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"Shelton Brothers lawsuit costs New York breweries millions" -- Brew York, New York

Discussion in 'Beer News' started by Todd, Apr 24, 2012.

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  1. Todd

    Todd Founder (1,430) Colorado Aug 23, 1996 Staff Member

    Update (4/26): Brew York, New York has since edited the title of his blog and some of its contents.

    As the article has change, I'm locking this down.

    ###

    Just saw this on Brew York, New York's blog:
    Read the rest:
    http://brewyorknewyork.com/post/21737990870/shelton-brothers-lawsuit-costs-new-york-breweries

    It continues to explain the impact to New York brewers and even our collaborative Beer for Beasts charity event with Sixpoint in Brooklyn.

    Other resources:
    Shelton v New York State Liq. Auth.
    Censorship Case Leads to Beer Tax Overhaul

    I've yet to fully explore all of this or form an opinion either way. I also hope to talk to the Shelton Brothers for their take.

    In the meantime ... Thoughts? More info? Please post.
  2. lurchingbeast

    lurchingbeast Initiate (0) Illinois Feb 19, 2009

    Sounds like Shelton was trying to point out the loop hole to benefit themselves and not to hurt the small NY brewers. State of NY closed said loophole for everyone.

    What is up with your state government, NY? No MMA and now this?
    pwoody11, Horbar and Beerandraiderfan like this.
  3. UncleJimbo

    UncleJimbo Site Editor (945) Massachusetts Sep 11, 2002 Staff Member

    Sounds like NY brewers were saving a lot of money on taxes and fees. Were the beers correspondingly lower in price to consumers?
  4. stupac2

    stupac2 Initiate (0) California Feb 22, 2011

    Hahahahahahaha.

    I get that everyone loves it when they get special loopholes so they pay less in taxes, but it doesn't really make sense for the state of New York to subsidize local breweries over out-of-state ones. So I'm not going to cry for the NY breweries affected.
  5. TheBigEast

    TheBigEast Savant (260) New York Oct 21, 2004

    This is enormous news for NYS beer enthusiasts. It will mean less beer choice and selection and may cause some potential breweries to be to scuttle their plans and cause others to shut down. It made sense to give breaks to small breweries who do not compete on a level playing field with the big boys. The label costs are meaningless to them. They are far from meaningless to small breweries. And the excise tax will place a large burden on small breweries. How would you like it if you woke up one day and the cost of doing business for your small business went up dramatically.

    If NYS truly cares about small business in this state, they will have to get involved promptly. We'll see what happens. It's unknown what the ultimate impact of this decision will be at the current time. What is not unknown is that this decision helps no one but the big boys.
    Horbar likes this.
  6. The Shelton Bros: Making beer more expensive since the 1990's
    grandq, yamar68, Pnell316 and 11 others like this.
  7. merc7186

    merc7186 Savant (345) New York Dec 5, 2010

    As a craft beer consumer who lives in NYS...well, it is NYS...they are broke and handle their finances poorly. Any additional income that they suck out of an individual is great for them (in their minds). With that being said, any NY brewer that now has to pay this tax and will force them to close (as stated earlier) if probably a piss poor brewer to begin with and will not be missed. On the other hand, these new taxes will be built into the costs of beer and passed onto Joe Consumer. Cheers to me and my higher priced beer.
  8. cosmicevan

    cosmicevan Champion (800) New York Dec 13, 2009

    Total BS. screw shelton. Your markups weren't enough on the beers you sell here? They are cheaper to order direct from overseas with that brutal shipping bill. Tax breaks for small business that are supportingnyour economy are a good thing. It stimulates the economy and creates jobs. Nothing wrong with helping out those who already pay our ridiculous taxes. I just wish that shelton didn't handle some breweries that I love, but I disagree with this. Hopefully this won't shut down any of the up and comers who are actually making good beer.
    VonZipper likes this.
  9. This seems like a case of the Law of Unintended Consequences, at least to me. If I lived in NYS I'd be more upset with the SLA than with Shelton Bros.
  10. stupac2

    stupac2 Initiate (0) California Feb 22, 2011

    Does anyone seriously believe this made beer cheaper on their end?
  11. Perhaps they were hoping that the state would level the playing field by eliminating the tax for out of state beers instead of extending said tax to in-state ones. Pretty naive.
  12. UncleJimbo

    UncleJimbo Site Editor (945) Massachusetts Sep 11, 2002 Staff Member

    Was the tax break for in-state breweries illegal? Is that why the state is revoking it? Or did the state decide it was illegal to offer the break only to in-state breweries? Or did the NY State Liquor Authority simply say "Frack it" and get rid all the breaks for the hell of it?
  13. stupac2

    stupac2 Initiate (0) California Feb 22, 2011

    A judge declared that the tax break for only in-state brewers was unconstitutional.
  14. jmw

    jmw Savant (430) North Carolina Feb 4, 2009

    There it is.
    SB's initial complaint was legit (nobody underage is going to want a Criminally Bad Elf even if they could get it). It was unfortunate that SLA looked at another aspect of the situation and said "oh, you know we should change that...."
  15. emannths

    emannths Savant (390) Massachusetts Sep 21, 2007

    NY could have circumvented this ruling allowing the tax/fee reductions to be enjoyed by all small brewers that sell beer in NY, or by all small brewers that brew beer in NY (regardless of where it's consumed). They chose not to.

    This isn't about small businesses. It's about being a homer.

    Also, these fees are still pocket change. Even in the more extreme example of the brewery that must pay $8.06 in excise tax per barrel, that amounts to a grand total of $0.15 per 6pk. That's about a 1.5% increase in price for a typical craft 6pk. The more typical case of a $4.34/bbl excise is $0.08/6pk.

    Really? All this griping over eight cents?
    Vav likes this.
  16. UncleJimbo

    UncleJimbo Site Editor (945) Massachusetts Sep 11, 2002 Staff Member

    So, not Shelton Bros. fault. The NYSLA could have gone the other way, not charging the fees & taxes to similar out-of-state small breweries, but they did not.
  17. stupac2

    stupac2 Initiate (0) California Feb 22, 2011

    Well, it's their fault insofar as they brought the lawsuit that resulted in the change, and the result they wanted was either "everyone gets a break" or "no one gets a break" and the former wasn't going to happen, NY wasn't going to give up that much tax revenue for no reason.

    That said, I think blaming them for a law that just distorted the market for no real reason and probably didn't actually lower prices for consumers is sorta silly.

    (Incidentally, if you're wondering why I don't think it lowered prices for consumers, my thought process is that most craft beer sold in NY is produced outside of NY, just because most beer is produced outside of NY. NY breweries price their beers based on what the market can support, which will be dominated by the out-of-state breweries, so their prices don't actually factor in the tax break. What the tax break did was make them more money, which, best case scenario, just allowed them to expand faster. You can argue about whether or not this is a good thing, but I think most people can agree that allowing the state to distort the market for no real reason is stupid. Also, I am definitely open to being proved wrong about this, if there exists some way to demonstrate that in-state beer is cheaper than out-of-state beer.)
  18. madawhy

    madawhy Aficionado (105) New York Sep 30, 2011

    I believe it did to some extent. I am currently(maybe not after this crap) able to buy a 64oz growler of local beer for about $12 +/- $1 or $2 at a retailer, not the brewery. That to me is a great deal to me considering how much all of the other beers are on tap at retail stores, usually roughly $14-$16 for seasonal or regular lineup stuff.

    But whatever, just give New York more cantillion and I won't care...
  19. stupac2

    stupac2 Initiate (0) California Feb 22, 2011

    No, the Cantillon is all MINE.

    Incidentally, I have no idea if that price is reasonable because CA doesn't allow off-site growler fills. Who's state has stupid beer laws NOW??
  20. madawhy

    madawhy Aficionado (105) New York Sep 30, 2011

    Touche sir, touche....
    stupac2 likes this.
  21. TheBigEast

    TheBigEast Savant (260) New York Oct 21, 2004

    I'd disagree with one point merc - a small business just like other business has a financial plan in place that allows them to survive and thrive in the marketplace. If one day your whole financial situation was thrown a huge curveball and your costs increased significantly to run your business, it is not easy to make immediate changes to overcome this. Particularly the smaller you are. Responsible brewers will be caught up in this as well.

    If the breweries had been given a reasonable lead time to make plans to adapt to this new situation, then they would be better able to cope with the impact the changes may have. As it is, they were given no lead time and now have to deal with the consequences.

    I hope this situation is resolved quickly and no significant impact is felt. But I'm not holding my breath.
  22. hoser

    hoser Savant (380) Alberta (Canada) Feb 17, 2003

    Go,Dan,Go!
  23. ChadQuest

    ChadQuest Initiate (0) Illinois Mar 4, 2009

    That is it! lets all stop buying any Cantiloon from the shelf in protest.

    yes, stop doing that everyone.....
    admiralcrunch, pwoody11 and Jnorton00 like this.
  24. cavedave

    cavedave Champion (930) New York Mar 12, 2009

    Bravo New York State! Making it impossible for its business community to conduct business in the state since Nelson Rockefeller left office. My state sucks ass. Just waiting for them to outlaw growler fills, the only, and I do mean the only, good beer-related thing about this state.

    And as for the money grubbing, Silas Marner wannabe's who control the flow of some of my favorite beers, and jack the prices to where etregourmet and belgiuminabottle shipping from Europe ferpittysakes are almost equal, all I gotta say, ala yoda, is choke on your victory I hope you do. Can't wait for you to lose all these contracts that the breweries themselves also can't wait to do business elsewhere. I have never met a retailer who had one nice thing to say about them, and plenty to say that would be too raw even for an Eddie Murphy routine.
    mschofield likes this.
  25. The way I read the story, NY State structured it's excise tax on beer specifically to HELP it's small breweries and only changed that upon the threat of a lawsuit from an out-of-state importer knowing that they would lose in the courts.

    As part of the resolution of the lawsuit, the State Liquor Authority and the Department of Taxation and Finance conceded that that the two exemptions discussed above are unconstitutional. The agencies’ decision was based on a long line of United States Supreme Court decisions that prohibit a state from giving preferential treatment to items produced in the state. STATE OF NEW YORK LIQUOR AUTHORITY

    So it appears your argument is with the SCOTUS and the US Constitution. ;)
  26. cavedave

    cavedave Champion (930) New York Mar 12, 2009

    I am sure you are right.

    That doesn't change the validity of one thing I said in my post, which references things in a general way, albeit in a forum discussing a particular ruling.

    New York citizens should be pardoned for having this chip on shoulder, even when, as you point out, it comes evident at imperfect times. I have watched businesses escaping the unfriendly business climate, rampant corruption, and stupidly high tax rates of NYS for much of my adult life. Oh what a proud day for all NY'ers when we finally climbed past NJ and Conn. to the top of the "most highly taxed state in the country" heap.;)
    ant880 likes this.
  27. Urbancaver

    Urbancaver Advocate (520) Ohio Nov 13, 2009

    It sucks that NY brewers now have to pay the same taxes and licensing fees as every other brewery in every other state...

    I'm not losing any sleep over it. Shelton Bros intentions weren't bad and the result will likely not mean a significant impact on breweries (other than a slight price increase potentially)
  28. The tax break for the in-state breweries would have meant a savings of 7¢ on a 64 oz. growler (13¢ in NYC). Even with the wholesaler's and retailer's mark-up on top of that, it would not add up to the difference of $2-4 for a growler fill of out-of-state beer.
  29. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    The SLA had the option to go the other way and not tax any small brewers. NY or PA or CA or wherever.
  30. ant880

    ant880 Advocate (635) New York Nov 7, 2010

    I couldnt agree with you more...sure, as some of the BAs have calculated, the price increases may be minimal but the bottom line is it is ANOTHER price increase. I live in the 4th highest taxed county in the country and work in Manhattan where a salad and a bottle of water for lunch will run you $11. Add in things like $150 parking tickets, some of the highest gas and car insurance costs in the nation and one of the most disfunctional state governments you could find (although Gov Cuomo has been reeling things in a bit) and it becomes overwhelming. Sorry about the rant, but it all makes that 7 cent increase feel like the straw that broke the camels back...especially when the only way left to forget about your cost of living is to drink more ;)
  31. Did they? (I can't find any suggestion of that in any of the articles right now).

    I would imagine that it would be up to the NY Legislature and the Governor to write, pass and sign a new law that would replace the one the NYSLA decided could not be defended in court due to it's unconstitutionality.

    Is there any other state that doesn't charge brewers, or even just small brewers, excise tax? It doesn't appear so.
    STATE TAX RATES ON BEER
  32. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    Good point. But I wouldnt think the SLA would have the power to get rid of the exception without the legislature either. Either way, its the legislatures job.
  33. MacNCheese

    MacNCheese Initiate (0) California Dec 10, 2011

    Is this why NY and Bos hate each other? And SB keeps most of the 'good stuff' to the eastern seaboard. Screw 'em.
  34. It was the NYSSC which invalidated the discount according to the NYS Dept. of Taxation memo:

    On March 28, 2012, the New York State Supreme Court, in Shelton v. NYS Liquor
    Authority & NYS Department of Taxation and Finance, issued an order that declared certain
    provisions of the Alcoholic Beverage Control Law and Tax Law unconstitutional and of no force
    and effect.
  35. emannths

    emannths Savant (390) Massachusetts Sep 21, 2007

    I'm not sure why they couldn't choose to strike out any portion of the law necessary to bring it into compliance. This could be as simple as striking striking out the "in this state" and/or the "having its...State" clause:
    This would preserve the exemption but not limit it only to in-state sales by in-state brewers.
  36. deadbody

    deadbody Savant (335) Minnesota May 10, 2010


    Multiple states have excise tax breaks for small Brewers. Brewers who brew less than 100k BBL/yr sell the first 25k MN excise tax free here. In wisconsin I think the threshhold is like 250k bbl/yr the first 50k are sold at half excise tax.

    NYS could have opened this up to all brewers.
  37. deadbody

    deadbody Savant (335) Minnesota May 10, 2010


    Problem is that the instate sales by instate brewers clause is nullified by the commerce clause. States cannot levy taxes against products from other states unless they tax products from their own state the same way (I worded that like shit but IANAL so deal, I do however know that is the intent of the law)
  38. emannths

    emannths Savant (390) Massachusetts Sep 21, 2007

    It should also be noted that NY had plenty of time to plan for this. The lawsuit was originally filed back in what, 2007? And there's very clear precedent that alcohol tax codes that favor in-state producers are unconstitutional. They had five years to work on an alternative tax code.
    Beerandraiderfan likes this.
  39. VonZipper

    VonZipper Savant (450) New York Feb 9, 2011

    Hopefully this won't hurt Barrier,in addition to other small brewers, and the move to the new brewery will help them make some more money(along with great beer.)
  40. zode

    zode Initiate (0) Massachusetts Mar 2, 2005


    Hey Todd you see that Brew York has detracted the headline for being defamatory;

    Editor’s Note: Due to complaints about the biased tone of the headline of this article, it has been changed. We apologize for the accusatory tone this piece may have taken with its previous title.
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