AB-7 – Credit for Breakage and Distressed Product
What businesses must know about updated tax credit rules and recordkeeping requirements
Maryland updated its policy for tax credits on destroyed alcohol products, removing the requirement for witnessed destruction in certain cases and replacing it with recordkeeping requirements, and this guidance explains when credits can be claimed and what documentation is required.
What you need to know
- Witnessed destruction is no longer always required
- Tax credits are allowed up to $200 per month without oversight
- Detailed records must be maintained for all destroyed product
- Larger claims still require coordination with the agency
Who This Applies To
This guidance applies to:
- Wine manufacturers
- Distilled spirits manufacturers
- Wholesalers
What Changed
Previously:
- All product destruction had to be witnessed by the agency
Now:
- Witnessing is not required if certain conditions are met
When Witnessing Is NOT Required
You do NOT need a representative present if:
- Total tax credit claimed is $200 or less per month
Recordkeeping Requirements
To claim a tax credit, you must:
- Maintain complete records of all destroyed product
- Include a signed affidavit for each destruction
- Keep records available for inspection during business hours
When Witnessing IS Required
You must contact the agency if:
- The tax credit exceeds $200 in a given month
In these cases:
- A representative may be required to witness destruction
- A service charge may apply
Compliance Risk
If records are not properly maintained:
- You may be required to have all future destruction witnessed
What This Means for Businesses
Businesses should:
- Track all breakage and distressed product carefully
- Maintain clear and complete documentation
- Monitor monthly totals to determine reporting requirements
- Contact the agency when thresholds are exceeded
Important Notes
- This change is intended to improve efficiency
- Recordkeeping is now the primary compliance requirement
- Failure to maintain records may result in stricter oversight
Need Help?
For questions about credit for breakage, contact the ATCC: 410-260-7314 ext. 4 or [email protected]