Continuing my in-depth analysis of the excise tax from Part 1
As part of the new tax law signed in late 2017, taxes were supposed to be so simple that “you could fill them out on a postcard”. Well, the IRS has unveiled a draft of the new postcard. It has half the number of lines as the old 1040, but adds six different schedules to make up for the loss of lines.
I received the July/August edition of The New Brewer magazine in my mailbox last week. I know that it’s the “technical brewing issue”, so why should business types be interested in the contents of this edition? I found two articles hidden inside all of the technical speak that are worth taking a look at:
In June 2018, Dr. Bart Watson, Chief Economist for the Brewer’s Association, shared an article about the changing demographics around craft drinkers. The percentage of craft beer drinkers has historically been weighted on the side of males, however stats from Nielsen are revealing a small but significant shift. In 2018, when looking at craft drinkers who enjoyed brews ‘at least several times a year’, 31.5% are female while 68.5% are male (source: Nielsen Harris on Demand).That’s an increase in females by 2% from 2015.
Every state has different sales tax law, which makes it challenging as a brewery owner to ensure you are in compliance with the rules and regulations of each state. Adding to that, states view manufacturing sales tax in different ways. One of the ways that legislatures believe that they can help grow the economy is to lower taxes for manufacturers. So it’s quite common to exempt sales tax from the large equipment (brew house, tanks, etc.) that builds a brewery. While you are planning your brewery, check your local sales tax law to see if your equipment is taxable in your state. It could be exempt from tax or merely subject to a lower sales tax rate. In addition, most states exempt raw material and those items used to create beer. It’s easy to exempt malt and hops, but what about CO2, water and electricity? These things are consumed to make the final product and are often free from sales tax.
There were a whole lot of changes in the tax bill signed into law last December. Because of the new law, there are some wholesale changes for 2018. Breweries are not exempt from changes, the new tax bill affects many areas of brewery life. I’ve highlighted a few below.
1. The Definition of UNICAP (Uniform Capitalization) Has Changed
Lately, it seems that everyone is talking about the slowdown in craft beer. The areas open to new breweries are shrinking on a daily basis. The greater number of breweries in a given area, the harder it is to standout in the crowd. Taproom patrons are happy, but wholesale sales begin to stagnate. With the increasing number of choices, it is hard to maintain sales much less grow sales.