Ask a Beverage Attorney: What Are the Recordkeeping Requirements for My Brewery?

Ryan is in his second year of operations at Slapshot Brewing. Since the day he opened, he has barely had time to rest. His beers were popular with friends and family, but he could not have predicted that in his first two years, he could sell beer faster than he could make it. The healthy profits accelerated his business plan by two years enabling him to purchase new equipment and double his production capacity.

One Friday afternoon, an auditor from the Alcohol and Tobacco Tax and Trade Bureau (TTB) came to the brewery for a surprise review of his records. He took the auditor to the brewery office and pulled out a stack of papers, apologizing that he was behind in entering the data into his Excel spreadsheet. After a few stressful hours, the auditor completed his review and explained to Ryan that he would be receiving a report that deficiencies in the records had been found, and that going forward Ryan should make recordkeeping a priority. There could be a fine as well.

Maintain Your Records

Under federal law, brewers and other alcoholic beverage producers must complete and maintain daily records and reports that capture information about manufacturing operations. These daily records are important because they are the source documents on which the Excise Tax and Brewers Report (BROP) are based (and the equivalent excise tax reports for other alcoholic beverage producers). The auditor explained that his situation was not uncommon, that brewers commonly fail to:

• Accurately report the amount of beer returned to the brewery;

• Properly maintain records regarding destruction of beer;

• Appropriately record lab sample removals; and

• Appropriately report, record, or maintain supporting documents regarding losses or shortages.

The auditor pointed out that there is an incentive for Ryan to keep good records because failing to do so will subject the brewery to payment of higher taxes than necessary. If the brewery cannot document and account for non-tax paid product, it will be assessed tax on the “missing” product. The best way to reduce the risk of paying unnecessary taxes is good, detailed, and timely records.

The auditor could not tell him if there would be a fine (that is a decision made by the legal department), but if there was, it would be several thousand dollars. The auditor assured him he would not lose his license if he addressed the problem immediately and prevented future noncompliance issues. The thought of a big fine scared Ryan, but not as much as the thought of losing his brewing license. He had more than a half million dollars invested in the brewery. It was time to get some professional help.

Brewery Management Software

Ryan set up a meeting with his craft alcoholic beverage attorney to devise a plan of attack. They discussed manual recordkeeping, but decided that a brewery management software program was the way to go; it organizes all of the required records and produces the necessary filings from the entered data. This would not only save several hours in report preparation time, but also save accounting fees. Although he could create his own system in an Excel spreadsheet, the software would enable him to implement it without any time investment in researching the requirements and creating the spreadsheet formulas. The time saved would allow him to focus on brewing, strategic planning, and sales rather than tedious recordkeeping and report compilations.

The software keeps records for all of the required data by date of the operation or transaction for:

• Each kind of material received and used in the production of beer and cereal beverage;

• The amount of beer and cereal beverage produced;

• Beer and cereal beverage transferred for, and returned from, bottling and racking, or bottled, racked, or removed from the brewery;

  • Beer removed for consumption or sale — for each removal, the record shows the date of removal, the person to whom the brewer shipped or delivered the beer, and the quantities of beer removed calculated in kegs and in bottles;

  • Beer removed without payment of tax — for each removal, the record shows the date of removal, the person to whom the brewer shipped or delivered the beer, and the quantities of beer removed in kegs, bottles, tanks, tank cars, tank trucks, tank ships, barges, or deep tanks of vessels;

• Packaged beer used for laboratory samples at the brewery;

• Beer consumed at the brewery;

• Beer returned to the brewery from which it was originally removed, or from another brewery that the brewer owns;

• Beer reconditioned, used as material, or destroyed;

• Beer received from other breweries or received from pilot brewing plants;

• Beer and cereal beverage lost as a result of breakage, theft, casualty, or other unusual cause;

• Brewing materials sold or transferred to pilot brewing plants (including the name and address of the person to whom it was shipped or delivered), and brewing materials used in the manufacture of wort, wort concentrate, malt syrup, and malt extract for sale or removal;

• Record of tests of measuring devices;

• Beer purchased from other brewers in the purchasing brewer's barrels and kegs and such beer sold to other brewers; and

• Daily summaries of the following transactions

  • Beer and cereal beverage bottled;

  • Beer and cereal beverage racked;

  • Beer removed for consumption or sale;

  • Beer returned to the brewery;

  • Beer returned to the brewery after removal from another brewery owned by the brewer; and

  • Brewing materials, beer and cereal beverage in process, and finished beer and cereal beverage on hand.

The software also scans and electronically saves invoices of material accepted into inventory as well as sales of beer.

In Ryan's example, the software turned out to be a great investment. It included a POS (Point of Sale) feature for tasting room sales, which allowed Ryan to organize the entire brewing process and sales records from “cradle to grave.” With the push of a button, he can now run reports and analytics on his data to aid in management and strategic planning.