The calendar flip to 2017 brought with it two important changes to the U.S. Internal Revenue Code that will impact a majority of the country’s brewers and cidermakers.
Most notably, due dates for excise taxes and bond requirements in the Internal Revenue Code of 1986 have been modified to ease the upfront cash outlay for brewers, distillers and winemakers.
According to the Alcohol and Tobacco Tax and Trade Bureau (TTB):
Beginning with the calendar quarter that starts on January 1, 2017, taxpayers are exempt from bond requirements if they reasonably expect to be liable for not more than $50,000 in taxes imposed on distilled spirits, wine, and beer for the calendar year, were liable for not more than $50,000 in such taxes in the preceding calendar year, and pay taxes on a semi-monthly, quarterly, or annual basis. Such taxpayers are exempt from bond requirements with respect to distilled spirits and wine only to the extent those products are for nonindustrial use.
Breweries making less than 7,143 barrels annually will be able to take advantage of the new exemptions, Brewers Association director Paul Gatza told Brewbound.
“Those brewers no longer have to keep a bond filed with the TTB, which is essentially an advance payment of taxes,” he said.
Additionally, nanobreweries paying less than $1,000 in taxes on beer — those making less than 143 barrels of beer per year — may now pay their taxes annually, rather than quarterly.
It’s uncertain exactly how many of the country’s 5,000-plus breweries will benefit from the changes, but in 2015, 90 percent of U.S. breweries made less than 4,000 barrels annually.
The current federal excise tax structure requires breweries making less than 2 million barrels annually to pay $7 per barrel on their first 60,000 barrels, something the BA hopes will be cut in half under the proposed Craft Beverage Modernization and Tax Reform Act (CBMTRA).
A second revision changes how hard cider is classified and taxed. The hard cider tax is lower than the tax rate for other wines, and the changes widen the range of wines eligible for the hard cider tax rate. According to the TTB, the changes include:
The allowable alcohol content increases to less than 8.5 percent ABV from less than 7 percent ABV.
The allowable carbonation level has also been increased from 0.392 to 0.64 gram of carbon dioxide per hundred milliliters of wine. (According to Gatza, this change opens the tax level up to sparkling ciders.)
Wines using pears and pear juice concentrate join apples as the only fruits eligible for the hard cider tax rate.
Those moves capped a fairly uneventful 2016 of TTB regulation reform, Gatza said, adding that the BA would continue to spend most of its political capital on passing CBMTRA, which would lower excise taxes, compliance burdens, and regulations on alcohol makers.
“We have to start at zero,” Gatza said after the bill failed to pass in an end-of-the-year tax-extender package.
Leadership changes in Washington, D.C. — a now-Republican controlled legislature and White House — also have reset the effort.
“We’re talking to previous co-sponsors about sponsoring it again and how to launch it,” he added.