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Breweries brace for barrel tax hike

KAAL-TV
Created: December 05, 2019 06:41 PM

(ABC 6 News) -- A tax cut meant to give craft breweries (and distilleries and wineries) room to grow, is set to expire at the end of the month. It’s called the Craft Beverage Modernization and Tax Reform Act, and unless it’s renewed, the taxes craft breweries on each barrel they produce will double.

In the past few years, Rochester’s become a destination for beer lovers, with its newest brewery, Thesis Beer Project, bringing the total to six.

“We are really a true industry that’s growing in the state of Minnesota, not only across the country, but Minnesota’s really got a lot of craft brewers,” said Tessa Leung, CEO of Grand Rounds Brewing Co. in Rochester.

Minnesota has around 180 breweries, all of them now bracing for a tax hike. Since 2017, breweries have paid a $3.50 federal excise tax on every barrel of beer they produce, but that temporary tax cut is set to expire at the year’s end.

Starting January 1, 2020, breweries will have to pay $7 a barrel.

“Which doesn’t sound like a lot,” Leung said, “but I’m sure if you start doing the math and you produce 5,000 barrels or 10,000 barrels, that’s a significant amount of money.”

The tax hike is projected to cost small and independent breweries $80 million nationwide.

“That’s somebody’s salary, that’s new equipment, that’s marketing and quite honestly, small breweries have come to depend and kind of work in the parameters of the $3.50,” Leung said.

“You know, there’s certainly a lot of operational costs at a brewery that many people don’t realize. This specific tax cut, there’s a lot of really great stories that the Brewers Association has collected of breweries being able to use this money to kind of put it right back into their business and help them grow,” said Lauren Bennett McGinty, executive director of the Minnesota Craft Brewers Guild.

Grand Rounds was able to invest in the research and development of their beers, update equipment and hire another brewer, but the tax increase will mean making adjustments.

“I wish we had, you know, the ability to double our prices and have nobody say anything about it, or take a vote on it, but people vote with their dollars, and they vote with where they’re at,” Leung said.

Breweries are hoping to make the bill permanent, or get an extension before the end of the year. The bipartisan bill has 323 co-sponsors in the House of Representatives and 73 co-sponsors in the Senate.

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