CBP Lacks Authority to Refund Excess Tax Payment if Error is Clerical, Not Mathematical

CBP is unable to refund the alchohol excise tax it collected from a company that mistakenly listed a tax rate over the actual required amount, the agency told Southern Wine and Spirits of America in July 3 ruling. The ruling, HQ H214255, addressed whether CBP has the authority to refund the excess payment that was a result of a miscalculated tax rate listed by Southern Wine on its entry filing. In this case, listing the wrong tax rate was a clerical error, rather than a "mathematical error," leaving CBP unable to give the refund, it said in the further review of protest.

Southern Wine imported a shipment of Malibu Rum in October 2011 and included on its Form 7501 an incorrect internal revenue (IR) alcohol excise tax rate, which is set by the Bureau of Alcohol, Tobacco, Tax and Trade Bureau. The company listed IR tax rate as 3.56632 per proof liter rather than the correct rate of $11.92 per proof gallon. About a month after the entry was filed, the company filed a Post Entry Adjustment that asked for liquidation of the entry with a refund of the tax as a result of a miscalculation. CBP rejected the PEA and the entry was liquidated in early 2012 at the tax rate included on the entry form.

The company protested CBP's decisions, claiming that a CBP refund should have been given because the mistake was mathematical . Southern Wine "alleges that the PEA was denied in error "and that 'CBP has previously permitted PEA’s to correct IR tax rates assessed on imported alcohol and issued refunds," said CBP. The port's position is that while there was a wrong "tax rate for this entry, it has no authority to issue the refund pursuant to CBP’s regulations, and that the Southern Wine must submit its claim with the assistant regional commissioner of TTB."

CBP regulations and Internal Revenue Code only allow for the port director to issue TTB excise tax refunds in certain instances, the ruling said. One such situation is when "the refund of tax is pursuant to a claim based solely on errors of computation of the quantity of the imported article, or on mathematical errors in computation of the tax due." While Southern Wine attributes the mistake to a mathematical error, the mistake is actually "clerical," the agency said. "Because Southern Wine’s alleged error does not involve an error in computation, there is no mathematical error." Therefore, the agency is unable to issue the refund. Still, CBP may still help the importer to pursue a refund through TTB by providing proof of entry and payment, said CBP. -- Tim Warren