Home » MBJ FEATURE » Tax break might mean relief for craft brewers

Tax break might mean relief for craft brewers

By BECKY GILLETTE

Here’s news you can lift a mug and do a “cheers” to. In late December the U.S. Congress passed a two-year version of the Craft Beverage Modernization and Tax Reform Act, which cuts the federal excise tax for craft breweries in half from $7/barrel to $3.50/barrel for domestic brewers producing less than two million barrels annually.

The legislation reduced the federal excise tax from $18/barrel to $16/barrel on the first six million barrels for all other brewers and all beer importers while maintaining the current $18/barrel rate for more than six million gallons.

“This savings will allow Mississippi small brewers, including many manufacturers and entrepreneurs, to reinvest in their businesses, expand their operations and hire more workers,” said Mississippi Brewers Guild Executive Director Matthew McLaughlin.

Mississippi has come late to game with the hot national trend toward the popularity of microbreweries. Before July 2017, it was one of only two states in the U.S. that didn’t allow sales of beer at breweries. Even today only an estimated .3 to .5 percent of the beer consumed in Mississippi is made in Mississippi, McLaughlin said.

“Without question, the biggest challenge the Mississippi Brewers Guild faces in Mississippi is that most beer is manufactured out of state,” McLaughlin said. “It is a high priority trying to get more Mississippians drinking Mississippi-made beer.”

Microbreweries bring manufacturing jobs home.

“Microbreweries create more economic impact,” he said. “They have an incredible impact on the communities where they do business. I would prefer a large number of craft breweries positively impacting a large number of communities than three or four large breweries that positively impact three or four communities.”

McLaughlin said the microbreweries are considered a kind of an economic\community development holy grail for a community because they involve manufacturing, are capital intensive, employ people and are a place where the community congregates.

“Microbreweries are very much a tourism draw,” he said. “Other states in the country have really experienced a wave of tourism around craft brewery. For example, state and local economic development groups have made it a priority for Asheville, N.C., and the state of North Carolina. The community and state put a lot of money into assuring those breweries can operate, thrive and become sustainable industries because they are manufacturing and they are a big tourism draw, too.”

Why are craft beers so popular? McLaughlin calls them “creative expression of liquid art. They provide flavor profiles that traditional macro manufacturers don’t provide. There is an infinite number of beer styles, so there is the variety of it. You can always access something new. It is very much a creative economy manufacturing industry.”

One popular offering at some microbreweries is called a “flight” of beers. Patrons get three or four two- to three-ounce beers to compare tastes and find their favorites.

“It is an exciting thing to do at a brewery,” McLaughlin said.

Microbreweries can be a good investment.

“A thoughtful and methodical business strategy for a particular market can be a very good investment,” McLaughlin said. “There is a lot of investment money both locally and nationally that is moving into the industry.”

Jon Alverson, founder of Greenville’s Mighty Miss. Brewing Company, said any reduction in monetary outlay for a very young business is a welcome change.

“The per-barrel tax on beer was a tax on production items and not on sales,” Alverson said. “Thus, it was an expense on an item yet to generate revenue.”

Lucas Simmons, president/brewmaster of Lucky Town Brewing Company in Jackson, said the CBMTRA gives a competitive advantage to small manufacturers in the beverage sector. But the savings are small potatoes representing a savings of only about .25 cents per case sold (24 12-ounce servings).

“For a brewery of our size, these cuts will not be quite enough to make any real changes in how we operate, but will help us overcome the rising costs of raw materials and packaging supplies,” Simmons said. “The breweries of the state have seen a rise in popularity. But we are still under a percent of beer drank in Mississippi, so we have a long way to go.”

The Brewers Association, which represents about 4,000 brewers across the country, and state guilds across the country have been working for about 10 years to get federal excise tax relief to small brewers. Bob Pease, president and CEO, Brewers Association, said they were pleased that Congress enacted the Act. He said their expectation is that small brewers will use their savings related to lower taxes to invest in their breweries, expand their operations, create more jobs and hire more American workers.

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