1. (a) Each permittee subject to the provisions of the Alcoholic Beverage Code, §§201.03, 201.04, and 201.42, and each licensee subject to the provisions of the Alcoholic Beverage Code, §203.01, shall be entitled to receive an exemption from tax or a tax credit for any alcoholic beverages destroyed in accordance with the provisions stated herein.

2. (b) In order to qualify for this exemption from tax or a tax credit, the alcoholic beverages to be destroyed must meet the following criteria:

   1. (1) be in full unopened containers;
   2. (2) be unsalable or unmarketable;
   3. (3) have never been claimed for any other type of tax credit or exemption; and
   4. (4) have never been claimed for a refund of tax.
3. (c) The beverages, which will be claimed for destruction, must be destroyed in such a manner that the product will be rendered unrecoverable or unfit for human consumption.

4. (d) Prior to the destruction of the alcoholic beverages, the permittee or licensee must:

   1. (1) notify the nearest authorized representative of the commission of the intent to destroy alcoholic beverages at least three full working days prior to the destruction. This notification must be made in writing on an "Application for Destruction of Alcoholic Beverages" and must contain the following information:

      1. (A) the account's trade name;
      2. (B) the account's location address;
      3. (C) the license or permit number of the licensee or permittee;
      4. (D) the reason the merchandise is to be destroyed;
      5. (E) the location at which the destruction will take place;
      6. (F) the time at which the destruction will take place;
      7. (G) the method to be used to destroy the alcoholic beverages;
      8. (H) the type of alcoholic beverages destroyed; and
      9. (I) a listing by brand, quantity, container size, and package size of the destroyed merchandise, if beer or ale and malt liquor are destroyed; or a summary by class of alcoholic beverage, quantity, container size, and wine gallons, if distilled spirits and wine are to be destroyed.
   2. (2) Receive written approval from the nearest authorized representative of the commission to conduct the destruction.

5. (e) The licensee or permittee must obtain the following documentation for the tax exemption or credit claimed:

   1. (1) A signed written approval for the destruction of the alcoholic beverages from the nearest authorized representative of the commission. This information should be retained in the licensee's or permittee's files and made available upon request for inspection by an authorized representative of the commission.
   2. (2) If distilled spirits and wine are destroyed, a detailed listing by brand, type or class of liquor, and package size of all alcoholic beverages destroyed. This listing may be in the form of an invoice if the invoice provides all required information. The listing should not be submitted with the Monthly Wholesalers Report but retained by the account for inspection by an authorized representative of the commission upon request.
   3. (3) If the alcoholic beverages were destroyed at a location which charges a fee for this service, the licensee or permittee shall retain a copy of the receipt for payment for this fee and make such available to an authorized representative of the commission upon request.

   4. (4) An affidavit of destruction executed by an employee of the licensee or permittee who witnessed the destruction of the alcoholic beverages. Separate affidavits must be prepared for distilled spirits and wine; ale and malt liquor; and beer. The affidavits should contain the following:

      1. (A) the name and title of the person who witnessed the destruction and is preparing the affidavit;
      2. (B) the date destroyed;
      3. (C) the location where the destruction took place;
      4. (D) how the merchandise was destroyed; and
      5. (E) a copy of the original "Application for Destruction of Alcoholic Beverages."

6. (f) An original and two copies of the affidavit for destruction should be made and distributed as follows:

   1. (1) The original should be submitted with the monthly report upon which the exemption for the destruction is claimed. If the licensee or permittee is unable to claim the destruction as an exemption on a tax report, they may submit a letter requesting an authorized tax credit. The request along with the destruction affidavit should be submitted to the commission's Austin headquarters.
   2. (2) One copy should be retained in the licensee's or permittee's files and made available upon request for inspection by an authorized representative of the commission.
   3. (3) The second copy should be forwarded to the commission office where the original "Application for Destruction of Alcoholic Beverages" was filed.
7. (g) The commission may designate an authorized representative to be present during the destruction of the alcoholic beverages.

Source Note:The provisions of this §41.54 adopted to be effective March 7, 1996, 21 TexReg 1532.