Cape Cod Brewing Talks Beer Tax

From Todd Marcus, Brewmaster of Cape Cod Beer

While I am typically not eager to mix my beer with Politics, I think there is a lot of talk lately about Beer & Taxes, and in the name of having informed consumers, I thought I might share with you a bit of knowledge and our thoughts on Beer and Taxes in the state of Massachusetts…and the United States.

How Beer is TAXED
By States & the Feds Every brewery in the United States pays taxes on the beer it produces. Not an income tax or payroll tax or property tax – which we pay too – but an excise tax on the production of beer. Very few producers/manufacturers are required to pay this type of excise tax – but breweries are one of them.

Massachusetts charges us $0.11 on every gallon we make. Last year (2008) we made 93,000 gallons of beer, which equates to $10,230 in beer tax paid to the state of Massachusetts. Find your state’s beer tax rate here.

We also pay the US Government $0.23 per gallon of beer produced – which in 2008 was $21,390.That means in total taxes paid on the PRODUCTION of BEER for 2008, Cape Cod Beer paid over $31,000.

Sales Tax? Beer Tax? What does it all mean?
Currently there is a Sales Tax Exemption on Alcohol in Massachusetts.

So that means when you go to the package store or brewery, there is no sales tax applied to the purchase of your beer. Most people think this is reasonable given that the beer excise tax is a good portion of the cost of the beer.

But now the Massachusetts legislature is considering repealing the sales tax exeption on alcohol. This is being considered while they are also considering raising the state sales tax from 5% to 6.25%.

This would mean that you would now pay an additional 6.25% at the register when buying beer. For our regular growler customers – that would mean refills would go up by at least 50 cents. People buying personal kegs would have to pay an additional $5 per keg.

It is important to understand this is not money that We – Cape Cod Beer – gets to keep – it is 100% money to be handed over to the state in the form of taxes. This is frustrating to us – as we have made every attempt to keep our growler prices low – even in the midst of rising fuel and raw materials costs…but if this happens the cost of beer will increase with no benefit to us at all!

WAIT….IT GETS WORSE…
Federal Tax Increases Considered

Over the last year, small brewers across America have joined forces via the Brewer’s Association to lobby to LOWER federal excise tax. This is Bill S. 1058 in the Senate or bill HR 836 in the House of Representatives. This bill asks to reduce the small brewer excise tax from $7.00/barrel to $3.50/barrel on the first 60,000 barrels, helping the smallest of brewers get out from under this oppressive tax.

Unfortunately at the same time, the Senate Finance Committee in Washington, DC has held hearings on, and is currently deliberating the merits of a proposal to increase and equalize the excise tax for alcoholic beverages in order to fund healthcare reform. This proposal would triple the excise tax for 4.5% ABV beer and impose even higher excise tax rates for higher ABV beers. (Note: most of our beers are over 4.5% ABV)

Tripling (or more) the tax on beer, and doing so by ABV would have a catastrophic effect on small brewers like Cape Cod Beer. Aside from inflating the cost & price of the beer, the cost of testing and compliance would drive many small brewers out of business.

Admittedly – all this talk scares us a bit. Making beer at the level we do is hard work. We sell our beer at a fair price, and have reinvested pretty much every dollar we have earned. Everything costs more every year – gas – grain – hops – liability insurance – health insurance..you know the drill. And while I am more than happy to do my part to get this state and our country back on the road to recovery – I am feeling like our industry is being taken advantage of…and certainly know that the smallest of us brewers will be the most greatly affected. That’s the scary part! What this country needs now is not more big businesses..but more small businesses…like brewers, and bakers, and farmers, and entrepreneurs..and increased sales tax and excise taxes certainly do not foster that entrepreneurial environment!

Thank you for taking time to learn a bit more about how these tax changes will effect your local brewery. There are links along the side of this email about how to get involved, if you so desire. We’d certainly appreciate your support!

Sincerely,

Todd Marcus

To Keep Massachussets Beer Tax Free
For Residents of MA – Contact Your Locally Elected Officials – Letter Template