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Davis Brown Tax Law Blog

Tax Law Blog: Tapping into Beer Tax Reform - May 18, 2015

Unknowing to the casual beer drinker, at the bottom of your pint glass, a tax battle is brewing. As the craft beer industry continues to boom, the margins of many craft breweries have continued to tighten. Representatives of the industry have taken to Congress to seek tax breaks for these small brewers, but the large, multinational beer giants also want a pour from the tax-break tap.


Currently, all brewers pay a federal excise tax, per 31-gallon barrel (about 248 pints), based on the volume the brewer produces or imports. On its first 60,000 barrels brewed or imported, breweries pay $7.00 per barrel. The tax increases to $18.00 for each additional barrel above 60,000.


The Small Brewer Reinvestment and Expanding Workforce Act (Small BREW Act), H.R. 232, was introduced on January 8, 2015. The Small BREW Act seeks to lower the federal excise tax on a brewer’s first 60,000 barrels from $7 per barrel to $3.50 per barrel, and lower the rate on production above 60,000 barrels from $18.00 to $16.00 per barrel. This rate would remain intact up to 2,000,000 barrels, at which point the rate would increase to the current $18.00 per barrel.


The Fair Brewers Excise and Economic Relief Act (Fair BEER Act), H.R. 767, was introduced on February 5, 2015. The Fair BEER Act seeks an even stronger tax break for the smallest brewers. The Fair BEER Act would eliminate the federal excise tax on a brewer’s first 7,143 barrels. For each barrel between 7,143 up to 60,000, the excise tax would be $3.50 per barrel, similar to the Small BREW Act. Furthermore, the Fair BEER Act has identical taxes and thresholds as the Small BREW Act for each barrel above 60,000--$16.00 per barrel up to 2,000,000, and $18.00 per barrel for all barrels above 2,000,000.


While the Fair BEER Act appears to be the most favorable to small brewers, it also contains a provision causing strong opposition from domestic craft breweries throughout the United States. Under the Fair BEER Act, the reduced excise tax applies to all barrels of beer produced domestically OR imported into the U.S. On the other hand, the Small BREW Act’s tax breaks apply only to barrels of beer produced in the U.S.  Therefore, while the Fair BEER Act provides a lower excise tax on smaller brewers, it also awards a tax break to the large, multinational breweries such as Anheuser-Busch InBev, MillerCoors, and Heineken. Despite the Fair BEER Act’s more drastic cuts on tax for the small brewers, many craft brewers prefer the Small BREW Act’s tax rates restricted only to domestic brews. While the outlook for the two Acts remains unclear, the differences between them will continue to polarize the beer industry, and are not likely to be settled simply over a pint.