North Coast wineries, breweries, distillers get another year of federal excise tax break
The U.S. House of Representatives on Dec. 17 passed a massive spending package that extends for one year the big break on federal excise taxes for wineries, breweries and distilleries that were slated to expire at the end of 2019.
The new measure, which was signed into law by President Trump on Dec. 20, gives alcohol producers an additional year of the tax reduction.
“This is a really big deal for us as a small producer,” said Fred Groth, who co-owns Sonoma Prohibition Spirits with his wife, Amy. “The excise tax is one of the biggest expenses we have, and what we are now saving is the equivalent of a full-time employee salary.”
The bill primarily benefits smaller producers as the tax is implemented on a sliding scale.
“The craft beverage bill has been an incredible boost for our industry, and this extension allows us to continue investing in our wineries by buying new equipment, remodeling tasting rooms, hiring new employees and more,” said Hank Wetzel, chairman of Wine Institute trade group.
Hanson Vodka of Sonoma founder Scott Hanson described the news of the extension as a “godsend.”
“The tax rollback in 2017 enabled us to invest money back into our business and hire and grow,” said Hanson. “We went from five employees to more than 25.”
Sonoma Springs Brewery partner Rob Raney was overjoyed at the news. “This lowers our federal tax payments and enables us to reinvest in our business,” he said.
The package benefits distillers most, as they pay a much higher federal excise tax than breweries and wineries and had no reduced rate prior to 2018. But it benefits all alcohol producers, including cideries, though it is skewed to help smaller manufacturers.
For example, the measure retains a new tiered tax credit system designed to help smaller producers. Wineries pay an excise tax of between $1.07 and $3.40 per gallon. Under the measure that was extended, there will remain a $1 per gallon tax credit for the first 30,000 wine gallons; 90 cents per gallon for the next 100,000 wine gallons; and 54 cents per gallon for the next 620,000 wine gallons. It also applies the tax credits to sparkling wine and provides the lowest excise tax rate for wines with an alcohol content up to 16 percent. The old cap used to be 14 percent.
“This will allow producers to invest in energy-efficient and other new equipment, upgrade facilities and grow the workforce so they can continue to thrive and compete on a global scale,” Rep. Mike Thompson, D-St. Helena, said in a statement. Thompson has been a key sponsor of the measure.
Beer is generally taxed at the federal level at $18 per barrel, the equivalent of 31 gallons.
The measure continues a rate of $16 per barrel for the first 6 million barrels of beer either produced domestically or imported. U.S. brewers who produce less than 2 million barrels annually would be eligible for a rate of $3.50 per barrel on the first 60,000 barrels.
Russian River Brewing Co. in Windsor would save about $140,000 next year from the federal excise tax break if it produces up to 40,000 barrels, co-owner Natalie Cilurzo said.
“Guess what we will probably spend that on? A freakin’ generator,” Cilurzo said in a text, referencing rental costs incurred during the October PG&E power shut-offs.