Wine and Liquor Makers Toast Excise-Tax Defeat for Treasury Department
January 29 2020 - 5:44PM
Dow Jones News
By Richard Rubin
WASHINGTON -- Makers of wines and spirits are celebrating a
federal-court decision that could save them billions of dollars in
excise taxes each year.
The ruling struck down Treasury Department regulations from 2018
that attempted to end what government officials saw as an unfair
benefit for imported products.
Judge Jane Restani of the Court of International Trade wrote
that the Treasury Department offered seemingly valid policy
arguments for its position, but she determined that the regulations
contradicted laws passed by Congress.
"The Final Rule is contrary to the clear intent of Congress as
expressed in the language and structure of the statute," Judge
Restani wrote last week in ruling for the National Association of
Manufacturers, which challenged the rules. "If the public fisc does
suffer ultimately from uncollected excise tax, then it is up to
Congress to decide whether to remedy the situation."
The dispute stemmed from a provision known as a drawback of
taxes. Under longstanding U.S. law, companies can get import taxes
refunded if they have a matching or similar export. That system
effectively lets them pay taxes only on their net imports for each
product category.
Since 2004, due to what Treasury officials say was an error,
wine companies have been able to engage in what the government sees
as tax avoidance. The companies produce bottles for export, never
paying excise taxes because the bottles weren't meant for domestic
consumption. Then, as the companies export those bottles and import
others, they seek and get refunds of the import taxes.
That benefit was set to expand to spirits makers and others
before Treasury issued its regulations. According to the Treasury
Department, that is a "double drawback" that puts domestic products
subject to excise taxes at a disadvantage and could cost the
government up to $3.3 billion a year in revenue.
"Excise taxes are intended to be paid on alcohol, tobacco, and
other goods that are sold and consumed in the U.S., whether
produced here or imported," said Adam Looney, a former Treasury
official who now teaches at the University of Utah. "The ruling now
means that those firms that both import and export alcohol no
longer will pay excise taxes on the alcohol they import and
sell."
The ruling is a victory for companies such as Diageo PLC, Pernod
Ricard SA and Altria Group Inc. that filed comments criticizing the
regulations.
"We were pleased with the ruling as we did not agree with
Treasury's decision on the regulations and it reversed a
longstanding policy that was widely accepted," Michael Kaiser, vice
president of WineAmerica, an industry trade group, said in an
email.
Industry officials say drawback encourages U.S. exports and
praised the judge's decision.
"We are pleased that the U.S. Court of International Trade
recognized that federal law clearly provides for the refund of
certain taxes when manufacturers export similar products," said
Peter Tolsdorf, deputy general counsel for the manufacturers
group.
The Treasury Department declined to comment.
(END) Dow Jones Newswires
January 29, 2020 17:29 ET (22:29 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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