Oklahoma lawmakers are pushing to reform the state’s beer landscape behind three separate bills that would dramatically change how the industry is both taxed and regulated. Industry stakeholders have mixed feelings about the bills, however.
The three bills, which would raise excise taxes on in-state beer producers and change how beer is sold in Oklahoma, are currently in their second round of House and Senate committee hearings.
One of the more fiercely contested bills on the table is House Bill 1858, which aims to increase the excise tax on low-point beer produced in the state by 300 percent, effectively quadrupling the current rate. Factions of both distributors and brewers oppose the bill, sources told Brewbound.
While HB 1858 aims to do away with the sales tax on every barrel of beer measured no higher than 3.2 percent alcohol by weight (roughly 4 percent ABV), if passed, it would increase the excise tax from $11.25 ($0.35 per gallon) to $45 per barrel ($1.42 per gallon).
State Rep. Harold Wright (R-Weatherford), the bill’s primary sponsor, said it’s necessary because the state has a problem with dishonest retailers that aren’t currently paying sales taxes on the low-point beer they sell.
Brett Robinson, president of Beer Distributors of Oklahoma, said his organization is firmly against the bill, adding it will harm the consumer rather than punish the tax cheats.
“When I deliver an invoice to a retailer, when one of my beer guys delivers beer, it’s going to be 300 percent higher than it was yesterday under this new law,” he said. “They’re going to take that beer in and they’re going to put their margins on top of that.”
Rep. Wright, for his part, contends those fears are unfounded, adding that by getting rid of the sales tax and lifting the excise, the costs would actually be evened out.
“It’s not a tax increase, it’s a break-even,” he told Brewbound. “The current sales tax plus the excise tax per ounce is going to be approximately the same as what the 45 dollars would be without the sales tax.”
Current sales tax rates in Oklahoma vary by municipality and approach 11 percent in some parts of the state.
Still others believe HB 1858 could have adverse effects on the state’s breweries as well. Kevin Douglas Hall, president of the nonprofit League of Oklahomans for Change in Alcohol Laws (LOCAL) recently detailed how it threatens small brewers on the organization’s website.
“The bill will punitively punish craft breweries and brewpubs in the state that will either pass this off onto consumers or will signal a death knell to many craft breweries’ low point program[s],” he wrote.
Hall added that low point programs – made up of beers no higher than 3.2 percent ABW – are critical because brewers cannot legally sell their stronger offerings direct to the public. As reported by The Oklahoman in August of last year, there’s been a growing trend of breweries in the state rolling out lower alcohol offerings as a means of selling beer directly to consumers and creating an additional revenue stream. A higher excise tax, opponents argue, would threaten the utility of such programs.
The bill, having recently passed out of the Budget Revenue and Taxation subcommittee, is now slated for vote in a full House committee.
But that’s not all that’s on that’s on tap at the Oklahoma Statehouse.
Another proposed bill aims to allow for brewers to sell their beer direct to the public on premises between the hours of 10 a.m. and 9 p.m. Currently, brewers can sell their low point beer direct to consumers, as detailed above, but not offerings that exceed the 3.2 alcohol by weight threshold (though they can give away free samples in limited quantities).
Sponsored by State Sen. Brian Crain (R-Tulsa), Senate Bill 424 has received endorsement from a number of breweries, including Marshall Brewing of Cain’s own district.
“Unfortunately, the six and a half years I’ve been here, we have turned away hundreds and hundreds of people. You always get the same heartbroken look on their faces when you say, ‘Look, we’re not allowed to sell beer to the public,’” said Wes Alexander, director of sales at Marshall. “It’s frustrating to be a craft brewer with all the passion to build the business and have them want to come and see your facility and have to inform them because we got some laws that are archaic, we can’t serve you a pint… we can’t sell you a growler.”
Robinson, with the wholesalers association, said he would be in favor of such change too, but is also interested in discussing quantity limitations with brewers.
The bill does come with an important caveat, however. While it would change a state statute, it would not change Oklahoma’s Constitution, which says brewers can sell only to licensed wholesalers, creating a question of constitutionality (such amendments do not apply to low-point beer).
Finally, there’s Senate Bill 383, which would allow liquor stores to start selling stronger beer chilled below room temperature. Currently, liquor stores – the only legal retailers of “strong beer” – can only sell alcohol at room temperature. As written, the bill, sponsored by State Sen. Stephanie Bice (R-Oklahoma City), would allow for beer, but not other wine and spirits, to be chilled.
“There’s no argument I can make against it,” added Alexander. “However, the bill has no legs.”
Under the status quo, convenience stores have a monopoly on selling cold beer (though they can only sell low-point beer), a distinction they’d like to protect as the bill will face opposition from the Oklahoma Petroleum Marketers & Convenience Store Association (OPMCSA).
“It will pick liquor stores to be the winners and convenience stores to be the losers,” Candace McGinnis, spokeswoman with the OPMCSA, told Brewbound. “Convenience stores would be giving up revenue without gaining anything to offset it.”
Both the cold beer and on-premise sales bills passed unanimously last week out of the committee on business and commerce and are up for full Senate committee hearings.