Federal Excise Tax
The American beer industry contributes nearly $350 billion to our economy and supports 2.23 million American jobs. However, on average, more than 40 percent of what American beer drinkers pay for a beer goes toward federal, state and local taxes—from excise to consumption to sales taxes, as well as the normal business taxes. That makes taxes the most expensive ingredient in beer today.
Beer Institute Position
The Beer Institute has been working to find common ground to unite the brewing industry behind one federal excise tax relief bill. The Craft Beverage Modernization and Tax Reform Act of 2017 accomplishes this goal. The bill (S.236/H.R. 747) was introduced in the 115th Congress by Senators Ron Wyden (D-OR) and Roy Blunt (R-MO) and Representatives Erik Paulsen (R-MN) and Ron Kind (D-WI). The beer provisions of the bill provide fair, equitable and comprehensive reform of the federal excise tax for all brewers and beer importers. We support legislation that serves all beer drinkers, no matter what brand they choose. Beer tax reform must be comprehensive and should remove barriers to growth in the industry, encouraging capital and workforce investment through fair, equitable and comprehensive reform for all brewers and beer importers.
Notably, the Craft Beverage Modernization and Tax Reform Act:
- Reduces the federal excise tax to $3.50 per barrel on the first 60,000 barrels for domestic brewers producing fewer than 2 million barrels annually;
- Reduces the federal excise tax to $16 per barrel on the first 6 million barrels for all other brewers and all beer importers; and
- Keeps the excise tax at the current $18 per barrel rate for barrelage over 6 million.In addition to the excise tax adjustments offered in the bill.
The proposal also includes:
- A provision that seeks to streamline bookkeeping processes for small brewers and brew pubs;
- Language that allows for greater collaboration between unaffiliated brewers; and
- Verbiage that simplifies the TTB processes for bonding requirements and adding beer ingredients such as adjuncts.
The Craft Beverage Modernization and Tax Reform Act also reinforces the differences between beer and hard liquor by continuing to tax them differently. We know that beer and hard liquor are not made, served or consumed the same way, so there should be independent tax and regulatory standards. These are points the Beer Institute has made forcefully to lawmakers and regulators and will continue to make to them.
History of the Federal Excise Tax on Beer
Existing federal excise taxes on beer are set at a rate of $18/barrel for brewers of more than 2 million barrels (62 million gallons, or the equivalent of 110 million six-packs) and all beer importers. Since the late 1970s, growth in the small brewing sector has been encouraged by tax credits offered to brewers which produce less than 2 million barrels, cutting their excise tax rate to $7/barrel on the first 60,000 barrels and allowing them a far lower overall effective tax rate on all barrels up to 2 million.
Today there are more than 4,000 breweries in the United States. More than 90 percent of all federally-permitted brewers produce fewer than 7,143 barrels annually, meeting the definition of a small brewer set by the Alcohol and Tobacco Tax and Trade Bureau (TTB). Many of those small brewers are brewpubs, which are restaurants with brewing operations designed to sell locally. As an industry, we’re proud to do our part in keeping America great. But the truth is, we’re doing more than our fair share, shouldering a higher tax burden than just about every other consumer product. Research shows that the tax burden borne by beer drinkers is more than 68 percent higher than for the average purchase made in the U.S.
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