Title 26 — Internal Revenue CodeRelease 119-73
§5114 Drawback
Title 26 › Subtitle Subtitle E— Alcohol, Tobacco, and Certain Other Excise Taxes › Chapter 51— DISTILLED SPIRITS, WINES, AND BEER › Subchapter A— Gallonage and Occupational Taxes › Part II— MISCELLANEOUS PROVISIONS › Subpart B— Nonbeverage Domestic Drawback Claimants › § 5114
Summary
If you paid the federal tax on distilled spirits and then used them to make medicines, medicinal preparations, food products, flavors, flavoring extracts, or perfume unfit for drinking, you can claim most of the tax back. The drawback equals the tax rate you paid minus $1 per proof gallon. Claims are filed quarterly, or monthly if you elect in writing, and the IRS may require a bond from monthly filers. You must file within the 6 months following the quarter in which the spirits were used. A claim cannot be denied just because you broke a paperwork or compliance rule, as long as you prove the spirits really were used for these nonbeverage products. But each compliance failure carries a $1,000 penalty unless you show reasonable cause, and the total penalties on a claim cannot exceed the amount of the claim.
Full Legal Text
Title 26, §5114
Internal Revenue Code — Source: USLM XML via OLRC
(a)In the case of distilled spirits on which the tax has been paid or determined, and which have been used as provided in this subpart, a drawback shall be allowed on each proof gallon at a rate of $1 less than the rate at which the distilled spirits tax has been paid or determined.
(b)Such drawback shall be due and payable quarterly upon filing of a proper claim with the Secretary; except that, where any person entitled to such drawback shall elect in writing to file monthly claims therefor, such drawback shall be due and payable monthly upon filing of a proper claim with the Secretary. The Secretary may require persons electing to file monthly drawback claims to file with him a bond or other security in such amount and with such conditions as he shall by regulations prescribe. Any such election may be revoked on filing of notice thereof with the Secretary. No claim under this subpart shall be allowed unless filed with the Secretary within the 6 months next succeeding the quarter in which the distilled spirits covered by the claim were used as provided in this subpart.
(c)(1)No claim for drawback under this section shall be denied in the case of a failure to comply with any requirement imposed under this subpart or any rule or regulation issued thereunder upon the claimant’s establishing to the satisfaction of the Secretary that distilled spirits on which the tax has been paid or determined were in fact used in the manufacture or production of medicines, medicinal preparations, food products, flavors, flavoring extracts, or perfume, which were unfit for beverage purposes.
(2)(A)In the case of a failure to comply with any requirement imposed under this subpart or any rule or regulation issued thereunder, the claimant shall be liable for a penalty of $1,000 for each failure to comply unless it is shown that the failure to comply was due to reasonable cause.
(B)The aggregate amount of the penalties imposed under subparagraph (A) for failures described in paragraph (1) in respect of any claim shall not exceed the amount of such claim (determined without regard to subparagraph (A)).
(3)The penalty imposed by paragraph (2) shall be assessed, collected, and paid in the same manner as taxes, as provided in section 6665(a).
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Prior Provisions
A prior section 5114 was renumbered section 5432 of this title. Another prior section 5114, act Aug. 16, 1954, ch. 736, 68A Stat. 619, related to recordkeeping by wholesale dealers, prior to the general revision of this chapter by Pub. L. 85–859. A prior section 5115, added Pub. L. 85–859, title II, § 201, Sept. 2, 1958, 72 Stat. 1342; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834, related to requirement that a sign be posted on premises where liquor is sold and penalty for noncompliance, prior to repeal by Pub. L. 105–34, title XIV, § 1415(a), Aug. 5, 1997, 111 Stat. 1047. Another prior section 5115, act Aug. 16, 1954, ch. 736, 68A Stat. 620, related to making and stamping packages filled on premises of wholesale dealers, prior to the general revision of this chapter by Pub. L. 85–859. A prior section 5116 was renumbered section 5131 of this title. Another prior section 5116, act Aug. 16, 1954, ch. 736, 68A Stat. 620, related to packaging of distilled spirits for industrial uses, prior to the general revision of this chapter by Pub. L. 85–859. A prior section 5117, added Pub. L. 85–859, title II, § 201, Sept. 2, 1958, 72 Stat. 1343; amended Pub. L. 94–455, title XIX, § 1905(a)(8), Oct. 4, 1976, 90 Stat. 1819; Pub. L. 108–357, title II, § 246(b), Oct. 22, 2004, 118 Stat. 1448, related to prohibited purchases by wholesale dealers in liquors, prior to repeal by Pub. L. 109–59, title XI, § 11125(a)(1)(C), (c), Aug. 10, 2005, 119 Stat. 1953, 1957, effective July 1, 2008, but inapplicable to taxes imposed for periods before such date.
Amendments
2005—Pub. L. 109–59 renumbered section 5134 of this title as this section. 1996—Subsec. (c)(3). Pub. L. 104–188 substituted “section 6665(a)” for “section 6662(a)”. 1994—Subsec. (c)(1). Pub. L. 103–465 substituted “flavoring extracts, or perfume” for “or flavoring extracts”. 1984—Subsec. (c). Pub. L. 98–369 added subsec. (c). 1976—Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing. 1968—Subsec. (b). Pub. L. 90–615 substituted “6 months” for “3 months” in last sentence.
Statutory Notes and Related Subsidiaries
Effective Date
of 1994 AmendmentAmendment by Pub. L. 103–465 effective Jan. 1, 1995, see section 136(d) of Pub. L. 103–465, set out as a note under section 5001 of this title.
Effective Date
of 1984 AmendmentAmendment by Pub. L. 98–369 applicable to products manufactured or produced after Oct. 31, 1984, see section 456(d) of Pub. L. 98–369, set out as an
Effective Date
note under section 5101 of this title.
Effective Date
of 1968 Amendment Pub. L. 90–615, § 2(b), Oct. 21, 1968, 82 Stat. 1210, provided that: “The amendment made by subsection (a) [amending this section] shall apply to claims filed on or after the date of the enactment of this Act [Oct. 21, 1968].”
Reference
Citations & Metadata
Citation
26 U.S.C. § 5114
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73