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Chris Clepp

Bottled-in-Bond Part 1 – Taxes and Death

In Episode 1 we talked a little bit about the bottled-in-bond designation and its history. Born of the snake oil and bathtub distillate in the 19th century, the program was a collaboration. It brought together private distillers and the US Department of the Treasury in the late-1800s to solve this crisis.

The Dark Ages of Bottling

Prior to 1897, you would be hard pressed to find liquor in your town that was unadulterated. That was the nature of the beast, and it made consumers leery of their liquor. Less upright distillers might buy grain spirits and cut them with additives. Things like boneblack, tobacco, and even iodine were added for color and flavor. You never knew what you were drinking, and that was the point: it was cheap and fast. Much like the bootleggers of Prohibition, the booze you got wasn’t always the booze you bought. Well-known distillers would produce their product and deliver to distributors who then cut, weakened, or mixed the high-quality whiskey with things like iodine or tobacco mixed with water to match the original color.

On top of the problems with quality and brand protection the distillers faced, the government found that many of those same unscrupulous distillers hid barrels, changed counts, or falsified age statements to avoid paying the required taxes on their product. The unsavory side of American whiskey withheld millions in today’s dollars of taxes from the federal government. Since everyone knows the Treasury always gets its pound of flesh, it brought interesting bedfellows.

Fed up with the stricter enforcement and oversight for their legitimate businesses, the leaders of the distilling world came up with a solution. Early leaders, like Colonel EH Taylor of Old Taylor fame, worked with the Treasury. Together they formed a plan on how to solve both of their problems: a national law to tax and verify. Only two things in life are inevitable: Death and Taxes. They sought to ensure your Bourbon doesn’t kill you, and that your supplier paid their taxes.

A Way Forward

Through this cooperation came the Bottled-in-Bond Act of 1897, a pivotal piece of legislation. First, it adopted a defined characteristic standard: all distillate must be from one season (January to June or July to December), it must be made by only one distiller, and it must be made at one distillery. Second, it provided a tax incentive for the distiller which limited their overhead. This was a delayed tax payment until after the whiskey was finished aging. To-date, taxes were paid every year while aging, which required significant up-front capital to launch new product. Third, the product must be bottled at precisely 100 proof, or 50% alcohol by volume, to ensure consistent product between brands. Finally, it required the aging take place in a federally-bonded warehouse under the supervision of the Treasury Department.

After all of this, the barrels were opened under government supervision and bottled with special tamper-proof paper seals that outlined their bonded status. Any attempt to open the bottle and change the contents would break or tear the seal, rendering the bottle suspect. As one of our nation’s first consumer protection laws, the Bottled-in-Bond Act of 1897 ensured that every bottle you purchased of a particular spirit were, in fact, the spirit it claimed to be, without contamination, additives, or unsavory changes.

The Aftermath

What the act did not do was guarantee the quality of the spirit or the skill of the distiller. It also denied mixed or blended whiskeys a distinguished bond, which soured the public on those blends. In the end, it became the earmark of top-shelf liquors and the way consumers identified good whiskey. Every American producer clamored to display their bonded offerings, shilling it as the best and the greatest available.

Does the Bottled-in-Bond designation have a place in modern society? Do our new food and drug laws cover the very reason the program was created? In theory, they prevent the addition of harmful or unknown additives, flavorants, and colorants. What we need to decide is if they actually stop these adulterations or if the Bottled-in-Bond program is still needed today.

Next time we’ll dive deeper into the Bottled-in-Bond programs that exist today and discuss some of the various distillers that keep this tradition alive. And there will be a Bottled-in-Bond episode that comes up soon so you can learn even more. Be sure to sign up for our newsletter below to learn when both are launched!

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