TTB Alcohol/Tobacco Excise Tax Examination Response

The situation

Like most craft breweries, Lost Pine benefits from the CBMA reduced federal excise tax rate ($3.50/barrel on the first 60,000 barrels vs. $18/barrel full rate), but the reduced rate requires documentation of annual production volume that must be maintained under 27 CFR Part 25.

In December 2025, TTB sent Jake an examination notification, their first TTB audit in 4 years of operation. The TTB examiner's Notice of Findings (January 2026) cited: (1) Lost Pine's excise tax records for Q2-Q3 2024 were missing batch production entries for 5 brewing sessions (record-keeping deficiency under 27 CFR § 25.292); (2) one barrel-count used for the CBMA reduced rate calculation was unsupported (the production log showed 4,220 barrels but the tax return claimed 4,180); (3) a hop extract the brewery had started using in December 2024 was not listed in Lost Pine's registered formula.

TTB proposed a $22,400 additional tax assessment + $3,100 penalty. Jake has 60 days to respond.

Jake's CPA handles his taxes but not TTB excise tax. brewerycompliance.com quoted him $7,500 for "NOF review and response preparation." Jake needs: help understanding which specific 27 CFR sections apply to each finding, a corrective action plan, and a formal written response that addresses each finding, documents he could produce himself with the right framework.

Who receives this

Small craft breweries (under 10,000 barrels/year), small wineries (under 100,000 cases/year), and craft distilleries (under 500,000 proof gallons/year) receiving TTB examination Notices of Findings for record-keeping deficiencies, excise tax computation errors, and formula/label issues. Secondary: permit compliance professionals and accountants who serve these businesses and want a drafting tool for their client work.

Why the agency will not advise you

TTB examiners cannot advise the permit holder on how to respond to their own Notice of Findings. TTB's own guidance (Industry Circulars, regulatory text) lays out the exact recordkeeping requirements and mitigation factors, applying them to specific findings is the value.

Key facts, with sources

• TTB (Alcohol and Tobacco Tax and Trade Bureau) enforces 27 CFR Parts 25 (beer), 24 (wine), and 19 (distilled spirits plants), among others. TTB trade practice audits and excise tax examinations occur periodically: new permittees are typically audited within 2 years of beginning operations; established permittees face periodic examinations (every 3-5 years). Common TTB examination findings: (1) excise tax computation errors, incorrect calculation of taxable gallons produced or removed, incorrect application of the Craft Beverage Modernization and Tax Reform Act reduced tax rates (which require documentation of production volume); (2) record-keeping deficiencies, 27 CFR § 25.292 (brewers must maintain records of materials used, beer produced, beer removed, and beer taxes paid); (3) label/formula approval violations, using a formula ingredient not listed in the approved COLAs Online submission; (4) bond deficiency, excise tax exposure exceeds bonded coverage; (5) failure to notify TTB of changes in personnel, premises, or production methods. TTB issues a Notice of Findings (NOF) with a response deadline; the permit holder's response determines whether TTB issues a monetary demand, consent agreement, show cause notice, or refers the case for revocation. Source: TTB Examinations and Investigations — Alcohol and Tobacco Tax and Trade Bureau · 27 CFR Part 25 — Beer (Recordkeeping Requirements) · Craft Beverage Modernization Act Tax Reform — TTB
• The craft beverage industry has grown dramatically: the Brewers Association counts 9,800+ craft breweries in 2024 (down slightly from 2023 peak of 9,900 but still dramatically above the 2014 count of 3,400); the Wine Institute counts 11,000+ bonded wineries; the American Craft Spirits Association counts 2,500+ craft distilleries. Approximately 90% of craft breweries have fewer than 20 employees and no in-house TTB compliance expertise. brewerycompliance.com (staffed by former ATF and TTB agents) is the only identified firm specifically targeting TTB examination defense, at $3,000-$10,000 per engagement. complianceshield.io provides pre-examination software but not examination response drafting. The Craft Beverage Modernization and Tax Reform Act (CBMA) reduced rates require complex production record-keeping, any error in the records creates a tax underpayment finding in a TTB examination. Source: National Beer Sales & Production Data — Brewers Association · TTB Permits Online — Qualified Brewers Notice · brewerycompliance.com — TTB Compliance Consulting (human service)

When to bring in a professional

Self-serve responses fit routine cases: clear facts, amounts a business can absorb, and a deadline still ahead of you. Bring in a licensed professional when the amount at stake is large relative to their fee, the facts are genuinely disputed, criminal exposure is possible, or the deadline has already passed. A short paid consultation to sanity-check your plan is often worth it even when you handle the filing yourself.

All sources for this guide

1. TTB Examinations and Investigations — Alcohol and Tobacco Tax and Trade Bureau
2. 27 CFR Part 25 — Beer (Recordkeeping Requirements)
3. Craft Beverage Modernization Act Tax Reform — TTB
4. National Beer Sales & Production Data — Brewers Association
5. TTB Permits Online — Qualified Brewers Notice
6. brewerycompliance.com — TTB Compliance Consulting (human service)