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Alcohol Excise Tax

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The production of alcohol results in the assessment of an excise tax.  In general, an excise tax is a tax on the manufacture, sale, or use of goods or the transfer of property.  So, in addition to incurring a sales tax when a consumer purchases alcohol from a retailer in most states, alcohol is actually taxed prior to the sale.  Unlike a sales tax, though, an excise tax is paid by the operation that produces the product.  For alcohol manufactures, a federal excise tax and potentially a state excise tax must be paid.  As a producer of alcohol products, it is important to understand when the operation becomes liable to the government for the excise taxes and when it must be paid.

Excise taxes at the federal level are paid to the Alcohol and Tobacco Tax and Trade Bureau through the National Revenue Center on returns filed for this purpose.  For bonded wine premises, taxation occurs when the wine is removed for consumption or sale.  This tax is imposed on producers or importers of wine that have less than 24 percent alcohol by volume.  Should a producer exceed this alcohol content, then the producer would classify the product as a distilled spirit and be taxed accordingly.  The tax rate on wine varies depending on the level of alcohol content and the total annual production of the winery.  As the alcohol content increases, so does the tax rate per wine gallon.  Additionally, there is a small domestic producers credit that applies to wineries who produce less than 250,000 wine gallons during the calendar year.  This credit applies to the first 100,000 wine gallons produced and is reduced for every 1,000 wine gallons produced by the winery over 150,000 in a calendar year.

Excise taxes on beer are imposed on all beer brewed or produced, and removed for consumption or sale, within the United States or imported into the United States.  The rate is $18 for every barrel containing not more than 31 gallons.  However, if a brewer produces not more than 2,000,000 barrels of beer during a calendar year, the per barrel rate of tax imposed shall be $7 on the first 60,000 barrels of beer which are removed for consumption or sale by the qualified small producer.

Distilled spirits are subjected to an excise tax by the federal government when produced or imported into the United States at a tax rate of $13.50 on each proof gallon.  The tax on distilled spirits actually attaches as soon as the substance exists, whether or not it is subsequently separated as pure or impure spirits.  A credit against this tax is allowed on each proof gallon of alcohol derived from eligible wine or eligible alcohol-containing flavors which do not exceed 2.5 percent of the finished product on a proof gallon basis.

In addition to the above federal taxes, each producer must determine if it is subject to excise taxes in the state or states where it operates.  Virtually every state assesses an excise tax on production of wine, beer, and distilled spirits.  The rates, however, vary widely.  We encourage you to call us with questions about excise taxes you have as an alcohol manufacturer.

We're Here to Help

Dear friends in the alcoholic beverage industry,

As we as an industry, nation and planet collectively try to navigate this unprecedented period the coronavirus has brought us, I’d like you to know that we at Craft Beverage Consultants (the other CBC!) are here to answer any question you may have (or not know you have) about not just surviving this time but positioning yourself to thrive as soon as social distancing measures allow your business to function at full capacity again.

If you schedule a free 60-minute phone or video conferencing consultation with me or any of my 11 highly specialized colleagues, we’ll help you figure out any of your immediate and/or longterm business needs, or “everything but the staffing,” as we like to say. We’re not high-pressure sales kind of people, especially these days, so you don’t have to worry about fending off annoying pitches. Make an appointment on our website or Facebook page, or just call us the old-fashioned way at 314-768-0220.

Our experts have a combined 150 years in the alcoholic beverage industry, with deep knowledge in everything from sales and distribution, production, and regulatory compliance to marketing, package design, event planning, IT, (social) media, hospitality, and even values-based executive coaching. 

For example, I can coach you through this season when chain accounts have canceled their spring resets and distributors have drastically cut orders. Our director of business strategy and compliance can save you money – now – on excise taxes, caution you to avoid naming your beers in ways that risk alienating your buyers (Wuhan Wheat? Coronavirus Cream Ale? Groan. No.), and secure TTB approval for the tastefully named beers you do make. Our creative director and web team can get your e-commerce site up and running and launch a social media campaign that keeps you top of mind for current and future customers. Our director of storytelling can put you in front of the press so you can tell your story to your community. 

Once you’re ready, we can look forward together. Now is the time to talk about post-virus. We all suspect the legal landscape to look different. But how? And how do you prepare yourself in a way that positions you to charge out of the gate ready to maximize the potential and profit of whatever the “new normal” turns out to be? Please get in touch so we can talk about it. 

And if you’d like to feel us out beforehand, join me as I answer all of your questions about sales and distro during my free “Ask Me Anything” presentation May 5 at  — p.m. Central on the Craft Beer Professionals Facebook page. Also, at 11 a.m. Central on April 28 Director of Storytelling, Communications and Public Relations Tara Nurin appears as a special guest of “Ask Me Anything” to share unique – and free – ways to use the media to your advantage now and going forward.

CBC’s roster includes local and regional clients like Epic Brewing, Logboat Brewing, Piney River Brewing, SudWerk Brewing and Common Cider Company.  The agency was founded in 2014 by Jacob and Beth Halls; I, Rick Laxague, joined as a partner in charge of sales, marketing and distribution consulting in 2019. 

I have close to 20 years of experience, a bulk of which was with Crescent Crown Distributing in Arizona. My last role there was Area Sales Manager for the dedicated craft beer division, coaching and leading a sales team to be nationally recognized. In early 2014 I helped take a regional brewery national as their Director of National Accounts and increase that segment of their business from 30,000 cases to almost 300,000 cases in two years, an increase that equates to $4.8 million in IRI dollar sales. 

Co-founder Jacob Halls brings 17 years of experience in regulatory compliance, business strategy, marketing and craft brand management to the company. In his former position as craft brand manager for the N.H. Scheppers Distributing Company in Columbia, Missouri, Jacob helped lead his team to winning the 2016 Distributor of the Year award from New Belgium and to a nomination for the Brewers Association’s Distributor of the Year award. Jacob is also the founder and director of the South East Craft Beer Fest/Sampling & Educational Conference. Beth Halls is Director of Business Operations and Coordinator of Charity Operations for the festivals and events run by CBC, such as the South East Craft Beer Fest, MO Bacon & Bourbon, and many more. 

Again, please reach out to me or my partners for anything. I’m at [email protected] and CBC can be reached at (314) 768-0220 or at craftbeverageconsultants.com.

I look forward to meeting/talking soon.

Sincerely,

Rick Laxague