These regulations govern the use of industrial alcohol when used in the research, development or manufacturing of a non-beverage product.

Tax free alcohol is the substance known as ethyl alcohol or ethanol having a proof of 190 degrees or more when withdrawn from the bonded premises of a distilled spirits plant free of tax, including all subsequent dilutions and mixtures of ethyl alcohol. An industrial use permit is needed to procure or use tax-free alcohol. Tax-free alcohol is highly regulated and may only be used for authorized purposes. The most relevant use for users of this guide would be “any laboratory for use exclusively in scientific research.”

Specially Denatured Spirits (SDS) is alcohol or rum that has been treated with denaturants to make it unfit for beverage use. SDS includes Specially Denatured Alcohol (SDA) and specially Denatured Rum (SDR). An Industrial Alcohol User Permit is needed to procure, use, recover and/or deal in SDS. SDS has many uses; in a laboratory, it is used as a solvent, for cleansing purposes or in the preparation of indicator solutions and reagents.

If you intend to use only small mounts of either tax-free alcohol or SDS formula, consider using reagent alcohol instead. Reagent alcohol is an ethyl alcohol denatured with approximately five percent methyl alcohol and further denatured with five parts per hundred of isopropyl alcohol. It can be obtained from most laboratory supply houses and may be obtained without a permit.

If you obtain reagent alcohol in containers exceeding four liters, a letterhead application must be filed with the Alcohol and Tobacco Tax and Trade Bureau.

Depending upon the quantity of alcohol you use annually, you may be required to post a bond and submit additional documentation.

The relevant forms include:
• ATF F 5120.22: Application of Industrial Alcohol User Permit
• ATF F 5120.25: Industrial Alcohol Bond (see Other Relevant Information)

It is suggested that you speak directly with a representative of the TTB.

Application for Industrial Alcohol Bond: TTTB Form 5120.25

Background Information for Tax-free Alcohol Applications

Background Information for Specially Denatured Spirits Applicants

Call (513) 684-7150
(Speak to whoever answers the phone. They can direct your call if you have specific questions or send you an electronic packet that contains information and a set of forms.)

However, most of these FAQs deal with the regulations governing bars, distillation, and similar activities. The most relevant FAQ in the TTB list is: How can I use distilled spirits in an industrial product or process without having to pay the excise tax?

The Internal Revenue Code provides three methods for doing this.

1) Spirits that are denatured (i.e., treated with substances to make them unsuitable for human beverage consumption) may be used free of tax by a person who holds an industrial use permit. However, no permit is needed to use completely denatured alcohol or an approved article made from denatured spirits. Denatured spirits are suitable in a wide range of industrial applications, from mouthwash to fuel, etc., but not in products for internal human consumption, unless the spirits are removed.

2) Organizations such as research laboratories, hospitals, universities and government agencies may use un-denatured tax-free alcohol if they hold an industrial use permit. Un-denatured tax-free alcohol is prohibited from use in the manufacture of any product for sale.

3) Un-denatured distilled spirits on which the tax has been paid may be used in the manufacture of medicines, medicinal preparations, food products, flavors, flavoring extracts, and perfume; and then drawback may be claimed. This drawback is similar to a refund; however, the drawback rate is $1 per proof gallon less than the applicable tax rate. The Government keeps the difference. For further information on using distilled spirits in any of these ways, please contact the TTB National Revenue Center at (800) 398-2282.

Background Information for Tax-free Alcohol Applications

Background Information for Specially Denatured Spirits Applicants

How frequently are forms updated?

The regulations are currently in revision. Check the Web site for updates (October 2005).

Is there a cost involved and how do you find out how much?

The filing fee is $250 for the special tax application, but Congress is considering repeal (October 2005)
Current tax rate for industrial alcohol: $13.50 per gallon, but if used in a non-beverage application, can, upon filing of claims, receive a $12.50 per gal rebate. (as of August 2005)
You should speak directly with a representative.

How long should you expect to wait before getting a response?

The office is quite good about answering their phones and returning messages. If your application is correct and complete, issuance of a permit generally takes one to three months. The Bureau may choose to inspect the premises prior to issuing a permit – inspections are entirely random.

• The United States

• State and local government agencies

• The District of Columbia

• Any scientific university of college of learning

• Any educational institution exempt from income tax under section 501(a) of the Internal Revenue Code

• Any laboratory used exclusively in scientific research

• Any hospital, sanitarium, blood bank, or any pathological laboratory exclusively engaged in making analyses or tests for hospitals or sanitariums

• Any clinic operated for charity and not for profit

If you wish to obtain MORE THAN 1,500 proof gallons of tax-free alcohol per year, you will need to file additional information with your application. See the Information for Tax free Alcohol Applicants.

To apply for a permit to use, recover, or deal in Specially Denatured Alcohol, you must submit the following:

• Application for Industrial Alcohol User Permit (Form 5150.22)

• Registration of stills used for recovery or re-distillation of alcohol, including SDS

• List of trade names under which operations will be conducted

• Signature authority for any person, other than the sole owner of a business, authorized to sign a document to be filed with ATF

Environmental Protection items including:

• ATF Form 5000.29, Environmental Information

• ATF Form 5000.30, Supplemental Information of Water Quality Considerations

• State certification or waiver for any discharge into navigable waters

Applicants who plan to obtain more than 5,000 gallons of SDS per year must submit additional information. See the Information for Specially Denatured Spirits Applicants.

Your storage facilities must be of sufficient capacity to hold the maximum quantity on hand at any one time, and must be constructed and secured to prevent unauthorized access. Stationary storage tanks must be equipped with a means for measuring spirits.