University of Michigan Tax-Free Alcohol Policy and Procedures
Procurement, storage and use of Tax-Free
190 and 200 Proof Ethyl Alcohol
I.
Date: 1/30/07
Responsible Department: Contract
Management
Purpose
This section outlines policy and procedures regarding the
acquisition, use, storage, and control of tax-free ethyl alcohol
on campus, in compliance with applicable regulations of the
Internal Revenue Code.
II.
Policy
A.
Responsibility
1. Contract Administration is responsible for the
acquisition and issuance of tax-free alcohol to campus
departments.
2. Each U-M Department shall assign responsibility for
control and issue of ethyl alcohol to no more than two
persons (one is preferred). The department custodian
shall maintain complete, accurate, up-to-date records of
all alcohol received and issued. It is the
responsibility to monitor, manage, and verify that its
custodian(s) are following Internal Revenue Code
procedures.
B.
Distribution
1. No issue shall be made of quantities that exceed the
stated monthly requirement for a given user (using
department). Requests for more than 25 gallons must be
submitted in writing and approved by U-M DPS Fire
Inspector and the U-M OSEH Department
2. Alcohol shall be used only on the premises and not be
transported to any location other than a University
building on a University campus.
Document last updated: June 4, 2015
C.
Storage
1. The using department shall provide locked storage space
adequate in size and construction to provide adequate
ventilation and in a suitable location. The storage
space must be secured by a cylinder-type lock or a
substantial padlock. The hinges must be recessed when
the door is closed, or the hinge pins must be altered in
such a manner that they cannot be removed. The key of
this storage area must be in the sole possession of the
person responsible for dispensing alcohol.
2. The “Conditions of Use of Tax-Free Alcohol,” Exhibit A,
shall be posted in a conspicuous place within the locked
storage area.
3. The U-M DPS Fire Inspector and the U-M OSEH Department
are responsible to approve storage areas for tax-free
alcohol. U-M DPS Fire Inspector and the U-M OSEH
Department are responsible to notify Strategic Contract
Management when storage areas are approved or denied.
D.
Use
1. Tax-free alcohol shall be used only for scientific,
medicinal, and mechanical purposes.
2. Under no circumstances may tax-free alcohol be used for
beverage purposes, or in any food product, or in any
preparation used in preparing beverage or food products.
3. Departments are also prohibited from:
a. selling tax-free alcohol,
b. using tax-free alcohol in the manufacture of any
products for sale, or
c. selling any product resulting from the use of taxfree alcohol.
E.
Containers
1. The U-M DPS Fire Inspector and the U-M OSEH Department
have limited the use of 5 gallon and 55 gallon
containers of tax-free alcohol. Departments are
encouraged to purchase one-gallon and pint containers.
2. Metal 5 gallon and 55 gallon containers are approved
shipping containers for tax-free alcohol from the
distributor. Plastic is no longer an approved container.
Orders placed to the distributor after January 29, 2007
will be for metal containers.
Document last updated: June 4, 2015
3. Plastic containers are approved shipping containers from
the distributor for pints and gallons of tax-free
alcohol.
III. Procedures
A.
Authorization
1. Department Heads are responsible to designate a
custodian(s) allowed to procure tax-free alcohol and to
verify that the quantities requested, intended usages,
and the custodian’s actions meet Internal Revenue and UM requirements.
2. Department Heads are responsible to monitor the purchases
of tax-free alcohol charged to their departmental
shortcodes and chartfields. If the Department suspects
unauthorized purchases, the Department Head is
responsible to contact Strategic Contract Management
immediately and provide supporting documentation.
B.
Purchase
1. Ethyl alcohol is ordered from the University of
Michigan’s designated Strategic Supplier. Current
procurement procedures are posted in the supplier page.
Departments must use the “U-M Requisition for Tax-Free
Alcohol Form.”
2. Departments are required to verify all tax-free alcohol
deliveries and sign for the shipment. Without
signatures, the distributor returns the tax-free alcohol
and the Department is billed for the tax-free alcohol.
3. A limited number of Departments and storage facilities
are approved to order and store 55-gallon drums of taxfree alcohol. Written authorization is required from
the U-M DPS Fire Inspector and from U-M OSEH Department
before orders are fulfilled. If a lab passes inspection,
the U-M DPS Fire Inspector and a U-M OSEH Representative
will forward their approval to the Manager of Strategic
Contract Administration.
Document last updated: June 4, 2015
C.
Effacing and disposal of alcohol containers
Effacing of all alcohol containers immediately after
emptying is required by Section 22.33 of the Code of
Federal Regulations. Individuals responsible for the
control of alcohol within the department must assure that
each bottle, can, and carton is effaced in such a manner as
to remove all traces of information pertaining to the
contents.
D.
Record keeping
Designated department custodians must keep a record of all
receipts and disbursements of tax-free alcohol ordered,
delivered to, used, and disposed of by their departments.
Departmental records are subject to audit any time by
request of Contract Management, Federal Internal Revenue
Service, or other authorized University Departments.
IV.
References and Related Policies
A.
B.
U.S. Code of Federal Regulations, Title 27, Part 22
U-M Standard Practice Guide Purchasing 507.01 – General
Policies and Procedures
Document last updated: June 4, 2015