Cheers! The start of the New Year is just around the corner. How are you going to celebrate? Maybe with a beer or a glass of champagne? Well, did you ever think about how that beer or champagne came to be? Or how it came to be taxed? In this article we discuss some of the implications on the taxing of beer and wine and a change lurking in the New Year.
All breweries may receive some help from Uncle Sam in the New Year. A new federal law will lower excise taxes on both craft and macro brewers. So both beer makers and beer drinkers may soon find a lower bar tab. The rapid growth of the beer industry has created struggles for regulators who are responsible for taxing and regulating beer and other alcoholic beverages.
The Craft Beer Modernization and Tax Reform Act (CMBTRA) attempts to improve the regulations and taxes governing the alcoholic beverage industry. This bill includes new categories, such as treating cider as a separate category from wine, and new tax rules that reflect the costs and structure of smaller producers.
This bill was introduced in Congress in 2015 and will be implemented in 2017. It is a broad piece of legislation that impacts not just the beer industry, but also wine and distilled spirits. In regards to beer, the bill restructures the federal excise tax, modernizes the Alcohol Tax and Trade Bureau (TTB) labeling requirements and eases certain restrictions on transferring beer between bonded facilities.
In addition, the CMBTRA will:
- Exempt brewers who pay less than $50,000 in federal excise taxes from bi-weekly filing and bonding requirements.
- Allow for consolidated bookkeeping for brew pubs.
- Expand the list of ingredients that could be automatically included in a beer with approval from the Alcohol and Tobacco Tax and Trade Bureau (TTB).
- Allow brewers to collaborate on new beers by giving them the flexibility to transfer beer between breweries without a tax liability.
This bill reduces the tax burden on all breweries while further reducing the costs of small brewers. This should translate into lower prices for manufacturers and consumers (hopefully!) and more beer production in the U.S.
More information on this bill can be found at the Tax Foundation.
State taxes on Alcohol
Of course, we are always interested in the state tax ramifications!
Aside from this new federal legislation, the treatment of tax on beer varies widely across the country. State and local governments apply excise taxes on beer in different ways, including fixed rate per volume taxes, wholesale taxes on the value of the product, and distributor and retailer fees, to name a few. As of 2014, Wyoming administers a tax of just $0.02 per gallon, while Tennessee was the highest ranking state at $1.17 per gallon.
To find out more about the different tax rates on beer among the states, please read here.
For all of you wine connoisseurs out there, let’s now take a look at the excise taxes of wine in the states with the highest and lowest rates. Wine taxes are higher than beer taxes because taxation generally tends to increase as alcohol content increases. As with beer, states do not apply excise taxes on wine uniformly. Taxes on wine are highest in Kentucky at $3.56 per gallon. The lowest taxed states are Louisiana at $0.11, California at $0.20, Texas at $0.20 followed by Wisconsin at $0.25 and Kansas and New York both tied at $0.31. All of these figures are 2014 figures and are priced per gallon.
To find out more about the different tax rates on wine across the country, please read here.
If you have any questions about how the sales of alcohol may affect your business or just want to say “Cheers” as we ring in the New Year, please give us a call at Miles Consulting Group.
