Sunday, October 16, 2011

Taxation on Beer

 If the government has it's way you may be paying more for that pint of beer in some states. In other states you may now be able to buy beer, wine and liquor on Sunday. Will the increase in your states ABV standard come with an additional tax as well? Reaching into the pockets of retailers as a source for State and Local revenue only means that consumers will have the increase passed on to them. Regardless of how any new taxation is levied, it appears that the hardest hit could be American Craft Brewers and their supporters.

 The biggest concern to small brewers in the "excise tax". This is the per barrel tax which breweries pay to the federal government based on the annual volume of beer produced. Now the MSNBC  report you have seen relates more to State and Local taxes and new legislation, but it's the excise tax you should understand. The Brewers Association has a different position on new legislation, taxation and the positive effect it would have on how craft brewers would be able do business. The concept is best describe this way on their website....

"Consumer demand for the bold and innovative beers brewed by America's small brewers has grown significantly in recent years.  But beer produced by small, independent brewers still represents only 6% of the beer sold nationwide.  As small businesses, small brewers face many economic challenges. Because of differences in economies of scale, small brewers have higher costs for production, raw materials, packaging and market entry than larger, well-established multi-national competitors.  Furthermore, efforts to increase state taxes for all brewers continue to threaten jobs and their economic stability.
To help strengthen American small businesses and preserve Main Street jobs, the Brewers Association supports legislation to recalibrate the federal beer excise tax rate for America's small brewers.  H.R. 1236 and S. 534 seek a recalibration of the federal excise tax rate for small brewers. Identical bi-partisan legislation introduced in the 111th Congress (2009-2010) gained the support of 133 U.S. Representatives and 28 U.S. Senators.
  • Currently, a small brewer that produces less than 2 million barrels of beer per year is eligible to pay $7.00 per barrel on the first 60,000 barrels produced each year.  Adjusting this rate to $3.50 per barrel would provide approximately $19.9 million per year to help strengthen our nation's smallest brewers and support their efforts to maintain and generate jobs.
  • Once production exceeds 60,000 barrels, a small brewer must pay the same $18 per barrel excise tax rate that the largest brewer pays at over 100 million barrels.  Adjusting the tax rate to $16 per barrel on beer production above 60,000 barrels up to 2 million barrels would provide small brewers with an additional $27.1 million per year that would be used to support significant long-term investments and create jobs by growing their businesses on a regional or national scale.
  • The small brewer tax rate was established in 1976 and has never been updated.  Since then the annual production of America's largest brewery increased from about 45 million to 105 million barrels.  The ceiling defining small breweries is 2 million barrels.  We support raising this ceiling to 6 million barrels to more accurately reflect the intent of the original differentiation between large and small brewers in the U.S.
The Brewers Association urges you to support legislation to create a graduated beer excise tax rate of $3.50 and $16 for America's small brewers.  An economic impact study by Dr. John Friedman of Harvard University on H.R. 1236 and S. 534 found that the bills would generate approximately $153 million in economic activity in the first year and almost $865 million over five years. Federal tax revenue would fall by $14.5 million in the first year and only $81.9 million over five years. The study concludes that over five years such a recalibration would generate nearly 4,400 jobs in the first year and an average of 300 jobs in each of the subsequent years."

I know my position on this issue, so lets hear yours. Cheers!

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