The Beer Tax: Which States Should You Avoid?

July 18, 2013 — 2 Comments

“This is an invisible tax that consumers don’t know they’re paying,” Beer Institute President Joe McClain said in a March 2013 audio interview posted on the group’s website. “The people who enjoy beer the most, those middle-class Americans, are feeling the bite of that tax more.”

‘Sin taxes’ are those taxes which are imposed on specific goods and activities, such as cigarettes, gasoline and indoor tanning services. In addition to raising revenue, these taxes are there to decrease consumption and to pay for government services which deal with the product. For example, gasoline taxes help fund road and highway repairs.

“Beer lovers not only indirectly pay a state beer tax, but they may also face a local excise tax as well as a federal excise tax of about 58 cents per gallon (for large brewers), or about 33 cents per six-pack. All of this is in addition to any state and local sales tax that is charged whether the beer is bought at a grocery store or a favorite pub. And some states tack on case or bottle fees and other special sales taxes specifically targeting alcoholic beverages.”

Beer brewers and distributors usually pay the excise tax on the beer beforehand but the effect is still felt by the consumer by the time the beer hits the shelves.

Tennessee, whiskey country, proves to have the highest beer tax at 66 cents per 6-pack. However, just over the border in Missouri, also the home of Anheuser-Busch, the beer tax for a 6-pack sits at a country low of 3 cents.

“The difference adds up. Buy a six-pack once a week for a year in Tennessee and your purchases will have included around $34 for state taxes. In Missouri, less than $2 in state beer taxes would be included in the same purchases.”

Tennessee’s wholesale beer tax is set to change later this month, nonetheless, the state will still hold the top spot for the tax. This is “due to combined excise and wholesale taxes that push the tax burden for consumers to $1.17 per gallonor 66 cents per six-pack,” says the Tax Foundation‘s analysis of beer-specific statewide taxes.

Some of the highest beer taxed states per gallon are Alaska ($1.07), Alabama ($1.05) and Georgia ($1.01), which all charge more than 50 cents in taxes on a six-pack.

The winner with the lowest beer tax goes to the tax-friendly Wyoming (2 cents per gallon, 1 cent per 6-pack). The birthplaces of Miller and Coors, Wisconsin (3 cents per 6-pack) and Colorado (5 cents per 6-pack) respectively, also proud themselves in some of the lowest beer taxes.

Anti-drunk driving groups and other advocacy groups are currently vouching for states to raise their beer taxes. They hope that this will, in turn, reduce consumption and produce a revenue to pay for healthcare programs.

In my home state of Pennsylvania, for example, the beer excise tax hasn’t been altered since 1947. Similarly, Wyoming has not changed its beer tax since 1935, which was 2 years after the end of Prohibition!

“The brewing industry counters that beer is already one of the country’s most heavily taxed goods. Including federal and state business taxes, taxes make up 40% of beer’s retail price tag, according to The Beer Institute, an industry trade group. Similar to sales taxes, beer taxes are regressive, meaning that they hit lower and middle-class consumers the hardest, the institute argues.”

Currently, the Beer Institute and a number of breweries, with help from U.S. Reps. Tom Latham, R-Iowa, and Ron Kind, D-Wisconsin, and 33 co-sponsors, are pushing the Brewers Excise and Economic Relief Act of 2013 (BEER Act), which would reduce the federal excise tax on beer for all brewers and beer importers.

Curious as to what your state’s beer tax is? Check out CNN Money’s interactive map.

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JDKatz: Attorney's At LawJDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

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