Paying Excise Tax

We use the formula above to calculate the Federal excise tax liability due on products ordered from our online store. The Federal Excise tax is included in the prices listed for each product, and will not be attached in addition to the listed prices. Ethanol Extraction does not profit from the collection of required Federal Excise taxes nor do we receive a portion of the excise tax to keep.