America’s brewers and beer importers are expected to receive a temporary tax break as part of the recent tax reform package passed by Congress. The Tax Cuts and Jobs Act, passed in December 2017, included a provision for a temporary reduction in the federal excise taxes on beer.
According to The Beer Institute, the tax break is a much-needed relief to an industry that supports more than 2.2 million American jobs and generates more than $350 billion in economic activity.
Part IX – Subpart A, entitled, “Craft Beverage Modernization and Tax Reform Act” (CBMTRA) spells out the details of the lower taxes on beer, wine, and spirits. Here are just a few changes:
- Lowers the excise tax rate on beer to $16 per barrel on the first six million barrels brewed by the brewer or imported by the importer (down from $18 per barrel)
- Allows the transfer of beer between bonded facilities without payment of tax if specified requirements are met.
- Modifies the credit against the excise tax on wine for small domestic producers for 2018 and 2019, and
- Reduces the excise tax rate for certain distilled spirits in 2018 and 2019.
The cut in excise tax will mean less revenue for the federal government, increased profits for alcohol producers, and possibly lower prices for consumers.
To put this in perspective, according to the Congressional Budget Office, the federal government collected $9.9 billion in revenue from excise taxes on distilled spirits, beer, and wine in 2015. Since alcohol producers are responsible for this tax, organizations like The Brewers Association predicts small independent breweries will invest millions of dollars back into their businesses.
However, if this is the case then the benefits of the tax cut might not be passed onto the end consumer. According to The Tax Foundation, in the United States, 40% of the retail price of beer consist of taxes on the production, distribution, and the sale of beer.
Combined with state and local excise tax and sales tax, the cost of beer varies from state to state. Even if some consumers benefit from a lower price at the checkout counter other consumers might see a higher price tag depending on where they live.
Although the tax break is a big win for small beer, wine, and spirit producers, it should be noted that the new law is only temporary. Lobbyists are already pushing for CBMTRA to be made permanent and implore small business owners impacted by the new legislation to contact their state’s representatives.
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