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Depletion tracking sounds mundane until you're in an audit explaining where 50 gallons went. The TTB has specific categories for removals; your records need to match. Here's the structure.
The TTB distinguishes between tax-paid and tax-free removals. Taproom sales, wholesale shipments, samples, and losses each have different treatment. A brewery that treats all depletions the same will struggle at tax time and during an audit. Your depletion records should align with how the TTB classifies removals. Taproom sales, wholesale shipments, samples, and losses each have different treatment. A brewery that treats all depletions the same will struggle at tax time and during an audit. Depletion tracking must align with how the TTB classifies removals.
The TTB Framework
When beer leaves the brewery (or leaves tax-paid status), it is a "removal." The TTB categorizes removals into:
- Tax-paid removals: Beer on which tax has been paid or will be paid. This includes taproom sales, wholesale shipments to distributors, and direct sales to consumers.
- Tax-free removals: Beer that may be removed without tax under specific conditions—e.g., exports, samples for quality control, or transfers in bond.
- Losses: Beer that is lost to spillage, breakage, or other operational events. Losses may be allowable deductions if properly documented.
Each category has different reporting and tax implications. Your depletion records should support that distinction.
What Depletion Tracking Requires
Every time beer leaves your custody—or leaves a tax-paid status—you need to record:
- What: Which beer (batch, SKU).
- How much: Volume or units.
- Where it went: Taproom, distributor, account, or loss.
- Removal type: Tax-paid, tax-free, or loss.
If that information is not captured at the moment of removal, it must be reconstructed later. Reconstruction is error-prone and rarely audit-ready.
Taproom Depletions
Taproom sales are tax-paid removals. Each pint, flight, or growler fill is a depletion. Many breweries do not log every pour; they estimate taproom depletion from POS data or from keg changes. The TTB accepts reasonable estimation methods if they are documented and consistently applied. The key is to have a process—whether it is POS integration, keg-weight tracking, or periodic reconciliation—that produces a defensible taproom depletion number.
Wholesale Depletions
Wholesale shipments—to distributors or direct accounts—are tax-paid removals. Each shipment should be logged: what was shipped, when, and to whom. Bill of lading, packing slip, or transfer documentation should support the depletion. When the distributor or account receives the beer, your records should reflect that removal from your inventory.
Samples and Tax-Free Removals
QC samples, sensory panels, and trade samples may qualify as tax-free removals under certain conditions. The TTB has specific rules for sample allowances. Whatever your practice, those removals must be logged separately from tax-paid sales. "Samples" should not be lumped into "general depletion" or "miscellaneous." They need their own category and documentation.
Losses
Spills, breakage, line purges, and other operational losses should be logged with a reason code. The TTB allows for losses but expects documentation. "Loss" without a reason is not sufficient. "Line purge at packaging," "spill during transfer," or "QC sample" are specific enough to support an audit.
Integration with Form 5130.9
Depletion tracking feeds the Brewer's Report of Operations (Form 5130.9). The removals section of the form requires tax-paid and tax-free breakdowns. If your depletion records are structured to match those categories, the report becomes a byproduct of daily operations rather than a reconstruction exercise.
Depletion tracking is not separate from production and inventory. It is the other side of the ledger—what goes in (production, transfers in) and what goes out (depletions, losses). When both sides are recorded consistently, your records support both operations and compliance.
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How BrewLedger Supports Depletion Tracking
BrewLedger tracks inventory movements as ledger entries. Depletions—whether taproom, wholesale, sample, or loss—can be logged with removal type and reason. That structure supports the data required for Form 5130.9 and audit readiness. See how it works when you are ready.