The tax hidden in your beer

  • 5 June 2018
  • NormanL

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An appropriate story for the summer months from our friends at the Tax Foundation -- just how much does your state tax beer? Though the figures vary from state to state, it turns out no matter where you live, government adds quite a bite to your pint of bitter:

According to the Beer Institute, “Taxes are the single most expensive ingredient in beer, costing more than the labor and raw materials combined.” Research has shown that approximately 40 percent of the retail price of beer is dedicated toward covering all the applicable taxes.

In addition to the federal excise tax on beer (which ranges from $0.11 to $0.58 per gallon based on production, location, and quantity), all fifty states and the District of Columbia collect their own tax on fermented malt beverages. Unlike general sales taxes, which are tacked on after the price of goods is subtotaled, most states collect beer excise taxes from retailers according to the quantity of beer sold (usually expressed as a rate of dollars per gallon), and vendors in turn pass those costs along to consumers in the form of higher prices.

While a state’s excise tax on beer is usually levied on retail sales, some variation in collection methods exists from state to state. For instance, some states levy taxes further up the supply chain by taxing brewers, importers, or other wholesalers as a percentage of revenue generated or at a fixed price per gallon, bottle, or case of beer sold. Many states also generate revenue by collecting license fees from beer distributors.

Because beer taxes are often collected at other points in the supply chain, the only tax a consumer will see printed on his or her receipt is any applicable state or local sales tax that applies to the purchase. However, some states specify higher alcoholic beverage sales tax rates (that apply to beer, wine, and spirits) in lieu of the general sales tax rate. For example, in Minnesota, beer retailers are taxed at $0.15 per gallon, and then an alcohol-specific sales tax of 9 percent (instead of the state’s 6.875 percent general sales tax rate) is applied at the point of sale.

The Tax Foundation has a handy map showing, and ranking, each state's excise tax on a gallon of beer. And those who remember history will recall how a national excise tax on whiskey lead to a small rebellion in parts of the early United States. 

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