In short: Filing TTB Form 5110.28 is a mandatory monthly federal requirement for distilleries. It tracks spirits moving through proofing, filtering, and bottling. Mastering this form ensures accurate proof gallon accounting, correct excise tax calculations, and compliance with federal regulations regarding the removal of tax-determined products.
Filing TTB Form 5110.28: the processing operations report, step by step, is a critical compliance task that tracks every drop of spirit as it moves through filtering, proofing, blending, and bottling. Mastering this monthly report keeps your distilled spirits plant in good standing with federal regulators and ensures you pay the correct federal excise tax. The federal rules governing these operations can be complex, and getting the math right is essential for avoiding costly penalties. Please note that all regulatory and statutory information provided here is general educational information, not formal tax or legal advice.
Every distillery operates under a federal Basic Permit, and the Alcohol and Tobacco Tax and Trade Bureau divides distilled spirits plant operations into three distinct accounts. These accounts are production, storage, and processing. Production covers fermentation and the initial distillation of spirits. Storage covers aging in barrels or holding spirits in bulk tanks without alteration. Processing covers everything that happens right before the spirit leaves the bonded premises. Activities like dumping barrels, proofing with water, filtering, blending, and bottling all occur in the processing account. Form 5110.28 specifically tracks this account, and understanding how to complete it accurately is vital to your daily operations.
What is the TTB processing account and who needs to file?
If you hold a federal permit to distill or bottle alcohol, you must file monthly operations reports. The processing operations report is required for any distilled spirits plant that is authorized for processing activities. Even if you have not yet produced, filtered, or bottled a single drop of alcohol, you are required to file this report. New distillery owners frequently learn that they must begin filing monthly zero reports as soon as their permit is approved. If you miss a filing, the federal government will issue automated warning letters, which can put your operation in jeopardy.
Processing is the final stage of your spirit's journey while in bond. When spirits leave the production still or the storage rickhouse, they are transferred into the processing account. Once spirits are bottled and removed from the bonded premises for wholesale distribution or retail sale, they leave the processing account entirely and become tax-determined. This boundary is highly regulated because the federal excise tax is calculated based on the volume and alcohol content of the spirits leaving the bonded area.
Because of this strict boundary, daily recordkeeping is required. You cannot simply estimate the amounts at the end of the month. You must maintain daily logs of every barrel dumped, every gallon of water added for proofing, every filtering loss, and every case of bottles filled. These daily records form the foundation of your monthly TTB Form 5110.28 submission. Detailed regulatory requirements for these records can be found in 27 CFR Part 19, which governs the operation of distilled spirits plants.
How do proof gallons work in the processing report?
All federal distillery reports are calculated using proof gallons rather than standard liquid gallons, which are known in the industry as wine gallons. A proof gallon is defined as one liquid gallon of spirits at 100 proof, which is fifty percent alcohol by volume at sixty degrees Fahrenheit. Because federal excise tax scales with alcohol content, tracking proof gallons ensures that the tax is applied fairly regardless of how diluted or concentrated the final spirit is.
For example, if you dump fifty liquid gallons of bourbon from a barrel and the spirit is 120 proof, you have sixty proof gallons. If you add water to proof that same batch down to 80 proof, the liquid volume increases to seventy-five wine gallons, but it remains exactly sixty proof gallons. The total alcohol mass has not changed. When completing your monthly reports, you will constantly convert your physical liquid volumes and temperature readings into proof gallons using official TTB gauging tables.
Getting this math right manually can be exhausting, especially when adjusting for temperature variations during a large bottling run. You must take accurate temperature readings and use hydrometers or digital density meters to find the true proof. Many distillers rely on a /tools/proof-gallon-calculator/ to streamline this step and ensure their daily logs are perfectly accurate before transferring the totals to the monthly report. The official procedures and tables for gauging spirits are detailed extensively in 27 CFR Part 30.
What are the daily recordkeeping requirements?
Before you can fill out the processing operations report, you must have your daily records in order. The federal government does not allow you to backdate or guess your processing activities. Distilleries are required to maintain a daily record of physical operations. When you move spirits from the storage account into the processing account, you must log a dump or batch record. This record must show the exact date, the source of the spirits, the wine gallons, the true proof, and the calculated proof gallons.
As you process the batch, you must document any water added for proofing and any filtering steps taken. If you are bottling the batch, you must generate a bottling record. This log details the size of the bottles, the number of bottles filled, the cases produced, and the proof of the finished product. These daily logs are the direct source material for your monthly TTB Form 5110.28. If an auditor visits your facility, they will check to ensure your daily logs perfectly match the summary numbers reported on your monthly forms.
TTB Form 5110.28: the processing operations report, step by step
Completing the form requires mapping your daily processing activities to the specific lines on the report. The form is divided into several parts, tracking bulk spirits, wines, and packaged products. Here is a practical breakdown of how a typical craft distillery fills out the main sections.
Part I tracks bulk spirits and is divided into two halves. The top half tracks spirits entering the processing account, and the bottom half tracks spirits leaving or being consumed. Line 1 is always your starting inventory, which must perfectly match the ending inventory from the previous month. The following lines record spirits received into processing. For most whiskey distilleries, this happens on Line 3, which records spirits transferred from your own storage account. When you dump barrels for a batch, you log the proof gallons leaving your Form 5110.11 storage report and entering your Form 5110.28 processing report.
The bottom half of Part I tracks where those bulk spirits went. Line 13 is where you record spirits that were bottled. This is a critical line. When bulk spirits are pushed through the filler and go into glass, they shift from bulk spirits to packaged spirits. You must also account for any losses during filtering or bottling on Line 30. Spills happen, and filters hold liquid, so a small amount of loss is expected and must be documented.
Part II of the form tracks wines and alcoholic flavoring materials. For most traditional bourbon and rye whiskey distilleries, this section remains blank. If you produce flavored spirits, gin, or blended products that incorporate wine or approved alcoholic flavors, you will track the receipt and usage of those materials here. All volumes in this section are also recorded in proof gallons.
Part III is where you track the actual finished bottles. It is called the Bottled and Packaged Products section. Like Part I, it has a received half and a removed half. On Line 1, you list your starting inventory of finished, un-taxed bottles sitting in your bonded casing area. On Line 2, you record the proof gallons of spirits you bottled during the month. This number must match the proof gallons you claimed were used for bottling in Part I, Line 13. This creates a balanced closed loop between your bulk processing and packaged processing accounts.
The removal lines in Part III are where the spirits finally leave bond. Line 9 tracks spirits withdrawn tax-determined. When you move a pallet of cases out the bonded door to your wholesale distributor, or transfer cases to your non-bonded tax-paid tasting room, you record those proof gallons here. This line directly triggers your federal excise tax liability for the period. Line 10 tracks spirits transferred in bond, which occurs if you ship untaxed bottles to another bonded facility.
Part IV is the final section of the report, where you summarize your end of month physical inventory. You must physically count your bulk spirits in tanks and your finished cases on pallets at the end of the reporting period. The totals found during this count must match your theoretical book inventory calculated in Parts I and III. If there is a discrepancy between your physical count and your book inventory, you must investigate the cause and log the difference as a shortage or overage.
How do you handle processing losses and destruction?
In any manufacturing environment, some amount of product will be lost. Distilleries are no exception. During processing, spirits are lost to evaporation, spilled on the floor, or trapped inside pumps, hoses, and filter pads. The federal regulations recognize that these normal operating losses happen, but they must be carefully documented. If you do not record these small daily losses, your theoretical book inventory will slowly outgrow your physical inventory. When you eventually perform a physical count, you will be forced to report a massive shortage, which is a major red flag for federal auditors.
Normal processing losses must be reported on Line 30 of Part I for bulk spirits, or Line 15 of Part III for packaged spirits. If a forklift punctures a tote or you accidentally drop a case of finished bottles, this is considered an abnormal loss. Abnormal losses require immediate documentation, and you may be required to file a claim for relief from the excise tax that would have been owed on the spilled product. Proper /distillery-compliance/ requires tracking all losses on a daily basis so your monthly report reflects reality.
If you need to intentionally destroy spirits because a batch went bad or a product is unsalable, you cannot simply dump it down the drain. You must notify the federal government prior to destruction. Once the destruction is approved and witnessed or documented properly, you report the destroyed proof gallons on the appropriate destruction line in the processing report. Failing to follow this procedure means you still owe tax on the destroyed product.
How does processing affect excise tax and CBMA rates?
Because processing is the final step before spirits leave the bonded premises, the numbers you report on Form 5110.28 dictate your tax bill. The standard federal excise tax rate is 13.50 dollars per proof gallon. However, the Craft Beverage Modernization Act provides significantly reduced rates for eligible distillers.
Under the reduced rates, eligible producers pay just 2.70 dollars per proof gallon on the first 100,000 proof gallons removed from bond during the calendar year. To qualify for this reduced rate, the distillery must actually perform a qualifying processing activity, not merely bottle spirits produced by someone else without further alteration. TTB has specific guidelines on what constitutes a qualifying processing activity for the purpose of the reduced tax rate, which you can review on the TTB CBMA overview page.
Keeping your processing report accurate ensures you apply the correct rate to the correct volume. You must monitor your total removals across the calendar year to know when you cross the 100,000 proof gallon threshold. To estimate your tax liability based on the volumes you plan to withdraw, you can use an /tools/excise-tax-calculator/ as part of your financial planning. You will pay these taxes using TTB Form 5000.24, the Excise Tax Return, which is typically filed semi-monthly.
What are the most common mistakes on this report?
The most frequent error new operators make is failing to file zero reports. If your plant is permitted but construction is delayed or you are simply not processing yet, you must still file Form 5110.28 with zeros across the board by the fifteenth day of the following month. Missing these filings will trigger automated warning letters and can complicate your standing with the federal government.
Another major issue is failing to reconcile the processing report with the storage and production reports. If you record that fifty proof gallons left storage to enter processing, your storage report must show a fifty proof gallon removal, and your processing report must show a fifty proof gallon receipt. Federal auditors look for these mismatched transfers immediately.
Distillers also frequently struggle with the boundary between bonded areas and retail areas. TTB regulations prohibit the sale or free sampling of untaxed spirits inside the bonded premises. Your tasting room must be a separate, non-bonded area. When you move bottles from your bonded processing area to the tasting room, they must be recorded as tax-determined removals on Form 5110.28, and the tax must be paid on your next excise return.
Mastering TTB Form 5110.28 requires discipline, accurate measuring equipment, and a commitment to daily logging. By understanding how proof gallons flow from bulk tanks into finished bottles, you can maintain compliance and avoid costly accounting errors.
Spirit Sight helps distilleries eliminate the headaches of federal compliance by automating daily logs and generating your TTB reports directly from your production data. Instead of wrestling with spreadsheets and manual proof gallon conversions, you can dump barrels, proof batches, and run bottling lines while the software tracks every drop, ensuring your monthly processing operations report is accurate, balanced, and ready to file.
Key takeaways
- TTB Form 5110.28 tracks all spirits moving through the processing account, including proofing, filtering, and bottling.
- You must file this report monthly by the fifteenth day of the following month, even if you are only filing a zero report.
- All volumes on the report must be calculated in proof gallons using official gauging tables, not standard liquid wine gallons.
- Spirits transferred from your storage account to processing must match exactly across both your storage and processing monthly reports.
- Removals of bottled products tracked on this form directly determine your federal excise tax liability.
Frequently asked questions
What happens in the processing account of a distillery?
The processing account is where spirits are prepared for final sale. Activities include dumping barrels, proofing with water, filtering, blending, and filling bottles or kegs.
Do I have to file TTB Form 5110.28 if I have not bottled anything yet?
Yes. Once your federal distilled spirits plant permit is approved, you must file monthly reports for all accounts, submitting zero reports if no activity occurred.
How do I calculate proof gallons for the processing report?
A proof gallon is calculated by multiplying the liquid wine gallons by the alcohol proof, then dividing by 100. You must use official TTB gauging tables to adjust for temperature and true alcohol content.
Does bottling trigger federal excise tax?
Bottling itself simply moves spirits from bulk processing to packaged processing. The excise tax is triggered when those bottled spirits are removed from the bonded premises for sale or tasting.
