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  • James Niekamp

TTB Audits: What to Expect

When auditing an alcohol industry member, TTB’s goal is “to ensure the proper payment of excise taxes and compliance with laws and regulations in a manner that protects the revenue and prevents unlawful activity in the commodities that TTB regulates.”

Recently, TTB has been active in auditing industry members, so now may be a good time to make sure your business is in compliance with TTB rules and regulations.

Preparing for your Audit:

TTB-regulated businesses should generally expect to be audited by TTB every 7-10 years, but this varies depending on the industry member type and size. No industry member is perfect, and it is common for TTB to find minor issues during a routine audit, but with the right compliance systems in place, an industry member can pass an audit with minimal heartburn.

There are three main common compliance issues to be cognizant of when preparing for a TTB audit. First, federal excise tax filings and payments. Timely filing and payment of your federal excise tax is absolutely critical. The penalties for both failing to file and failing to pay are significant. Even if you have no activity to report for a filing period, you should always mark the federal excise tax return as zero and file with TTB. Second, submitting your TTB Reports of Operations is also critical. Operational reports give TTB a snapshot of the activity within the business for the applicable time period. These may be done on a monthly, quarterly, or annual basis depending on the commodity and industry member. Each commodity has different standards for these filings, so be sure to check which operational reports apply to you and that you are filing on the correct schedule. The last common compliance issue is internal records. Internal records capture each day’s operations as they occur (e.g., batch records for each batch of production, physical inventories, etc.). These internal records should support tax payments and operational reports as well. Internal records are not necessarily filed with TTB, but industry members are required to keep records, as all records are subject to TTB inspection.

Audit Process Overview:

Step 1. Audit Planning

Before a TTB agent visits the premises, it is typical for TTB to contact the industry member and ask for certain information in advance. The type of information requested may vary depending on the nature of the industry member, or whether TTB is conducting an audit based on concerns flagged internally.

Step 2. Audit Fieldwork

The next step is generally for TTB agents to visit the facility. When TTB comes to the premises, they will review records, interview subject personnel (e.g., your compliance officer), measure control standards, and identify compliance issues. This step in the process can take several days or even weeks. TTB audits are case specific, so be prepared with the necessary information on hand to make the process run smoothly for both you and the TTB agents.

Step 3. Audit Findings

Once TTB concludes its fieldwork portion, the audit investigators will generally hold a closing conference with the industry member to discuss audit findings and recommendations moving forward. After the closing conference, you can expect to receive a formal management letter identifying the audit results. The letter might include tax adjustments, compliance violations, internal control weaknesses, and whether administrative permit action will be recommended by the auditor. In the event that adverse actions are proposed, the industry member may, but it is not required to, provide a written response explaining the compliance failures and how it plans to correct issues going forward.

Final Thoughts:

TTB audits can be stressful, but they don’t have to be. One of the best ways to prepare for a TTB audit is to run a mock audit on your own operations. This way, industry members can identify weaknesses in their processes and make any adjustments needed prior to a real TTB audit. Industry members should also be familiar with Chapter 27 of the Code of Federal Regulations, Part 53, to ensure they are current on the federal rules and regulations. For more guidance, visit and review the various compliance resources provided for TTB industry members.


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