What is the federal excise tax on ethanol?

The federal excise tax on ethanol imposed by the Alcohol and Tobacco Tax and Trade Bureau (TTB) is an important aspect to consider for individuals and businesses involved in the production and distribution of ethanol. The tax is levied on the sale or use of ethanol and is intended to generate revenue for the government while also regulating the industry.

For industrial ethanol, the tax is based on the quantity sold or used, measured in wine gallons. The current federal excise tax rate for industrial ethanol is $13.50 per proof gallon. A proof gallon is a standard measure used to determine the alcohol content of a liquid.

To calculate your tax implication, you need to determine the quantity of ethanol sold or used, convert it to wine gallons or proof gallons as applicable, and multiply it by the corresponding tax rate. It’s important to consult the TTB’s regulations and guidelines or seek professional advice to ensure accurate calculations and compliance with tax laws.

Understanding and properly calculating the federal excise tax on ethanol is crucial for businesses and individuals involved in the industry. By staying informed and complying with tax regulations, you can effectively manage your tax liabilities and ensure smooth operations within the ethanol market.

Industrial ethanol
simple solvents industrial ethanol corn silo

USP-grade ethanols and other industrial alcohols are commonly used in botanical extraction processes to extract essential oils, flavors, or active components from plant materials. Every buyer is required to understand the federal excise tax on ethanol. Here’s how industrial-grade ethanol plays its part:

Botanical Extraction: Industrial ethanol acts as a solvent to extract desired compounds from plant materials, with excellent solvent properties helping dissolve and extract target constituents more easily. Ethanol’s effective solvent properties allow it to extract essential oils, terpenes, cannabinoids, and other phytochemicals found in plants efficiently.

Concentration and Purification: Following extraction, ethanol can often be used in the concentration and purification steps to remove unwanted impurities such as waxes, fats, and chlorophyll through processes such as winterization or filtration.

Tincture and Extract Production: People commonly use industrial ethanol as a solvent to create tinctures and extracts. They soak plant materials to extract and preserve the desired compounds, resulting in concentrated solutions for various applications, such as herbal remedies, flavorings, or natural health products.

Note that when it comes to botanical extraction, selecting an appropriate grade of ethanol is of great significance. While industrial-grade ethanol may work, ensuring its purity and quality meet the required purity standards is crucial to producing contaminants-free botanical extracts. People frequently choose USP-grade ethanol to provide the highest purity and safety in extracted compounds.

Production: Manufacturers utlize industrial ethanol as a solvent, cleaning agent, or extraction solvent in various manufacturing industries. It’s used widely in producing pharmaceuticals, cosmetics, personal care products, perfumes, and cleaning solutions.

Chemical Industry: Industrial ethanol is integral in manufacturing various chemicals such as paints, coatings, adhesives, resins, dyes, inks, and varnishes. Furthermore, ethanol can also be used as an essential reagent in laboratory settings for chemical reactions and synthesis processes.

Fuel and Energy: Fuel manufacturers often blend ethanol (including industrial-grade ethanol) with gasoline as a biofuel additive to increase octane ratings and decrease emissions, improving performance and reducing emissions. Standard blend concentrations include E10 (10% ethanol) or E85 (85% ethanol) for flexible-fuel vehicles.

Cleaning and Sanitizing: Due to its excellent solvent properties, industrial ethanol has long been used as an effective cleaning and sanitizing agent in various industries, including food processing, healthcare facilities, laboratories, and electronics manufacturing.

Alternative Energy Sources: Industrial ethanol is also an ideal feedstock for biofuel production, such as cellulosic ethanol derived from non-food plant material such as agricultural residues or dedicated energy crops.

Use our ethanol federal excise tax calculator to find your tax rate now.

Visit our blog regarding the federal excise tax on ethanol.

For more information visit the TTB website.

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