Small Brew Act

From the article:

Once a brewer reaches an annual barrelage of 2million/yr (AB, MC, BBC, Pabst, Yuengling) they pay the full $18 per barrel on all their production.

The Federal Excise tax (the subject of this proposed act) is not levied on a percentage basis, it is paid at a per barrel rate by the brewery. A "macro" barrel of beer (say, 2 Budweiser ½ bbl. @ $63) retails for $126 which includes $18 excise tax paid, while a barrel of a craft beer from a brewery smaller than 60k bbl/yr (the vast major of "craft" breweries in the US) which retails for $450 (6 sixtels @ $75) includes $7 FET.

So, using those broad examples - 14% of the retail cost of a "macrobrewer's" beer is FET while only about 1.5% of the retail cost of a small brewer's beer is FET.

Or, as the TTB examples note - if you buy economy macro beer (Natural Light, Keystone, etc) that averages 50¢ a can - 10% of that is the FET. Buy a single bottle of a "craft" beer from an under 60k bbl/yr brewery for $2, and 1% of that is FET.

Obviously, the same is roughly true for the brewers prices' charged to their distributors, and the distributors' wholesale prices to retailers, but the percentages are going vary, as they will be due to different "per ounce" prices for different packages (kegs, 12 oz. bottles, 22 oz. bombers) and normal retail quantity discounts (single vs sixpacks vs cases vs kegs).

 

Like all tax situations its usually not a fair deal. Something I do applaud in my state of MD, is they are finally waking up here. Recently the state opened the doors for our small brewers and wineries. Locally they have created farm brewery licensing. It provides favorable tax treatment and easier start up. However, to qualify a certain percaintage of your grain bill or ingredient must be derived from crops within the state. The percentage is pretty low so its not a monopoly.

Just north of me in DE, brewers are everywhere. Why, because DE, says come here and prosper. I guess my point is some states have figured this out, however the Feds are still trying to get every last drop of blood.

 

2¢ a bottle FET on craft beer really qualifies as "every last drop of blood"?

Even for macro brewers, the effective FET rate, based on the typical retail price of the beer, has gone down since Repeal. (Not many taxes one can that about).

After full Repeal with the passage of the 21st Amendment the Beer FET was $6/barrel for "full strength" (not 3.2) beer. A bottle of Budweiser was typically 15¢ - so less than 2¢ was FET but that was more than 10% of the retail price.

Today, on a bottle of 75¢ Budweiser (based on a $4.50 sixpack), AB paid 5¢ FET - or about 6.5% of the retail price.

I'd be happy if my tax rate was less than my grandfathers'.

 

My understanding is that the main policy problem microbreweries face involves state laws related to distribution, not federal excise taxes. Is that not correct?

 

It used to be closer - the original "reduced rate" for small brewers' first 60k of $7/bbl was created in the 1970s when the full rate was still $9. When the Excise Tax of alcoholic beverages went up in 1990 and the full rate on beer doubled to $18/bbl, the reduced rate stayed the same.

 

That was the point of my post. The FET, is an excise tax paid by us. It does nothing to help a Brewer. He builds the cost into the product. In economics their should be what's called a tax incident, however it is me an you paying.

The states are wising up, if they can make it lucrative to brew, what happens? More production,sales= more revenue in tax collected.

Also in any consumable product if a tax or raw material drops, we are likely to never see the benefits. Oil has been cheap for months, my wife's Tupperware still costs the same.

 

Exactly!

 

would love to see an article about this that isn't written by that media outlet.

 

Well, you could read the two press releases from the two brewers' organization on this very topic that Todd posted at
http://www.beeradvocate.com/community/threads/statement-from-the-brewers-association-on-introduction-of-beer-act.255386

 

cheers!

 

I well remember lobbying a state legislator on the proposed Pop the Cap initiative (N.C. 2003-2005), which would raise the allowable alcohol limit to be above 6%. He was very opposed to the idea on religious and social grounds. He had owned a mill in western N.C. and said that on Mondays his employees wouldn't show up because they were drunk. He said raising the alcohol limit would only make things worse. I changed the subject to revenue and he was all ears and found a way to support the expansion of business.

 

It almost doesn't pay to grow a business. I know in NM there were a few brewers upset at the unbalanced nature of the tax rates

For NM:
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$0.08 per gallon of microbeer for sales up to 10,000 barrels (310,000 gallons)
$0.28 per gallon of microbeer for sales from 10,001 to 14,999 barrels (310,031 to 464,969 gallons)
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Beyond 15k barrels, you are no longer classified as a microbrewer, and I believe the rate is even high. I think only Santa Fe Brewing Company is at this level.

There was talks of breweries leaving and opening up distribution plants in neighboring states.

 

Not sure how that would avoid any tax since State Excise Tax on beer is paid to the state where the beer is sold (in NM by the wholesaler), not to the state where it is brewed.

 

NPR did a piece on the bills in Congress, on All Things Considered. Naturally, to get the small brewery perspective they visited Right Proper, the goto brewery for public radio reporters around here.

 

http://www.npr.org/blogs/thesalt/20...ft-beer-tax-battle-is-brewing-on-capitol-hill

 

In Canada, the NDP (National Democratic Party) is proposing a similar act at the Federal level. I'm a bit skeptical of how this would play out but at this point, anything is better than Stephen Harper

 

In the competing bill, the Fair Beer Act where they want to completely eliminate the tax on the first 7,143 barrels produced, I want to know how they arrived at that exact number. Got an answer on that one @jesskidden ?