Beer & Taxes

The rise of craft breweries in the United States has brought into question the current taxation of breweries.  Presently, there are two proposed amendments to IRS Tax Code to adjust the excise tax on beer:  the Small BREW Act and the Fair BEER Act.

 

BarrelsExisting LawSmall BREW ActFair BEER Act
0-7,143$7.00/barrel$3.50/barrel$0/barrel
 

7,144-60,000

 

$7.00/barrel

 

$3.50/barrel

 

$3.50/barrel

 

60,001-2,000,000

 

$18.00/barrel

 

$16.00/barrel

 

$16.00/barrel

 

2,000,000+

 

$18.00/barrel

 

$18.00/barrel

 

$18.00/barrel

 

Now, let’s do the math on a brewery that produces 100,000 barrels per year:

 

 EXCISE TAX
BarrelsExisting LawSmall BREW ActFair BEER Act
0-7,143$ 50,001$ 25,001$ -0-
 

7,144-60,000

 

$ 369,999

 

$ 185,000

 

$ 185,000

 

60,001-100,000

 

$ 720,000

 

$ 640,000

 

$ 640,000

 

Total Tax on 100,000 barrels

 

$ 1,140,000$ 850,000$ 825,000
Savings ($) $ 290,000$ 315,001
Savings (%) 25%28%

 

 

The proposed legislation, either the Small BREW Act or the Fair BEER Act, would certainly improve margins for smaller craft breweries and give them more available cash for growth.  In working with companies in this industry, we have seen firsthand the importance of cash flow management as part of a growth strategy.

We will continue to follow Congress and the beer & taxes issue.  In a follow-up post we will discuss growth strategies for craft breweries and the impact on valuation.

Contact us to discuss:

Courtney Sparks White, J.D., LL.M., ASA, CVA at cwhite@claruspartners.com

Kirk Trowbridge, CPA at ktrowbridge@claruspartners.com

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