27 C.F.R. § 19.36 – Spirits produced in industrial processes.

(a) General. Except as otherwise provided in paragraph (b) of this section, any person who produces distilled spirits in an industrial process, including spirits produced as a byproduct in connection with chemical or other processes, is considered to be a distiller and therefore is required to qualify such operations as a distilled spirits plant and is subject to the registration requirements under the provisions of 26 U.S.C. chapter 51 and this part.
(b) Waiver. TTB may waive application of any provision of 26 U.S.C. chapter 51, or of this part, involving the production of nonpotable chemical mixtures containing spirits, including any provision relating to qualification (except the dealer registration requirement) if the mixture is produced:
1. (1) For transfer to the bonded premises of a distilled spirits plant for completion of distilling; or
2. (2) As a byproduct which would require expensive and complex equipment for the recovery of spirits, and the mixture:
  1. (i) Would be destroyed on the premises where produced; or
  2. (ii) Would contain a minimum quantity of spirits, taking into account the procedure employed, would not be subjected to further operations solely for the purification or recovery of spirits, and would be found by TTB to be as nonpotable and as difficult to recover as completely denatured alcohol.
    (26 U.S.C. 5201)