The Free Alcohol Act of 1906, the Amendment of 1907 and Internal Revenue Regulations.
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| The Free Alcohol Act of 1906, the Amendment of 1907 and Internal Revenue Regulations. |
CHAPTER XIV.Public—No. 201.
An Act for the withdrawal from bond, tax free, of domestic alcohol when rendered unfit for beverage or liquid medicinal uses by mixture with suitable de-naturing materials.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That from and after January first, nineteen hundred and seven, domestic alcohol of such degree of proof as may be prescribed by the Commissioner of Internal Revenue, and approved by the Secretary of the Treasury, may be withdrawn from bond without the payment of internal-revenue tax, for use in the arts and industries, and for fuel, light, and power, provided said alcohol shall have been mixed in the presence and under the direction of an authorized Government officer, after withdrawal from the distillery warehouse, With methyl alcohol or other de-naturing material or materials, or admixture of the same, suitable to the use for which the alcohol is withdrawn,[226] but which destroys its character as a beverage and renders it unfit for liquid medicinal purposes; such de-naturing to be done upon the application of any registered distillery in de-naturing bonded warehouses specially designated or set apart for de-naturing purposes only, and under conditions prescribed by the Commissioner of Internal Revenue with the approval of the Secretary of the Treasury.
The character and quantity of the said de-naturing material and the conditions upon which said alcohol may be withdrawn free of tax shall be prescribed by the Commissioner of Internal Revenue, who shall, with the approval of the Secretary of the Treasury, make all necessary regulations for carrying into effect the provisions of this Act.
Distillers, manufacturers, dealers and all other persons furnishing, handling or using alcohol withdrawn from bond under the provisions of this Act shall keep such books and records, execute such bonds and render such returns as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may by regulation require. Such books and records shall be open at all times to the inspection of any internal-revenue officer or agent.
Sec. 2. That any person who withdraws alcohol free of tax under the provisions of this Act and regulations made in pursuance thereof, and who removes or conceals same, or is concerned in removing,[227] deposting or concealing same for the purpose of preventing the same from being de-natured under governmental supervision, and any person who uses alcohol withdrawn from bond under the provision of section one of this Act for manufacturing any beverage or liquid medicinal preparation, or knowingly sells any beverage or liquid medicinal preparation made in whole or in part from such alcohol, or knowingly violates any of the provisions of this Act, or who shall recover or attempt to recover by redistillation or by any other process or means, any alcohol rendered unfit for beverage or liquid medicinal purposes under the provisions of this Act, or who knowingly uses, sells, conceals, or otherwise disposes of alcohol so recovered or redistilled, shall on conviction of each offense be fined not more than five thousand dollars, or be imprisoned not more than five years, or both, and shall, in addition, forfeit to the United States all personal property used in connection with his business, together with the buildings and lots or parcels of ground constituting the premises on which said unlawful acts are performed or permitted to be performed: Provided, That manufacturers employing processes in which alcohol, used free of tax under the provisions of this Act, is expressed or evaporated from the articles manufactured, shall be permitted to recover such alcohol and to have such alcohol restored to a condition suitable solely for reuse in manufacturing processes under such regulations as the Commissioner[228] of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe.
Sec. 3. That for the employment of such additional force of chemists, internal-revenue agents, inspectors, deputy collectors, clerks, laborers, and other assistants as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may deem proper and necessary to the prompt and efficient operation and enforcement of this law, and for the purchase of locks, seals, weighing beams, gauging instruments, and for all necessary expenses incident to the proper execution of this law, the sum of two hundred and fifty thousand dollars, or so much thereof as may be required, is hereby appropriated out of any money in the Treasury not otherwise appropriated, said appropriation to be immediately available.
For a period of two years from and after the passage of this Act the force authorized by this section of this Act shall be appointed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, and without compliance with the conditions prescribed by the Act entitled “An Act to regulate and improve the civil service,” approved January sixteenth, eighteen hundred and eighty-three, and amendments thereof and with such compensation as the Commissioner of Internal Revenue may fix, with the approval of the Secretary of the Treasury.
Sec. 4. That the Secretary of the Treasury shall make full report to Congress at its next session
of all appointments made under the provisions of this Act, and the compensation paid thereunder, and of all regulations prescribed under the provisions hereof, and shall further report what, if any, additional legislation is necessary, in his opinion, to fully safeguard the revenue and to secure a proper enforcement of this Act.
Under the Act quoted above, the Commissioner of Internal Revenue was empowered to make regulations whereby the law might be carried into effect.
In the first place it may be said that those who are permitted by this Act to manufacture de-natured alcohol must be distillers; in other words, those who have regularly licensed and registered distilleries. This does not mean that the plant must be large or costly—as witness the numerous little “stills” to be found throughout the South; but that the still, whatever its size, must be under constant supervision, and regularly licensed to manufacture alcohol. The requirements to this end can be had from the Commissioner of Internal Revenue, Treasury Department, Washington.
Pursuant to the law regarding de-naturing, rules and regulations have been drawn up of which the following is a synopsis with extracts where deemed advisable.
A distiller desiring to withdraw alcohol from bond for de-naturing purposes under the provisions of this act shall, at his own expense, provide a de-naturing bonded warehouse, to be situated on and constituting a part of the distillery premises. It shall be separated from the distillery and the distillery bonded warehouse and all other buildings, and no windows or doors or other openings shall be permitted in the walls of the de-naturing bonded warehouse leading into the distillery, the distillery bonded warehouse or other room or building, except as hereinafter provided. It must be constructed in the same manner as distillery bonded warehouses are now constructed, with view to the safe and secure storage of the alcohol removed thereto for de-naturing purposes and the de-naturing agents to be stored therein. It must be approved by the Commission of Internal Revenue. It shall be provided with closed mixing tanks of sufficient capacity. The capacity in wine gallons of each tank must be ascertained and marked thereon in legible letters, and each tank must be supplied with a graduated glass gauge whereon the contents will be at all times correctly[231] indicated. All openings must be so arranged that they can be securely locked. Suitable office accommodation for the officer on duty must be provided.
Sec. 3. The de-naturing bonded warehouse shall be used for de-naturing alcohol, and for no other purpose, and nothing shall be stored or kept therein except the alcohol to be de-natured, the materials used as de-naturants, the de-natured product, and the weighing and gauging instruments and other appliances necessary in the work of de-naturing, measuring, and gauging the alcohol and de-naturing materials.
These bonded warehouses must be numbered serially in each collection district, and the words “De-naturing bonded warehouse No.—, district of—,“ must be in plain letters in a conspicuous place on the outside of the building.
In case the distiller’s bond has been executed before the erection of such warehouse the consent of the sureties to the establishment of the de-naturing warehouse must be secured and entry duly signed made on the bond.“
The ceiling, inside walls, and floor of said room must be constructed of brick, stone, or tongue-and-groove planks. If there are windows in the room the same must be secured by gratings or iron bars, and to each window must be affixed solid shutters of wood or iron, constructed in such manner that they may be securely barred and fastened on the inside. The door must be substantial, and must be so constructed that it can be securely locked and fastened.
Sec. 5. At least two sets of tanks or receptacles for storing de-naturing material must be provided, and each set of tanks must be of sufficient capacity in the aggregate to hold the de-naturing material which it is estimated the distiller will use for thirty days. A set of tanks shall consist of one or more tanks for storing methyl alcohol, and one or more tanks of smaller capacity for storing other de-naturing materials. The capacity of each tank must be ascertained and marked in legible figures on the outside.
The tanks must not be connected with each other, and must be so constructed as to leave at least 18 inches of open space between the top of the tank and ceiling, the bottom of the tank and the floor, and the sides of the tank and walls of the de-naturing material room. Each tank shall[233] be given a number,and this number must be marked upon it. There shall be no opening at the top except such as may be necessary for dumping the de-naturing material into the tank and thoroughly plunging or mixing the same. Said opening must be covered so that it may be locked. Likewise the faucet through which the de-naturing material is drawn must be so arranged that it can be locked. Each tank must be supplied with a graduated glass gauge whereby the contents of the tank will always be shown.“
No one shall be permitted to enter the warehouse except in the presence of said officer, and the warehouse and room shall be kept closed and the doors, exterior and interior, securely locked except when some work incidental to the process of de-naturing and storing material is being carried on. Standard Sleight locks shall be used for locking the de-naturing bonded ware-house and the de-naturing material room, and they shall be sealed in the same manner and with the same kind of seals as distillery bonded warehouses and cistern rooms are now sealed. Miller locks shall be[234] used in securing the faucets and openings of the mixing tanks and the de-naturing material tanks.
The officer in charge of the de-naturing bonded warehouse, material room, and tanks shall carry the keys to same, and under no circumstances are said keys to be intrusted to anyone except another officer who is duly authorized to receive them.”
Application for Approval of De-naturing Bonded Warehouse.
“Sec. 7. Whenever a distiller wishes to commence the business of de-naturing alcohol he must make written application to the collector of the district in which the distillery is located for the approval of a de-naturing bonded warehouse.
Such application must give the name or names of the person, firm, or corporation operating the distillery, the number of the distillery, the location of the same, the material of which the warehouse is constructed, the size of same, width, length and height, the size of the de-naturing material room therein, and the manner of its construction, the capacity in gallons of each tank to be used for denaturing alcohol or for holding the de-naturing agents, and the material of which said tanks are constructed.
Such application must be accompanied by a diagram correctly representing the warehouse, the mixing tanks, de-naturing material room, and de-naturing material tanks, with all openings and surroundings.[235] It must show the distillery and all the distillery bonded warehouses on the premises, with dimensions of each.”
“Sec. 11. After receipt of notice of the approval of said warehouse the distiller may withdraw from his distillery warehouse, free of tax, alcohol of not less than 180 degrees proof or strength, and may de-nature same in said de-naturing warehouse in the manner hereinafter indicated, provided he shall first execute a bond in the form prescribed by the Commissioner of Internal Revenue, with at least two sureties, Unless, under the authority contained in an act approved August 13, 1894, a corporation, duly authorized by the Attorney-General of the United States to become a surety on such bond, shall be offered as a sole surety thereon. The bond shall be for a penal sum of not less than double the tax on the alcohol it is estimated the distiller will de-nature during a period of 30 days, and in no case is the distiller to withdraw from bond for de-naturing purposes and have in his denaturing warehouse in process of de-naturation a quantity of alcohol the tax upon which is in excess of the penal sum of the bond.
Sec. 12. If at any time, it should develop that the de-naturing warehouse bond is insufficient the distiller must give additional bond.
Sec. 13. The bond herein provided for must be executed before the distiller can withdraw from distillery bonded warehouse, free of tax, alcohol to be de-natured, and if he desires to continue in the business of de-naturing alcohol, said bond must be renewed on the first day of May of each year or before any alcohol is withdrawn from bond for de-naturing purposes. It must be executed in duplicate in accordance with instructions printed thereon. One copy is to be retained by the collector and one copy is to be transmitted to the Commissioner of Internal Revenue.”
Conditions under which Alcohol is Withdrawn.
“Sec. 15. Not less than three hundred (300) wine gallons of alcohol can be withdrawn at one time for de-naturing purposes.
When a distiller, who is a producer of alcohol of not less than 180 degrees proof and who has given the de-naturing warehouse bond as aforesaid desires to remove alcohol from the distillery bonded warehouse for the purpose of de-naturing, he will himself, or by his duly authorized agent, file with the collector of internal revenue of the district in which the distillery is located, notice to that effect.”
Upon the receipt of this notice (the form for which is given in the Regulations) the collector for the district will order a gauger to inspect the alcohol so withdrawn, and to gauge the same, and to make report; and directions are given to the official “storekeeper” to permit the transferral of the spirits to the de-naturing warehouse.
Spirits Transferred to be Marked.
“Upon receipt of the permit by the storekeeper the packages of distilled spirits described in notice of intention to withdraw may be withdrawn from distillery bonded warehouse without the payment of the tax, and may be transferred to the de-naturing bonded warehouse on the distillery premises; but before the removal of said spirits from the distillery bonded warehouse, the gauger, in addition to marking, cutting, and branding the marks usually required on withdrawal of spirits from warehouse, will legibly and durably mark on the head of each package, in letters and figures not less than one-half an inch in length, the number of proof gallons then ascertained, the date of the collector’s permit, the object for which the spirits were withdrawn, and his name, title, and district.
Such additional marks may be as follows:
“Sec. 20. When the packages of spirits are marked and branded in the manner above indicated they shall at once, in the presence and under the supervision of the storekeeper, be transferred to the de-naturing bonded warehouse.”
Record of Spirits Received in De-naturing Bonded Warehouse.
“Sec. 21. The officer in charge of the de-naturing bonded warehouse shall keep a record of the spirits received in said de-naturing bonded warehouse from the distillery bonded warehouse and the spirits delivered to the distiller for de-naturing purposes.
Upon the debit side of said record, in columns prepared for the purpose, there shall be entered the date when any distilled spirits were received in de-naturing bonded warehouse, the date of the collector’s permit, the date of withdrawal from distillery bonded warehouse, the number of packages received, the serial numbers of the packages, the serial numbers of the distillery warehouse stamps, and the wine and proof gallons.
Upon the credit side of said records hall be entered the date when any spirits were delivered to the distiller for de-naturing purposes, the date of the collector’s permit for withdrawal, the date of withdrawal from distillery bonded warehouse, the[239] number of packages so delivered, the serial numbers of the packages, the serial numbers of the distillery warehouse stamps, and the wine and proof gallons.
Immediately upon the receipt of any distilled spirits in the de-naturing bonded warehouse, and on the same day upon which they are received, the officer must enter said spirits in said record.
Likewise, on the same date upon which any spirits are delivered to the distiller for de-naturing purposes, said spirits must be entered on said record.
Sec. 22. A balance must be struck in the record described in above section at the end of the month showing the number of packages and quantity in wine and proof gallons of spirits on hand in packages on the first day of the month, the number of packages and quantity in wine and proof gallons received during the month, the number of packages and quantity in wine and proof gallons delivered to the distiller during the month, and the balance on hand in packages and wine and proof gallons at the close of the month.”
“Sec. 26. Unless otherwise specially provided, the agents used for de-naturing alcohol withdrawn[240] from bond for de-naturing purposes shall consist of methyl alcohol and benzine in the following proportions: To every 100 parts by volume of ethyl alcohol of the desired proof (not less than 180°) there shall be added 10 parts by volume of approved methyl alcohol and one-half of one part by volume of approved benzine; for example, to every 100 gallons of ethyl alcohol (of not less than 180 degrees proof) there shall be added 10 gallons of approved methyl alcohol and one-half gallon of approved benzine. Alcohol thus de-natured shall be classed as completely de-natured alcohol.
Methyl alcohol and benzine intended for use as de-naturants must be submitted for chemical test and must conform to the specifications which shall be hereafter duly prescribed.”
De-naturants Deposited in Warehouse.
“Sec. 27. As the distiller’s business demands, he may bring into the de-naturing bonded warehouse, in such receptacles as he may wish, any authorized de-naturant. Such de-naturants shall at once be deposited in the material room; thereafter they shall be in the custody and under the control of the officer in charge of the warehouse. Before any de-naturant is used it must be dumped into the appropriate tank and after the contents have been thoroughly mixed, a sample of one pint taken therefrom. This sample must be forwarded to the proper officer for analysis. The officer will then securely close and seal the tank.
No part of the contents of the tank can be used until the sample has been officially tested and approved, and report of such test made to the officer in charge of the warehouse.
If the sample is approved the contents of the tank shall upon the receipt of the report, become an approved de-naturant and the officer shall at once remove the seals and place the tank under Government locks.
If the sample does not meet the requirements of the specifications, the officer shall, upon the receipt of the report of non-approval, permit the distiller, provided he desires, to treat or manipulate the proposed de-naturant so as to render it a competent de-naturant. In such case another sample must be submitted for approval. If the distiller does not desire to further treat the de-naturant the officer shall require him immediately to remove the contents of the tank from the premises.”
Record of De-naturants Received.
“Sec. 28. The officer shall keep a de-naturing material room record. This record shall show all material entered into and removed from the de-naturing material room.
There shall be proper columns on the debit side in which are to be entered the date when any material is received, the name and residence of the person from whom received, the kind of material, the quantity in wine gallons, and, if methyl alcohol,[242] in proof gallons, the date upon which the material was dumped into the tank, the number of the tank, the date upon which sample was forwarded, and the number of the sample, and the result of the official test.
On the credit side of said record shall be entered in proper columns the date upon which any material was removed from the de-naturing material room for de-naturing purposes, the kind of material, the number of the tank from which taken, the number of the sample representing the tank and sent for official test, the number of wine gallons, and, if methyl alcohol, the number of proof gallons.”
Monthly Returns of De-naturants Received.
“Sec. 29. A balance shall be struck in this record at the end of each month whereby shall be shown the quantity of material of each kind on hand in the de-naturing material room on the first day of the month, the quantity received during the month, the quantity rejected and removed from the premises during the month, and the quantity delivered to the distiller for de-naturing purposes during the month, and the quantity on hand at the end of the month.
“Sec. 30. The distiller shall also keep a record, in which he shall enter the date upon which he deposits any material in the tanks of the de-naturing material room, the name and address of the person from whom said material was received, and the kind and quantity of the material so deposited; also he shall enter in said record the date upon which he receives any material from the de-naturing material room, the kind and quantity of such material so received, and the disposition made of same.”
Notice of Intention to De-nature Spirits.
“Sec. 31. The distiller shall, before dumping any spirits or de-naturants into the mixing tank, give notice to the officer in charge of the de-naturing warehouse in proper form in duplicate, and enter in the proper place thereon (in the case of distilled spirits) and in the proper column the number of the packages, the serial numbers of same, the serial number of the warehouse stamps, the contents in wine and proof gallons and the proof as shown by the marks, the date of the withdrawal gauge, and by whom gauged.
In case of de-naturing agents he shall enter in the proper place and in the proper columns the number of gallons, the kind of material, and the number of the de-naturing material tank from which same is to be drawn.
The contents of the several packages of alcohol, as shown by the withdrawal gauge, shall be accepted as the contents of said packages when dumped for de-naturing purposes unless it should appear from a special showing made by the distiller that there has been an accidental loss since withdrawal from distillery bonded warehouse.
Upon receipt of this notice the officer in charge of the de-naturing warehouse shall, in case of the packages of alcohol, inspect same carefully to ascertain whether or not they are the packages described in the distiller’s notice. He will then cut out that portion of the warehouse stamp upon which is shown the serial number of the stamp, the name of the distiller, the proof gallons, and the serial number of the package. These slips must be securely fastened to the form whereon the gauging is reported and sent by the officer with his return to the collector.”
Transfer of De-naturants to Mixing Tanks.
“Sec. 32. The distiller, unless pipes are used, as herein provided, shall provide suitable gauged receptacles, metal drums being preferred, with which to transfer the de-naturing agents from the material tanks to the mixing tanks. These receptacles must be numbered serially and the number, the capacity in gallons and fractions of a gallon, the name of the distiller, and the number of the de-naturing bonded warehouse marked thereon in durable letters and figures. They shall be used
for transferring de-naturing material from the material tanks to the mixing tanks and for no other purpose. The distiller must also provide suitable approved sealed measures of smaller capacity. The gauged receptacles are to be used where the quantity to be transferred amounts to as much as the capacity of the smallest gauged receptacle in the warehouse. The measures are to be used only when the quantity of material to be transferred is less than the capacity of the smallest gauged receptacle.
Sec. 33. The distiller may provide metal pipes connecting the material tanks and the mixing tanks and the de-naturant may be transferred to the mixing tanks through these pipes. Such pipes must be supplied with valves, cocks, or faucets, other proper means of controlling the flow of the liquid, and such valves, cocks, or faucets must be so arranged that they can be securely locked, and the locks attached thereto must be kept fastened; the keys to be retained by the officer in charge, except when the de-naturing material is being transferred to the mixing tanks.
In the event pipes are used as above provided, the glass gauges affixed to the material tanks must be so graduated that tenths of a gallon will be indicated.
Before any material is transferred from a material tank to a mixing tank the officer must note the contents of the material tank as indicated by the glass gauge. He will then permit the de-naturant to flow into the mixing tank until the exact quantity[246] necessary to de-nature the alcohol, as provided by the regulations, has been transferred. This he will ascertain by reading the gauge on the material tank before the liquid has begun to flow and after the flow has been stopped. He should verify the quantity transferred by reading the gauge on the mixing tank before and after the transfer.
Sec. 34. The distiller must provide all scales, weighing beams, and other appliances necessary for transferring the de-naturing materials gauging or handling the alcohol, or testing any of the measures, receptacles or gauges used in the warehouse, and also a sufficient number of competent employees for the work.”
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