Yesterday’s implementation of a new beer tax in Washington left some of us scratching our heads wondering what it all really means. Many of the mainstream press articles point out that this tax will not affect small, local breweries, but that is not entirely true. I spoke with Heather McClung, president of the Washington Brewers Guild, to help clear up some questions. Following are some details about the new tax.
- This is not a direct to consumer sales tax. In other words, consumers won’t be seeing an immediate increase within a separate tax line-item on your receipt at the store when they go pick up that six-pack of Bud today. The tax is levied against the producers of the beer. How much of that tax is then passed on to the distributors, retailers and the consumer is the question that will be answered over time. Some brewers may absorb the tax, others may not.
- The new added tax amounts to $15.50 per barrel of 31-gallons. This almost triples the total tax for affected breweries, from $8.08 per barrel to $23.58 per barrel. That is about $.28 extra per six-pack. Or, $1.12 extra per case of 24, $7.75 per typical 1/2 barrel keg or just over $0.06 per 16oz pint.
- Domestic breweries that sell less than 60,000 barrels (120,000 kegs) of beer in the state of Washington will be exempt from paying the tax. Again – this tax exclusion is not based on how much overall beer a brewery produces or where they are located, but with how much beer it sells in Washington. This tax will apply to all foreign breweries importing their beers into WA (regardless of volume), as well as larger domestic breweries. While I don’t have brewing volumes at my finger tips, I verified with two of the larger WA breweries, Mac & Jack’s and Pyramid, that they will be exempt from the tax.
- The sale of any “strong beer” is not exempt from the tax, regardless of overall volume. Strong beer is designated by the Department of Revenue as anything 10% alcohol by volume (8% alcohol by weight) or greater. For example, barleywines greater than 10% ABV produced by local breweries will have the added tax. This is contrary to the belief that this new tax won’t affect local breweries. The effect won’t be massive, but it will touch local breweries. It’s possible (but probably not likely) that this could influence breweries to brew less high gravity beers or to shoot for their strong beers to come in at 9.9% ABV.
- The state expects that this beer tax will raise a total of $180 million from when it was implemented on June 1, 2010 through when it is set to expire (yeah, right) on June 30, 2013.
- This moves Washington from being the state with the 18th highest beer taxes in the country to having the 3rd or 4th highest beer taxes in the country (I’ve seen conflicting reports).
According to McClung, the issue isn’t just about the direct increase itself. “The real issue is that the way that this came about sets a horrible precedent. There was no talk of any beer tax all session long, and this initiative came to fruition within a week or two. None of the legislators talked with any key stakeholders, such as distributors, large breweries, small breweries, or the restaurant association, all of which will be affected by this. There was no public hearing, and they just pushed the tax through by using ‘small beer’ as the conscience-saver for all of the legislators. It really is kind of dangerous for the future.”
McClung goes on to explain how the increase could affect retailers as well as local breweries indirectly. “It’s unclear at this point how many producers will suck up the tax, and how many will push it down the line. If they push it down, then the gap between macro beer and micro beer will theoretically lessen.” Heather makes a great point about the gap lessening between what is perceived to be value products vs. premium products. Sounds like a great thing for the local craft beer market, right? Well, maybe. She goes on to clarify, “I say theoretically, because retailers likely won’t allow that gap to become too little, because they need to maintain differential pricing between the two tiers of products. So, it’s possible that if they feel they need to raise macro prices they may also accordingly raise micro prices.”
Mike Brown, Commissioner of Inspiration and Aspiration for Pyramid Breweries commented: “It is a regressive tax by nature. This isolates beer and not setting a tax on other beverages sets a dangerous precedent. While we appreciate the attempt to minimize the impact on craft brands who sell less than 60,000 bbls, the tax will still have a significant impact. Retailers, distributors, and bars will need to raise the price across the board to offset the tax, which will affect all beers and cause all beer prices to increase.”
If anyone has additional or conflicting information, please feel free to post or email me. I don’t claim to be an expert on this…just trying to clear things up. Hopefully this was helpful.
this is super lame, as someone who is working towards starting a microbrewery, i am shocked there was no forum for this.
I’m not as opposed to this tax as some, but maybe we could also pair it with a 8000% tax increase on soda pop and some of the other garbage that people put in their bodies.
Good article Geoff.
As the previous commenter said, I’m surprised that there wasn’t any pushback from the craft brewing community. Even some empty political grandstanding would have been better than just rolling over.
You know, it’s almost like the tax man sees beer drinkers as an easy, slow-moving target. While politicians recognize that other products are under-taxed by comparison, they see more of a fight coming from other consumer groups. Olympia needs to be reminded that beer drinkers are not lazy and stupid. Then again, maybe we are. Given some of the misguided comments I’ve heard beer lovers make on this issue, I’m not sure anymore.
I love it:
Drink “Strong Beer” in support of the State of Washington!
Brew your own beer Iv been at it for 3 years now.
No TAX at all. And hard cider is supper easy to make. Put the yeast in and two weeks later your drunk, no tax. If the gov. can’t stop the over taxing they just created the problem of the new moon shine underground.
A New Washington State Beer Tax « Atattooedtale's Weblog // Jun 2, 2010 at 1:34 pm
[…] in Uncategorized There is a new Washington State beer tax that was just implemented yesterday. Seattle Beer News has the breakdown on what it all means. But essentially the tax is on beer SOLD in Washington state, not just in domestic breweries here. […]
Very well written article.
Dean: There WAS push back from craft brewers (I am one and I wrote and called my representatives, as did my collegues), it fell on deaf ears and there was hardly any time to make any impact. Purposely it was rammed through so that nobody could pull together opposition. Trust me, nobody “rolled over”! Our voices and concerns were dismissed.
I-1086, repeal the strong beer tax:
Assigned Number: 1086
Filed: 04/13/2010
Sponsors
Mr. Tim Eyman
Mr. Leo J. Fagan
Mr. M.J. Fagan
Public Contact Information:
P.O. Box 18250
Spokane, WA 99228
Phone: 425-493-8707
Fax: 425-493-1027
jakatak@comcast.net
Ballot Title
Statement of Subject: Initiative Measure No. 1086 concerns ending a temporary excise tax on beer and strong beer.
Concise Description: This measure would end a temporary B&O tax, otherwise expiring in 2013, on manufacturing and selling beer and strong beer, except certain producers of less than sixty thousand barrels per year.
Should this measure be enacted into law? Yes [ ] No [ ]
Ballot Measure Summary
This measure would end a temporary B&O tax, otherwise expiring on June 30, 2013, on manufacturing and selling beer and strong beer, in the amount of $15.50 per barrel of thirty-one gallons, except certain producers of less than sixty thousand barrels per year.
*Revised by court order on 05-14-2010
http://www.sos.wa.gov/elections/initiatives/people.aspx?y=2010
http://www.sos.wa.gov/elections/initiatives/text/i1086.pdf
Also I-1093, repeal beer tax:
Assigned Number: 1093
Filed: 04/19/2010
Sponsors
Mr. Tim Eyman
Mr. Leo J. Fagan
Mr. M.J. Fagan
Public Contact Information:
P.O. Box 18250
Spokane, WA 99228
Phone: 425-493-8707
Fax: 425-493-1027
jakatak@comcast.net
Ballot Title
Statement of Subject: Initiative Measure No. 1093 concerns ending temporary taxes on selling certain carbonated beverages and beer.
Concise Description: This measure would end temporary taxes, otherwise expiring in 2013, on the activities of selling certain carbonated beverages and of manufacturing and selling beer and strong beer, above minimum revenue or production levels.
Should this measure be enacted into law? Yes [ ] No [ ]
Ballot Measure Summary
This measure would end certain temporary taxes, otherwise expiring June 30, 2013, including a tax on the activity of selling certain carbonated beverages, not including alcoholic beverages or carbonated water, at two cents per twelve ounces, exempting each bottler’s first $10,000,000 of gross sales; and a tax on manufacturing and selling of beer, in the amount of $15.50 per thirty-one gallon barrel, but with an exception for certain producers of less than 60,000 barrels annually.
*Last day to challenge title and/or summary: 5-4-2010
http://www.sos.wa.gov/elections/initiatives/people.aspx?y=2010
http://www.sos.wa.gov/elections/initiatives/text/i1093.pdf
The final word on the beer tax increase. Maybe. | Just Put Your Feet Up // Jun 4, 2010 at 5:00 am
[…] Our friends over at the Seattle Beer News published a story yesterday that provides insight into the actual impact of this tax increase. we encourage you to go check it out. […]
One retailer has already raised prices .50 across the board on all draft and bottled products. After reading this I see they are just gouging their patrons.
We are starting a new microbrewery and although it could take a while for this to affect us we do not think the precedent set by this is a good one.
May for once support an Eyman initiative.
Vote Beer!
"I will smash ur face in!" Cromartie and Hasselbeck in twitter battle - Page 4 - The Warpath // Jan 30, 2011 at 12:53 pm
[…] tap house cost $5.5, now it's $6.5…WTF? Maybe its partly because of taxes levied on brewers. The New Washington Beer Tax – More Details and How It Affects Local Breweries Also I think that cheap beer is awesome. I like a lot of different kinds of beer but theres a […]
"I will smash ur face in!" Cromartie and Hasselbeck in twitter battle - Page 5 - The Warpath // Feb 1, 2011 at 3:08 pm
[…] […]
I just bought a 6 pack of Bush Light at 7-11….it was 7.69
Yesterday it was 5.42
wow
Viridian Tax And Accounting » Liquor Before Beer, In the Clear // Jun 6, 2012 at 1:49 pm
[…] “Beer before Liquor, never sicker” I think that’s how the whole saying went. The harder alcohol is always consumed before the lower volume alcohol in order to keep your stomach in check. Honestly I don’t know if there is any truth to this, but could it relate to future tax hikes on our beer? Now that we have these higher taxes on our liquor – are beer and wine not too far behind? Or did they actually lead the way (New Washington Beer Tax)? […]
Why isn’t anyone talking about where this money would go to? If the state will spend it on education and health care I see no reason to oppose this tax increase. If used correctly this can be money well spent.
In defense of supporting local - Standard Brewing // Apr 19, 2013 at 11:54 am
[…] and here. If you’re interested in getting some perspective on the original tax proposal, rewind to 2010. You will note that the original tax was almost a tripling of the tax rate at that time, that the […]