Ethanol FAQ

Oversight at the Federal level for Ethyl Alcohol falls under the Alcohol and Tobacco Tax and Trade Bureau, formerly known as the ATF.

What are Federal Excise Taxes?

The Federal Excise Tax (FET) on alcohol is a tax that attaches to the physical material. It is not a sales tax – the tax will always be the same no matter what the price of the alcohol is.  The current FET for alcohol is charged at a rate of $13.50 per proof gallon. This calculates to a rate of $27.00 per gallon of 200 proof alcohol and $25.65 per gallon of 190 proof alcohol.  The TTB collects FET on a biweekly basis from alcohol distributors, so The Warner Graham Company must collect FET in advance of sale.

Are there exemptions to the FET?

Yes. Some institutions are eligible for an Industrial User of Alcohol permit, better known as a Tax Free Permit. Typically these permits are reserved for hospitals, schools, research laboratories and government agencies. Holding a current permit will allow you to purchase a set amount of alcohol per year without paying any FET. Here is a brochure from the TTB which can help guide you through the process of obtaining a Tax Free Permit:  http://www.ttb.gov/tax_audit/p51504.pdf

What if I don’t qualify for a Tax Free Permit?

For users who need to purchase pure alcohol but who are not eligible for a Tax Free Permit, you may still be able to file to receive back a portion of the FET paid. This is referred to as a drawback. Here is a tutorial on that process:  http://www.ttb.gov/ssd/drawbacktutorial.shtml

What if I don’t need pure ethanol?

If you have a process that does not require the use of potable alcohol, you may be looking for a Denatured Alcohol. Denatured alcohol is not subject to the FET, but it is still regulated by a permitting process. There are several categories, Specially Denatured Alcohol (SDA), Completely Denatured Alcohol (CDA), Reagent Alcohol, and private formulas known as Articles.

What is Specially Denatured Alcohol?

Specially Denatured Alcohol (SDA) is alcohol to which denaturing materials have been added according to formulas that are set by the TTB. Generally, SDA is used in cosmetic products but its use extends to pharmaceuticals, chemical manufacturing, and products where SDA is the solvent or reactant.

If you are interested in SDAs, you must have an Industrial User of Alcohol Permit from the TTB.  Here is a tutorial to help guide you through that process:  http://www.ttb.gov/tax_audit/p51503.pdf

What is Completely Denatured Alcohol?

Completely Denatured Alcohol (CDA) is similar to SDA in that it is ethanol that has been denatured according to a formula maintained by the TTB. CDA is more heavily denatured than SDA. CDA formulas are not subject to FET and are available for sale without a permit.

What is Reagent Alcohol?

Reagent Alcohol is ethanol denatured with 5% methanol and 5% isopropyl alcohol.  It is a denatured alcohol for laboratory use. The formula is what is referred to as a “general use” article by the TTB. Reagent alcohol may be purchased in containers less than 4 liters in size without payment of FET and without any permit or special permission from the TTB. Purchasing Reagent Alcohol in a container larger than 4 liters requires approval by the TTB.  Information on the application process can be found here:  http://www.ttb.gov/tax_audit/p51504.pdf

What is an Article?

Articles are formulas created by private parties who use alcohol for industrial applications.  These formulas must use an SDA formula as a starting point and then further denature the alcohol by adding material that will form an azeotrope with ethanol.  These formulas must be submitted to the TTB for approval.  Once approved the article can be purchased without paying FET and without any permitting or special permission.

What other considerations are there in buying alcohol?

Even though the TTB has the ultimate oversight on the purchase of Alcohol, each state may have different or additional requirements. Please follow this link to help determine whether your state may require additional licensing or permitting.  http://www.ttb.gov/wine/state-ABC.shtml