Legislation Would Reduce Excise Tax on Craft Beer, Wine, Cider and Spirits

The Boulder-based Brewers Association sent a press release late last week announcing a milestone in legislation designed to help the craft beer industry, when U.S. Senator Jim Inhofe (R-Oklahoma) became the 51st senator to support the Craft Beverage Modernization and Tax Reform Act. Shortly after that, Sen. Kamala Harris (D-Calif.) became the 52nd supporter in the Senate.

“America’s small craft brewers are incredibly proud and appreciative of the strong bipartisan and bicameral support that we have received from the United States Congress,” said Bob Pease, president and CEO of the Brewers Association in that press release. “We are small Main Street manufacturers located in virtually every congressional district in the country, and employing more than 130,000 Americans. We truly are an American success story built on the passion that our small brewers have for their craft and their communities. Members of Congress see that passion, determination and success, and want to foster it. That is why more than half the United States Congress has co-sponsored the Craft Beverage Modernization and Tax Reform Act. We are hopeful that this consensus legislation can be enacted this year.”

Distilleries, wineries and cider makers will also see benefits if the legislation does in fact pass.

Small craft brewers that produce less than two million barrels of beer per year (or 62 million gallons) pay an excise tax of $7 per barrel on the first 60,000 barrels. The proposed legislation reduces that tax to $3.50 per barrel.

Once production exceeds 60,000 barrels, the craft brewer pays $18 per barrel in excise tax, the same as a mega-brewer. The legislation drops that rate to $16 per barrel.

The reduced tax rate would also apply to foreign manufacturers and importers.

The legislation also:

  • allows for consolidated bookkeeping for brewpubs.
  • expands the list of ingredients that could be automatically included in a beer without approval from the Alcohol and Tobacco Tax and Trade Bureau (“wholesome fruits, vegetables, and spices suitable for human food consumption that are generally recognized as safe for use in an alcoholic beverage and that do not contain alcohol are generally recognized as a traditional ingredient in the production of fermented beverages.”).
  • allows brewers to collaborate on new beers by giving them the flexibility to transfer beer between breweries without tax liability.
  • excludes the aging period from the production period for beer, wine and distilled spirits.
  • modifies the small wine producer tax credit to increase the amount of the credit, expand the producers that are covered and specifies an adjustment for hard cider.

The Brewers Association says this recalibration of the two excise taxes could amount to an extra $110,500,000 those breweries could reinvest in their businesses.

Nick Calaway, owner/brewer of Algoma’s Ahnapee Brewery, agreed.

“Even in our small scale, the reduction of the federal tax would help greatly,” he said. “We, just like the average American person, are taxed by the federal and state government. In Wisconsin the state tax is $2 a barrel, however federal is $7 a barrel; $9 a barrel may seem small, but for a small business like ours, the few dollars a barrel would equal thousands of dollars over the year. The money saved would be invested back in the business immediately, to help grow and create more local opportunities.”

Deb Carey, of New Glarus Brewing, also agreed in a comment in the Brewers Association press release.

“Double digit annual growth, keeps us in a constant state of hiring and production/construction,” she said. “Relief from bi-weekly debt of more than $100,000 would result in additional hiring, bricks and mortar construction, environmental improvements and economic stability for this growing business. Sixty million dollars of impact in this rural struggling region is important.”

Chris Roedl, who plans to break ground in the village of Egg Harbor soon for his Hatch Distilling Co., said he has been following the legislation and is optimistic now that it has majority support in the Senate.

“I think the key for this legislation to survive is to remain as a standalone piece of legislation,” he said. “If it gets tacked on to a broader tax reform legislative effort, I could see it falling victim to partisan division.”

He added that it would be a definite boon to his new business.

“Currently a typical 750ml bottle of spirits has about $2.15 of federal excise tax on it, depending on the proof,” he said. “The current proposal would drop federal taxes on the same bottle down to 43 cents for small producers. That tax break would provide an opportunity to invest in employees and infrastructure, and also pass some savings along to our customers.”

Identical legislation in the House of Representatives has 281 co-sponsors from both sides of the aisle. The legislation was introduced there by Representatives Erik Paulsen (R-Minn.) and Ron Kind (D-Wis.).

Kind said he introduced the bipartisan Craft Beverage Modernization and Tax Reform Act to help Wisconsin brewers continue to grow and create jobs.

“The Wisconsin beer industry not only produces the best beer in the world, but it also creates jobs and grows the local economy in communities,” Kind told the Pulse. “I am proud to introduce a bipartisan bill to help Wisconsin brewers – large and small, tap into new markets and create good-paying jobs here in Wisconsin.”

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