Brewers want last call on beer tax growth in Tenn.

January 30, 2013 • Business

A worker attends to a beer bottling machine at the Yazoo Brewing Co. in Nashville, Tenn., on Wednesday, Jan. 30, 2013. Yazoo is among the brewers who are calling for an overhaul of Tennessee’s taxes on beer, which are the nation’s highest. (AP Photo/Erik Schelzig)

NASHVILLE, Tenn. (AP) — Brewers want Tennessee lawmakers to announce last call for the state’s ballooning taxes on beer.

An industry group on Wednesday revealed a proposal it claims wouldn’t cause the state to lose its ranking as having the highest-taxed beer in the country, but that it would halt future increases tied to rising costs and inflation.

Rich Foge, president of Tennessee Malt Beverage Association, said beer sales in the state have declined 5 percent over the last decade, while wholesale beer tax collections have risen 30 percent over that same period.

“There’s a tipping point,” Foge said. “This thing is ramping up so fast, it’s dragging down the whole industry.”

[auth] Beer in Tennessee is subject to three taxes. Brewers pay federal and state taxes per barrel, and then a 17 percent tax is charged to wholesalers based on price. Consumers pay as much as 9.75 percent in sales taxes on top of the previous charges.

Kentucky is the only other state with a similar tax arrangement based on the sales price of beer. The Tennessee measure would convert the 17 percent local tax to a levy based on volume, meaning the tax would remain at a constant of about $34 per 31-gallon barrel, regardless of the price of beer.

Sponsors envision no loss in $125 million revenues cities and counties currently collect from beer, but the measure would halt the steady growth in tax collections in future years. The measure is sponsored by Rep. Cameron Sexton of Crossville and fellow Republican Sen. Brian Kelsey of Germantown.

Standardizing the tax would ease pressure on the price of higher-end beers, but would also result in cheaper brands costing more.

“They’re willing to have those beers go up some to reform this tax,” Foge said. “The beer industry is united by this effort.”

But legislative leaders didn’t immediately rush to support the proposal. House Majority Leader Gerald McCormick said the measure will get a fair hearing, but said lawmakers will think carefully about upsetting revenues for local governments.

“I’d rather have us not have the highest tax in anything,” said McCormick, R-Chattanooga. “But if we do, I’d rather it be beer and liquor than anything.”

Supporters say the state’s high beer taxes were partly why Chico, Calif.-based Sierra Nevada Brewing Co. decided to bypass Alcoa, Tenn., and build a new brewery near Asheville, N.C., about 80 miles to the east.

Sierra Nevada spokesman Ryan Arnold said there were several factors that gave North Carolina the nod, but did not give specifics about the tax rate.

“Western North Carolina ultimately made the most cultural and business sense,” he said in an email.

Fort Collins, Colo.-based New Belgium Brewing Co. has since begun building its East Coast brewery near the new Sierra Nevada site.

While the beer industry has embraced the idea of overhauling whey they call an archaic Tennessee tax, it was been resistant to similar arguments about archaic laws made by supporters of proposals to allow wine to be sold alongside beer in supermarkets and grocery stores.

Foge called those issues unrelated, but pointed out that state taxes on wine aren’t based on the price. He said the tax on a gallon of wine is $1.21, while the tax on a gallon of premium beer like Bud Lite averages $1.37. The tax on craft beers and imports us about $1.86 per gallon.

“So the beer tax is surging past what the wine tax is in Tennessee,” he said.

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