Alcohol industry unites to try to save tax break by Jan. 1

PORTLAND, Ore. (KOIN) — It may be last call for cheap(er) booze from your favorite small distiller, brewer, or wine maker. The federal tax on craft beverages is set to return to pre-2018 levels if Oregon Senator Ron Wyden’s bill doesn’t get passed in an end-of-year package.

The Tax Cuts and Jobs Act of 2017 included decreases in the Federal Excise Tax (FET) paid by small alcohol makers. Distilleries saw the most dramatic benefit, since they have always paid a much higher rate than other forms of alcohol.

For 2018 and 2019, the FET dropped from $13.50 per proof gallon, to $2.70 per proof gallon on the first 100,000 proof gallons produced. The vast majority of Oregon-based distilleries put out fewer than 100,000 proof gallons.

The American Craft Spirits Association credits the tax drop, at least in part, for a more than 15% increase in the number of active craft distillers across the country. Many existing distillers expanded their businesses.

“It allowed us to put that savings back into our distillery,” Sara Brennan, co-owner of Oregon City’s Trail Distilling told KOIN 6 in September. “It allowed us to hire more people for sales … (and) invest in more equipment so we can distill more product.”

Brennan said she and other distillers will likely raise their prices if the tax rate goes back up.

“On average, about 54% of a bottle is the taxes and fees that go into making it,” she told KOIN 6. “That doesn’t include the bottle, the label, the salary to actually distill it. So I would hate for a price to have to go up, but that’s probably what would happen.”

Breweries and wineries have been seeing savings as well. Oregon has more than 284 craft breweries, according to the Brewers Association.

Beer is normally taxed at $18 per barrel (31 gallons). According to the proposed reforms, domestic breweries that produce fewer than 2 million barrels each year would pay $3.50 per barrel on the first 60,000 barrels, and $16 per barrel on the next 1,940,000 barrels.

“More than 2,000 breweries who opened between the time the law took effect and the impending sunset at the end of the year will see a 100% increase in their Federal Excise Tax,” Katie Marisic, the federal affairs manager of the Brewers Association said in a statement to KOIN 6. “This is a brand-new tax for them and is a massive financial burden they have not faced since opening their businesses.”

Marisic said craft brewing jobs grew by 15,000 in 2018, in part due to the tax cuts, the largest yearly employment gain on record for small brewers. She said brewers were able to “reinvest the savings into their business by purchasing new equipment, upgrading tasting rooms, hiring additional employees and increasing employee benefits.”

With just weeks before the lower tax rates expired, groups representing craft distillers, brewers, wine and cider makers organized a National Day of Action, encouraging “state-wide guilds” and individuals to “call, tweet and email their members of Congress,” Marisic said, adding that there were “more than 30,000 interactions occurring as a result.”

Wyden was behind the original tax cuts. He tells KOIN 6 he intended for the reduced rates to be permanent all along, but they slipped into the tax bill as a temporary measure. So this past February, he introduced the Craft Beverage Modernization and Tax Reform Act which would make the cuts permanent.

“I’m doing my best to try to make this what I originally proposed: permanent, bipartisan legislation,” said Wyden when asked about the bill. “So that, particularly, our small industries in beer, wine, and cider would have some predictability.”

The bill has broad bipartisan support in both the House and Senate, but no action has been taken since it’s introduction. As of last week, a representative for the democratic senator said they are still pushing for the bill to pass before the end of the year.

“I just want Oregonians to know that I’m going to stay with this until we get what my original proposal called for,” said Wyden.