Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 62-25

1962-1 C.B. 356

IRS Headnote

Where the proprietor of a bonded wine cellar does not allow a credit or refund to a customer returning unmerchantable wine, the proprietor's claim for credit or refund of tax for such wine is not allowable. A claim may be filed by the proprietor of any bonded wine cellar where wine has been returned whether or not the proprietor is the one who paid the tax on the unmerchantable wine.

Full Text

Rev. Rul. 62-25

Advice has been requested whether a claim for credit or refund is allowable to the proprietor of the wine cellar to which the wines has been returned for destruction in those cases where the proprietor does not give credit, for the tax paid, to the customer returning the wine.

Wine, produced and taxpaid in California, was shipped to the premises of a taxpaid wine bottling house in Kansas City, Missouri. The wine was found to be contaminated by the Food and Drug Administration of the Department of Health, Education, and Welfare. Thereafter, the wine was sent from the bottling house to a bonded wine cellar in Kansas City to be destroyed. After the wine had been destroyed, a claim for credit or refund of tax was then filed by the proprietor of the bonded wine cellar in Kansas City. However, the proprietor did not give credit or refund to the bottler for the wine or tax attributable thereto.

Section 5044 of the Internal Revenue Code of 1954 provides that in the case of any wine produced in the United States and returned to bond as unmerchantable under section 5361 of the Code, any tax imposed by section 5041 of the Code shall, if paid, be refunded or credited, without interest, to the proprietor of the bonded wine cellar to which such wine is delivered, under such regulations as the Secretary of the Treasury or his delegate may prescribe.

Section 5361 of the Code provides, in part that the proprietor of a bonded wine cellar may receive unmerchantable taxpaid wine for destruction.

Section 5371 of the Code provides that any refund or credit of, or other relief from, taxes on wines or wine spirits authorized by law shall be allowed only to the extent that the claimant is not indemnified or recompensed for the tax.

A claim for credit or refund of tax for unmerchantable wine returned to a bonded wine cellar may be filed by the proprietor of any bonded wine cellar where wine has been returned. The proprietor filing the claim need not be the one who paid the tax on the unmerchantable wine. The burden of proof that the wine has been taxpaid lies with the claimant proprietor.

Revenue Ruling 60-201, C.B. 1960-1, 712, relating to claims for refund or credit of tax on beer removed from the market, holds that where a brewer does not allow credit to a customer, the brewer is indemnified by the customer through payment for the beer and that for this reason the brewer's claim for credit must be disallowed.

In the instant case, the proprietor of the bonded wine cellar to which the unmerchantable wine was returned was not the taxpayer and did not purchase the wine at a price reflecting the tax, or allow to the person returning the wine a credit in an amount equal to the tax paid on such wine. To allow the proprietor credit or refund of the tax in such a case would constitute unjust enrichment since he neither directly nor indirectly bore the burden of the tax. Thus, he is in the same position as a person who has been indemnified for the tax. Accordingly, since it was not the intent of the statute to provide relief to a person who did not bear the burden of the tax, claims for credit or refund in such cases are not allowable.