Breweries are responsible for federal, state, and local taxes. Although taxes are not glamorous, they are necessary for a successful business. We will explore the basics of brewery taxation and some variables to consider.
According to the Internal Revenue Service (IRS), a federal excise tax is “a tax imposed on the sale of specific goods, services, or activities.” Alcoholic beverages, including beer, fall under the federal excise tax. The Treasury Alcohol and Tobacco Tax and Trade Bureau (TTB) oversees the breweries’ taxation and tax determination. The current tax rates were established in 2018 and are based on annual production rates and per barrel.
In the U.S., the median state excise tax is $0.20/gallon. This tax ranges from $0.02/gal in Wyoming to $1.29/gal in Tennessee. Each state has a different tax rate and may have additional taxes based on specific variables, including volume percentages or if the beer is sold wholesale or on-site. Taxes may also vary within each state depending on which county or city the brewery resides. Except for Alaska, Delaware, Montana, New Hampshire, and Oregon, breweries are responsible for the state’s general sales tax and excise tax rates. For specific 2023 state tax rates on beer per state, click here.
Many factors affect taxation, including the brewery’s business structure and the state and county they operate. Common issues faced by breweries are filing excise tax returns, failure to file, and tax determination. The TTB website is a great resource to help breweries file tax returns, including automated reminders and a link to Pay.gov to file returns electronically. The website also provides payment options if you have trouble paying the brewery’s taxes.
Taxes are a complex and integral part of running a brewery. The taxes you are responsible for are based on many variables, such as your production schedule, alcohol by volume, import/export plans, and whether you plan to operate a taproom. Contact the attorneys at Beer Law HQ. We will review your brewery’s taxable variables and help you create a tax strategy that works for you and your business.