How Can I Donate Product to Charities?12.22.15
Some of my Tennessee clients have asked if they can donate product directly to charities. The issue is not so much with the federal regulations. There is a line item on the reports to list charitable donations. The issue is with Tennessee regulations. Tenn. R. & R. 0100-06.03(15) says:
"An industry member may deplete inventories for purposes of contributing to any entity that has obtained a special occasion permit issued by the Commission. If the industry member is a manufacturer, then such contribution shall be distributed through a licensed wholesaler. The licensed wholesaler shall retain records of all such withdrawals showing the amount of inventory withdrawn, the purposed of withdrawal and the employee responsible for such withdrawal in accordance with 0100-03- .14(2)."
This is the only language in Tennessee laws or regulations that addresses donations to charities. I know several Tennessee distilleries have donated in other situations and I personally do not see the harm. Note that this regulation only authorizes donations to special occasion permit holders, not all charities, non-profits or catered events. This language is more restrictive than what a lot of distilleries understand to be the rule. I am not saying they are wrong, just pointing out that this is the only written authority available. There has been some misinformation out there, both by members of the industry and enforcement authorities. With regard to state gallonage taxes, I see no exemption for donations to charities.
If the product goes through a wholesaler, the wholesaler would be required to report and pay the tax (and likely charge the distillery for that tax). If distilleries are allowed to donate it directly, they would have to report it on their manufacturer's gallonage tax return as a "use" of that product. I suggest industry members be cautious when donating product other than through a wholesaler.