No Refund for CBP Excise Tax Processing Error
Feb. 16, 2021
By: Meaghan E. Vander Schaaf
CBP recently released a 2019 ruling (HQ H294599, November 8, 2019) where the agency reviewed the special situations in which CBP is permitted to issue refunds of alcohol taxes. Here, the importer maintains that at the time of entry the shipment of bulk wine was declared as 'tax deferred' on CBP Form 7501. However, due to an Automated Commercial Environment (ACE) processing error, the entry was incorrectly processed and the internal revenue (IR) taxes were erroneously assessed at the time of entry. The importer filed a Protest with an Application for Further Review (AFR) to challenge the double assessment of IR taxes on its shipment of bulk wine. The ruling is headquarters’ review of that AFR.
There are very limited circumstances in which a credit or refund of alcohol or tobacco taxes is permissible under Section 6423 of the Internal Revenue Code ('IRC') of 1954, (as amended 26 U.S.C. § 6423). A credit or refund is possible 'only if the credit or refund is claimed on the grounds that an amount of alcohol or tobacco tax was assessed or collected erroneously, illegally, without authority, or in any manner wrongfully, or on the grounds that such amount was excessive.' See 26 U.S.C. § 6423(c). Typically, claims for a credit or refund are filed with TTB under its regulations promulgated under 26 U.S.C. § 6423(b). However, CBP’s regulations at 19 CFR 24.36(d) identify certain circumstances where CBP can refund IR taxes. At issue in this ruling is CBP’s ability to issue refunds when there is a mathematical or computation error in either the quantity of the imported article or the amount due. (19 C.F.R. § 24.36(d)(5))
Ultimately, CBP found that the ACE processing error did not amount to a mathematical or computational error and a refund from CBP under 19 CFR 24.36(d) would not be allowed. CBP found the alleged incorrect assessment of IR taxes was not a computation error with respect to the quantity of the imported article or a mathematical error made in calculating the amount of tax due. Instead, it was only the timing of the IR assessment was in error. Citing HQ H214255 (July 3, 2014), CBP found that this type of “error” does not fall within the meaning of a computation error, i.e. an error in “the difference between a computed or measured value and a true or theoretically correct value.” As the error in this case is not enumerated in 19 C.F.R. §24.36(d), CBP could not issue a refund of IR taxes collected on the imported alcohol.
However, the importer may still be able to receive a refund directly from the Alcohol and Tobacco Tax and Trade Bureau (TTB). In the ruling CBP noted that under 19 CR 24.26(e), the agency may “assist the importer in pursuing a refund from TTB by providing proof of the entry and payment of internal revenue tax deposited via the procedure outlined in the regulation.” CBP noted the procedure for requesting a refund of overpaid alcohol excise taxes from TTB after final liquidation of the entry can be found in 19 C.F.R. § 24.36(e).
Should you have any questions seeking refunds for ACE processing errors or other excise tax refunds, please contact a trade attorney at Barnes, Richardson & Colburn LLP.