[narvin]

http://blogs.reuters.com/great-debate/2015/02/19/beer-may-be-about-to-get-cheaper/

I'm all for the lowering of excise taxes for small brewers, but these numbers don't seem to add up.  Any pros have a comment?

[majorvices]

Taxes really do add up to around 40% of the total cost of beer production. It's hard to fathom but once the feds and the state have taken their chunk that's about what it adds up to.

[narvin]

Are you talking about business taxes in general, or just the beer specific taxes?  $7 a barrel plus state alcohol tax seems like it would be way less than 40%.

Edit: I guess if you count sales taxes, which are levied on the sale price and not the cost of production, it would add a lot to the overall "cost" of the beer compared to raw materials.  But that seems like a silly comparison since it's going to be directly proportional to revenue for the brewery.

[majorvices]

Keep in mind we are still paying taxes on ingredients we buy. $7 a bbl plus the state taxes end up being a huge chunk when you add that ontop on everything else.

[Stevie]

Keep in mind we are still paying taxes on ingredients we buy. $7 a bbl plus the state taxes end up being a huge chunk when you add that ontop on everything else.

You pay taxes on malt, hops, and yeast? I've always thought they were exempt as food.

[anthony]

For us, federal and state excise taxes make up about 19% of our cost on an average beer. As you get larger and you take advantage of economies of scale AND you pay the larger tax rate, I could easily see the cost being 40% of the costs.

Taxes really become crazy when you start looking at labor costs...

[majorvices]

Keep in mind we are still paying taxes on ingredients we buy. $7 a bbl plus the state taxes end up being a huge chunk when you add that ontop on everything else.

You pay taxes on malt, hops, and yeast? I've always thought they were exempt as food.

I'll have to double check that but I always thought that the tax exempt status was only on the state level. In AL we pay 8% sales tax on everything, including food. In PA there was no tax on food.

I do not keep the books at YHB but we had kicked around the numbers before on how much taxes we paid over all in a meeting a couple times and the numbers were quite painful. By the time a pint is pulled the feds and the state have taken quite a chunk. I've seen it worked out before and it is close to 40%.

So perhaps it is not 40% on our level but it does end up being close to that on the consumer level.

I doubt you would see the price of beer drop very much on the consumer level. But it may make it possible for some competitive price leveraging.

[narvin]

For us, federal and state excise taxes make up about 19% of our cost on an average beer. As you get larger and you take advantage of economies of scale AND you pay the larger tax rate, I could easily see the cost being 40% of the costs.

Taxes really become crazy when you start looking at labor costs...

19% of your cost sounds reasonable.  The thing that seemed a little crazy was the claim that 40% of retail price was taxes.  I guess I can see this in the same sense that 40% of my "costs" are taxes, ignoring the fact that removing taxes would not necessarily mean I would still make the same salary and also not have to pay for things like private pirate insurance and personally security and other things required to keep society going.

[Jimmy K]

Since it said that 40% of the retail cost is Federal, State, and Local taxes, I would assume that includes beer and non-beer related taxes, along with liquor licensing fees for the retailer, sales tax on final sale, business income taxes for everybody, etc.
 
Not to say that it isn't also 40% of the cost of producing beer. Taxes on beer production would be a percentage of total taxes, but costs of beer production is also a percentage of the retail price.

[Thirsty_Monk]

Lies, damn lies and statistics. Twist the number as it sounds good.

You should not pay sales taxes on raw material because it will get transform into a new product. Sales tax is paid only at the final sale point.

Cost of your beer can be calculated multiple ways for this statistical discoveries. Is it just raw material? RM+ labor? RM + Labor + utilities and rent? How about amortization on equipment?

So all these percentage numbers should be taken only as educated question.

[majorvices]

I'm pretty sure there is some taxes paid somewhere on that pallet of German Pilsner malt. There is tax on imports, there are taxes on transport costs. There are all kinds of taxes wrapped in that sack of pils.

[micsager]

Keep in mind we are still paying taxes on ingredients we buy. $7 a bbl plus the state taxes end up being a huge chunk when you add that ontop on everything else.

In Washington State, we do NOT pay sales tax on ingredients.  Anything that actually goes in the beer is taxed when the beer is sold to the customer.  Grains, hops, yeast, irish moss, other adjucts, even the Co2 I use to carbonate is all sold to me without the imposition of sales tax.  Co2, get's a little weird, because the Co2 for pushing beer, or purging tanks is certainly taxable.  Fed and state beer taxes are about 3% of sales price.  We're small enough we pay no business taxes.  There may be taxes on these products further back in the supply chain that I am unaware of.   

[majorvices]

Keep in mind we are still paying taxes on ingredients we buy. $7 a bbl plus the state taxes end up being a huge chunk when you add that ontop on everything else.

In Washington State, we do NOT pay sales tax on ingredients.  Anything that actually goes in the beer is taxed when the beer is sold to the customer.  Grains, hops, yeast, irish moss, other adjucts, even the Co2 I use to carbonate is all sold to me without the imposition of sales tax.  Co2, get's a little weird, because the Co2 for pushing beer, or purging tanks is certainly taxable.  Fed and state beer taxes are about 3% of sales price.  We're small enough we pay no business taxes.  There may be taxes on these products further back in the supply chain that I am unaware of.

But there are stiil import and tarif taxes that the malt companies pay, right?

[Stevie]

But there are stiil import and tarif taxes that the malt companies pay, right?

I imagine you are right, but that would be factored into the price of the malt. This is partially why so many "foreign" cars are being built in the US, Mexico and Canada.

[micsager]

I get what you're saying Keith, but I don't think it's right to consider that a "tax" on a commercial brewery.  Home-brewers and distillers pay that tax as well.  In fact as noted above, we pay that as a part of the purchase price in everything from German Pislner Malt to an iPhone. 

And don't even get me started about the taxes on gasoline that are hidden in the purchase price.  Should we include that as a brewery tax as well?