11 March 2004 Excise Interpretation 49832 - Spirit Licensee Producing Whiskey or Any Wine-blended Spirit Products

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

The purpose of this memorandum is to respond to XXXXX questions with regard to the various licences a person is required to possess in order to blend wine with spirit to produce spirit (e.g. producing whiskey) and the monthly reporting of the spirits and wine used in producing these products.

From various conversations with XXXXX we understand that a spirit licensee (SL) in XXXXX produces whiskey and as part of the whiskey production, blends wine with spirit to produce spirit. This spirit licensee also possesses a user licence and a wine licence. Currently, this SL receives wine under their wine licence, transfers wine from that licence to the user's licence and transfers neutral grain spirit (NGS) from the spirit licence to the user licence. The licensee then blends the wine with spirit to make fortified wine. This fortified wine is then returned to the possession of the wine licensee (WL). There is a second transfer then from the WL to the licensed user (LU) of this fortified wine and a second transfer from the SL to the LU of aged spirit. The fortified wine and aged spirit is blended to produce spirit, in this case whiskey. The final product is then transferred back to the SL. The various transfers among licensees are recorded on the applicable monthly returns.

From an analysis of the process, the legislation and from consultation with the Department of Finance we find that, in this case, there is unnecessary transferring and, as a result, reporting among the various licensees.

In reviewing the situation we must determine the end product and look at who can produce and possess it, in this case a spirit product. In the situation described and in all situations where a person wishes to blend wine with spirit to produce spirit, a spirit licence and a user licence or wine licence are required. In this situation, the user licence permits the licensee to possess the wine but it is the SL who is producing the whiskey - the end product.

To produce whiskey the licensee in question needs a spirit licence and a user licence. The spirit is not transferred to the user licence. The LU may receive the wine from any WL and remove it for blending with spirits to produce spirits. If the licensee in question is not producing an end product that is wine (e.g. fortified wine), then a wine licence is not required. This will eliminate unnecessary record keeping and reporting.

It is section 131 of the Excise Act, 2001 (the Act) that permits a LU who is also a SL to blend wine with spirits to make spirits and proposed paragraph 131.2(1)(b) of the Act deems the spirits to be produced at the time of blending. To be in compliance of section 60 of the Act, the SL must be the producer of the spirits.

Reporting

For reporting purposes the LU will report on page 3 of the B 263 the additions to inventory and then reduce their inventory on line "Blended with spirits to produce spirits" (line 3) for the quantity that is removed for the wine-blended spirit product. The SL will reduce their bulk inventory under "Other, Non-Duty-Paid" (and specify the product produced) for the quantity of all spirits that is removed to produce the whiskey or any wine-blended spirit product. The SL will then add to inventory the total quantity, in litres of absolute ethyl alcohol (LAA), of the final product produced, in this case whiskey, as "Spirits Produced". The Act does not permit a SL to possess wine; therefore, a SL must never add wine to their spirits inventory.

If you require further assistance in this matter, please feel free to contact me at (613) 954-5897.

Joy Piepjohn
Senior Rulings Officer
Excise Duty Operations, Alcohol
Excise Duties and Taxes Division