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Shelton Brothers issue statement regarding New York's repeal of beer tax and fee exemptions

Discussion in 'Beer News' started by Todd, May 1, 2012.

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  1. Todd

    Todd Founder (1,410) Colorado Aug 23, 1996 Staff Member

    Some of you may remember the recent thread regarding New York state ending tax and fee exemptions for in-state brewers, the resolution of a lawsuit initiated by Shelton Brothers against the State Liquor Authority (SLA) for rejecting beer labels in 2006 under the assumption that they'd appeal to children. During the lawsuit, Shelton Brothers also questioned the fairness of tax and fee exemptions offered solely to in-state breweries, with the intentions of having them eliminated for everyone. The SLA and Department of Taxation and Finance eventually conceded that giving preferential treatment to beer brewed in state was "unconstitutional." However instead of eliminating the taxes and fees for everyone, the state eliminated the exemption for everyone.

    The bottom-line is that all beer sold in New York state is now subject to state and city excise taxes (previously waived for the first 200,000 bbls; NY breweries only), and each individual brand sold in state will require an annual $150 registration fee (previously waived if the volume produced per brand was under 1,500 bbls; NY breweries only).

    In response to recent coverage by the press and bloggers, much of which has been less than favorable, the following statement was issued by the Shelton Brothers today.

  2. emannths

    emannths Savant (390) Massachusetts Sep 21, 2007

    Bingo.

    The previous arrangement was illegal. The increased costs are minuscule. NY brewers should quit their whining.
  3. meltroha

    meltroha Savant (270) Ohio Aug 16, 2011

    Thanks for talking down to everyone! I wasn't one of the people bashing you, but I am pretty sure that some of them may be of equal intellect as you. You should have just stopped distributing there, instead of trying to be ready yourself. I do not live in New York, so I really do not have a say in this, but I certainly will never drink your beer due to this. I am also sure that many people will also do the same, as we are a community.
  4. Awesome, more Cantillon, Fantome, 3F, Jolly Pumpkin, and Anchorage for all of us!

    Solid response by Shelton....very well-thought out and well-spoken.
  5. stupac2

    stupac2 Initiate (0) California Feb 22, 2011

    I never understood the negative reaction to the decision. The old situation was illegal and unfair, it's not like Shelton were bad guys for pointing that out.

    Also, lulz at the above. Do you honestly think people are going to stop drinking Cantillon because of this? Or that they won't buy the Westy bricks? Yeah right.
  6. meltroha

    meltroha Savant (270) Ohio Aug 16, 2011

    Crap, I just saw all you distribute. I will be drinking your beer, strike that last statement. I still think small breweries should be exempt, at least for what they sell in state. 200000 bbls may be high for the cut off, maybe like 100000 would be more appropriate
    beertunes and ShogoKawada like this.
  7. rlcoffey

    rlcoffey Savant (480) Kentucky Apr 20, 2004

    The state of NY can do that. But they cant do it for only small NY breweries.
  8. Todd

    Todd Founder (1,410) Colorado Aug 23, 1996 Staff Member

    Classic.
  9. There may have been a few snarky lines that crept in, but I have to agree with bigfnjoe and emannths— by and by, this seems like a pretty well thought-out and rational response to all the ragers.
    So the tax situation didn't work out the way they had intended (whoopsie-doodle). It certainly sucks, but I can't see it putting anybody out of business.
  10. cmmcdonn

    cmmcdonn Savant (350) Virginia Jun 21, 2009

    Is it wrong that I read the Brooklyn brewer part aloud with a terrible NY accent?

    No bonus? Forgedaboutit!
    avenuepub likes this.
  11. grandq

    grandq Aficionado (245) New York Jun 4, 2005

    The condescension in the Shelton's official response makes me want to boycott their beers even if their actions didn't.

    I get it, they contested an impediment to interstate commerce. But it bothers me that a middle-man importer from out of state - who don't incur the actual operating costs of creating a product in this expensive, heavily taxed state, to say nothing of the beer-specific fees and taxes - whinges on about leveling the playing field.
    halo21, raverjames, jacksback and 2 others like this.
  12. A few thoughts here:

    It's completely inappropriate for the negative backlash, particularly from professional brewers.

    That being said, I don't agree with him here. As an out of state business, you ACTIVELY CHOSE to do business in New York and likewise have the option of paying the fees or not. As a local New York brewery, you need to pay those fees for EVERY SINGLE BEER you produce, regardless of where it goes. The mandatory nature of it for local businesses makes it far more imposing.

    I also don't know much about interstate commerce law, but I don't see why a State can't offer a tax exemption to local businesses to promote the growth of small business and lower prices on local goods. Tariffs have been used to do this internationally since the dawn of commerce.

    I don't blame Shelton Brothers for this situation, I blame New York State. However, this situation feels a lot like a kid trying to get out of doing his homework by pointing to his friend and saying, "He didn't do it either!" That never ends in no homework. It ends in spoiling it for everyone and LOTS of tension.

    Just my two cents on the issue.
  13. Careful there. The last poster who threatened a boycott changed his mind in only 8 minutes after looking up what he'd be boycotting.
  14. leedorham

    leedorham Champion (835) Washington Apr 27, 2006

    I don't shop at Wal Mart, unless I need something they sell.
  15. codasnap52

    codasnap52 Savant (305) Connecticut Jan 24, 2008

    That is exactly what I was thinking. Although Shelton Bros provides the beer industry and the brewers they represent with an important service, they are indeed just middle-men in their business. I appreciate the hard work they put into their jobs, and selling quality beer from far places to our markets is commendable, but they exist to MAKE money. Can't fault them for that, but if this issue was brought up initially by a little mom and pop brewery, I think we all might have had a slightly different reaction.
    sliverX likes this.
  16. Sesmu

    Sesmu Savant (280) Massachusetts Feb 28, 2007

    I don't see anything condescending in Sheltons' response. If anything, I think they were being sarcastic towards the well-wishers, which is understandable.

    Personally, I don't understand it either, but if this is the case, it is what it is. The bottom line is the ball was in NY State Administration's court and they chose to go with this decision.

    If they want to support small breweries, in and out of state, as I understand it they can make an exemption by size. If they want to support local business, I'm sure there are legal ways to do it. Even from the beer tax they collect they can set up some sort of a fund to support small local businesses, including breweries, or something to that extent. But again, it's certainly not Sheltons' fault that NY State decided to tax everyone.
  17. stupac2

    stupac2 Initiate (0) California Feb 22, 2011

    Personally, I judge things like this on the merits. The fact that it was Shelton who got the unconstitutional tax break repealed is completely irrelevant to how I react to it. I cannot understand why it matters to anyone.
    beerindex likes this.
  18. Bluecane

    Bluecane Initiate (0) New York Dec 30, 2011

    Agreed. There's just 1 point that seems disingenuous; they complain about the impact of the fees on them -- even aside from the fact that they're clearly unconstitutional -- but then they tell the complaining breweries to suck it up because it's no big deal. You can't really have it both ways.

    Ultimately, this was the correct legal decision. But, I'm not as sure that the Shelton Brothers and other similarly-situated brewers/distributors have my emotional support.
  19. emannths

    emannths Savant (390) Massachusetts Sep 21, 2007

    Though it's been decided law since about the existence of the US Constitution, the courts have never really explained why Congress's power to regulate interstate trade restricts the States' powers to regulate it through import tariffs. The elimination of such tariffs was a major goal in the switch from the Articles of Confederation to the Constitution, but it's unclear why Congress doesn't need to take legislative action to create laws limiting the States' powers to regulate interstate trade. Lots more discussion in this long article.

    Nonetheless, there's 200+ years of legal precedent that says it's unconstitutional for states to favor commerce of in-state goods over imported ones.
  20. Because the Commerce Clause in conjunction w/ the notion of equal protection in the U.S. Constitution (14th amendment) prohibits acts in restraint of interstate commerce. "No state shall deny to any person within its jurisdiction the equal protection of the laws."

    International tariffs are not interstate commerce. Hence the difference.
  21. emannths

    emannths Savant (390) Massachusetts Sep 21, 2007

    I suspect that section is there to explain that the reason they challenged the registration law was because it had a relatively large impact on them as compared to NYS brewers. They may be trying to head off the complaint that they filed the suit to get the fee imposed on NYS brewers as opposed to having it lifted from importers.
  22. I'm guessing its because of the Supremacy clause and the notion of pre-emption.
    decadance likes this.
  23. stupac2

    stupac2 Initiate (0) California Feb 22, 2011

    If you actually read the whole thing (I admit it's long, but still) you're see that they say that they pay a significant amount of registration fees while making up a much, much smaller percentage of total sales. This is because Shelton has a metric crapton of brands, but basically none are high volume. Because they need to register each brand, they end up getting hit a lot harder by that fee than a brewery that makes many fewer brands and sells more of each.
    Beerandraiderfan likes this.
  24. unlike the brooklyn brewing charity foundation?
    beerindex, Kgristoff, sliverX and 2 others like this.
  25. grandq

    grandq Aficionado (245) New York Jun 4, 2005

    I'm well aware of their portfolio and am happy to support my local brewers rather than trainspot the latest from trend from Europe. Certainly some old standbys I'd be sad to give up, but there's enough variety from the great brewers here and nearby, and other importers bringing in quality product from elsewhere
    halo21 and jimmy666 like this.
  26. God, I love Beer Advocate. You log on to learn about beer, and get a bonus Constitutional law discussion.

    (being serious, not snarky. This discussion is interesting, & completely out of my knowledge base)
    Retail1LO and Kgristoff like this.
  27. emannths

    emannths Savant (390) Massachusetts Sep 21, 2007

    Not to make this Constitutional Advocate or anything, but the question arises because Section 10 on the Constitution explicitly says that the States can't do certain things that Congress is empowered to do in Section 8 (e.g., it says that States can't coin money). Section 10 says nothing about restricting the States' ability to regulate interstate commerce.

    The Equal Protection Clause (1868) post-dates relevant Commerce Clause precedent that finds states cannot tax imports from other states. Additionally, in post-1868 cases, the 14th Amendment is usually not cited in connection with the Commerce Clause this precedent.
  28. Way to avoid the latest trend. . . by supporting local brewers. . .and by not purchasing "old standbys".

    Um, . . .
  29. decadance

    decadance Savant (385) Texas Mar 14, 2010

    As a Con Law prof (undergraduate) I absolutely love this.
  30. Please don't take my statement to mean you didn't have a legitimate question(s).

    There's plenty of explicit things in the Constitution that caselaw determines isn't the case (1st amendment, Congress shall make "no law abridging" . . . there's plenty of time/place/manner restrictions for example, completely contrary to the verbage "NO" law. . .). And then there's the opposite. . . right to privacy? Nowhere in the Constitution. Courts made it up last century as a constitutional right.

    But the ability to regulate commerce IS in Section 8 . . .so I don't understand where you're getting confused. Section 10 says state's can't do what Congress can in section 8, section 8 says congress can.

    The 14th amendment involves everything involving States and federal rights, re: incorporation.
  31. GarrettOliver

    GarrettOliver Initiate (0) New York Jul 25, 2003

    Well, well, well. I have just been made aware of this thread. Let me just make a few points here. I am not a lawyer like Mr. Shelton, so I cannot claim to have any direct knowledge of what effects these tax law changes will have. I also have nothing to do with legislative issues or dealings with political figures - I make beer. I argued to Mr. Shelton, in a private email, that perhaps he should not be doing things that will have negative effects on small breweries.

    I pointed out that I like many of the beers he imports, that I have helped promote them (as most of us have, in some way or other), and that I've poured them in numerous tastings. Why, I wondered - talking, as I thought I was, to him alone - would he want to do a thing like this? Even if his statements regarding tax law are correct (and I have no idea whether they are), many states have situations that in some way favor in-state brewers. Frankly, it never occurred to me to think of them as unfair. I will not go down this path and print bits and pieces of Mr. Shelton's response; I would, however, characterize it as inflammatory. Mr. Shelton and I have had many heated arguments, often to the wee hours, all over foreign capitols; it's a running joke at this point.

    I will also say that I have not, with anyone, anywhere, discussed, mentioned, or alluded to this issue. Nor have I read any of these blogs he speaks of. Did I ask Mr. Shelton "WTF"? Yes, I certainly did. I did not expect to find my comments to him characterized in the press; I thought I was talking to Mr. Shelton. But then again, I'm an adult, and I do read the news, and I should know better - people do these things. And, the more I think of it, in this situation, that makes me the idiot here. Mr. Shelton is far smarter, and knows exactly what he's doing.
    halo21, dc55110, bugdoc and 21 others like this.
  32. grandq

    grandq Aficionado (245) New York Jun 4, 2005

    I don't see what was "um" worthy about my statement, perhaps I wasn't clear. I have some I've frequently purchased from Sheltons' portfolio, they have a couple English Bitters and Milds, styles I find hard to locate from other sources, thus personal "standbys."

    But I would willingly forgo them, along with their trendy, ticker-bait, "look how new and rare and hard to find our selection is" and stick to my local brewers.
  33. Because it affects his bottom line and everyone should be treated equally?
    beerindex likes this.
  34. Bluecane

    Bluecane Initiate (0) New York Dec 30, 2011

    Right. But a registration law, requiring all distributors to pay a given fee for each brand they sell probably wouldn't be unconstitutional, at least not on its face.
  35. I just didn't understand how not buying the products you've been buying as old standbys was avoiding a trend.

    Whereas, "support your local ____" you were going to adhere to seemed to be a more prevalent trend than purchasing old standbys.
  36. Bluecane

    Bluecane Initiate (0) New York Dec 30, 2011

    I did read it. But, as I said above, a rule that taxes per brand, without discriminating against out-of-state brewers, would not be facially unconstitutional, since it's not discriminatory on its face. I don't know what New York's State Constitution looks like, but the taxing power is usually broad, and I would expect such a law to be subject to merely rational basis review, which basically no law ever fails (so as to be unconstitutional).
  37. grandq

    grandq Aficionado (245) New York Jun 4, 2005

    It was worded a bit offhand, I didn't know I needed to carefully parse the semantics before posting. I have "standbys" I regularly buy from both local and far flung breweries, a couple of which are Shelton. I am annoyed with Shelton for damaging my local brewing scene and for their petulant response, so I will cut out what portion I buy from them. The "trend" comment was in reference to my view of their business model: long tail, low volume, putting an emphasis on rarity
  38. Bluecane

    Bluecane Initiate (0) New York Dec 30, 2011

    Basically, I'm less inclined to feel bad because it's just an incident of their business, another cost that has to be considered among the others. They were certainly legally correct in their challenge to it; but, even if the law were structured so as to be constitutional, I don't feel particularly bad that their business model exposes them to an increased cost relative to other business models.
    grandq likes this.
  39. emannths

    emannths Savant (390) Massachusetts Sep 21, 2007

    Section 10 says States can't do specific things. There are powers given to Congress in Sec 8 that aren't mentioned in Sec 10. Nowhere does it say that Sec 8 powers are entirely exclusive to Congress.

    Sec 10:
  40. You don't need to do anything. The general notion, not the semantical value was what didn't make sense (to me).

    Can you point me to this "damage" you speak of? It sounds like a claim not backed by evidence, or that is speculative, but I'm not in New York, maybe there have been lots of documented layoffs and breweries closing their doors specifically over this already that I'm not aware of.
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