Bonded Warehouse
A bonded warehouse is a storage area where spirits are held under bond, meaning the federal excise tax has not yet been paid. Tax becomes due when spirits are removed from bond.
Holding spirits in bond lets distilleries age inventory for years without paying tax until the product is actually removed for sale. The distillery must maintain bond coverage against the spirits in storage and report removals, which drive the excise tax owed.
What does it mean for spirits to be 'in bond'?
Spirits held in bond have not yet had federal excise tax paid on them. The tax becomes due when the spirits are removed from bond, typically for bottling and sale, which is why a distillery can age inventory for years before the tax is owed.
Why hold spirits in a bonded warehouse?
Aging is the whole point of whiskey, and bond lets a distillery mature inventory for years without paying tax on spirit it has not sold. In exchange, the plant must maintain adequate bond coverage against the spirits in storage and report removals that drive the excise owed.
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