More Details on New Alcohol Tax Laws


Taxes. It’s a dreaded topic, often filled with thoughts of dollar signs flying out the window, procrastination and eye-rolls. It’s certainly not the fun side to writing about wine. But after reporting on the new alcohol-specific tax legislation that was added to the larger tax overhaul bill, this time, it’s a topic with plenty of interesting things to talk about.

Thanks to my editors at SevenFifty Daily, I was able to write a comprehensive report that I hope will be informative and useful to industry professionals, but there were some tidbits I had to leave on the cutting-room floor.

And that’s where this space comes in. For those seeking a bit more behind-the-scenes details about the Craft Beverage Modernization and Tax Reform legislation, here’s some of that additional reporting. (Note: If you haven’t read my piece yet, go read that first … I’ll wait).

After interviews with Michael Kaiser of WineAmerica, Bob Pease of the Brewers Association and Mark Shilling of the American Craft Spirits Association, it was clear the purpose of the federal excise tax cuts was reinvestment back into the industry. Yet as consumers, it’s easy for us to hear “less taxes”, and hope (and maybe pray) that those savings will fall into our pockets. But that’s not quite the case as Kaiser clarifies:

The whole point of a tax credit like this is that the money is going to be back into their business. In some other articles that have been written about this bill, there’s been a narrative that now wineries, brewers and distillers are going to lower the cost of their product because they’re paying less taxes, but in reality our member companies and the other commodity companies are going to refold it back into their businesses.”

These new tax laws didn’t appear out of the blue. Lobbyists have been working for close to a decade to lower federal excise taxes and it’s one of the few times members of the wine, beer and spirits industries banded together in support of a common goal.

In January 2017, the Craft Beverage Modernization and Tax Reform Act was introduced with strong bipartisan support. The stand-alone bill called for the tax rates and credits to be permanent changes, but when lawmakers decided to fold it into their gigantic tax overhaul at the end of the year, that permanency was reduced to only two years.

Another casualty was the amount of time the Alcohol and Tobacco Tax and Trade Bureau (TTB) had to implement the changes. Instead of a year, they only got about 10 days. The Tax Cuts and Job Act was passed on Dec. 22, 2017 and became law on Jan. 1, 2018, which given the holiday season, only gave the regulatory agency that administers the laws about four full work days (provided none of its staff was on vacation).

This, not surprisingly, has caused some confusion.

Scott Rosenbaum, a spirits specialist at T. Edward Wines and Spirits, described a “disconnect,” when he tried to do his job at the start of the year.

“As an importer, I had [spirits] crossing the border on [Jan. 2] which should have had the new tax rate applied, and we were charged the old tax rate and told that we could file for a refund because they hadn’t put it into play yet even though it went into action,” he told me while I was researching the SevenFifty Daily story.

Kaiser of WineAmerica, who was among the lobbyists fighting for the bill’s passage, wrote in an explainer piece to wineries that he doesn’t expect the TTB to finalize its written rules and regulations until early spring. But he assures businesses that if they are still paying the old rates, the savings will be retroactive back to the beginning of the year.

So, what’s next? The lobbyists all told me they’re committed to fighting for reauthorization and making the new tax rates permanent like it was intended. They’re also working to help smooth out its implementation.

“In the permanent version of this bill, there was some actual language that would have required Congress to appropriate some more money for TTB to implement this,” Kaiser says. “And so separate from this, we’re working to get more money for them through the appropriations process.”

One more thing worth mentioning, or perhaps asking: Why did this bipartisan-supported bill get wrapped into an extremely divisive piece of legislation?

Without getting lost in the intricacies of how Congress does business, one answer might lie in the act’s impact. Mere weeks after tax bill was signed into law, there’s evidence that small drinks businesses are already hiring for newly-created positions — many of which are manufacturing jobs, which the Trump administration has been promising.

Pease, of the Brewers Association, says his industry has always been a source for manufacturing jobs, often in urban environments. 

And as Meredith Meyer Grelli, co-owner of Wigle Whiskey, noted when I spoke to her last week: “Being in Pittsburgh, getting back manufacturing jobs has been the rallying cry for decades and it’s sort of interesting that in some ways it’s happening through alcohol.”