Unless something changes between now and July 1, the way Pennsylvania breweries collect and remit tax on the beer they sell on-site will change.
And suffice it to say, they’re not happy about it.
The Pennsylvania Department of Revenue announced last year that, effective Jan. 1, breweries that sell beer to customers from a taproom would have to start charging a 6% sales tax. Previously, brewery beer sales were exempt from sales tax.
Due to backlash from many of the state’s nearly 300 breweries, the department delayed the implementation of the tax change until July 1 to see if something could be worked out.
The change has been opposed by Brewers of Pennsylvania, the state’s official brewers guild, because it will create different tax rates for breweries that sell beer from their facilities and restaurants and bars that sell the same beer. Restaurants and bars pay a tax on the wholesale price of a keg of beer they buy from a distributor or a brewery but are not required to charge a retail sales tax to customers.
So, if a brewery sells a keg of beer to a restaurant for $100, the restaurant pays 6 percent on the cost of the keg: $6. Under the proposed tax change, breweries would have to charge sales tax on every pint of beer they sell. So if a pint costs $5 and there are 120 pints in a keg, it’s $36.
Brewers are also opposed to the change because it is not the result of new legislation or Pennsylvania Liquor Control Board policy, but instead a unilateral decision by the Department of Revenue.
Ted Zeller, an attorney with Norris McLaughlin in Allentown who specializes in liquor law, said last week that the state House of Representatives has passed a bill that would bring the tax breweries pay in line with other retailers.
“Under the special bulletin from the Department of Revenue that has not yet gone into effect but was going to go into effect July 1, breweries would be taxed at four to five times the rate of grocery stores, bars and restaurants,” he said.
Zeller, who is the general counsel for Brewers of Pennsylvania, the state’s official brewers guild, said the guild worked with Gov. Tom Wolf’s office to come up with a formula to equate the retail sale amount to a wholesale amount for tax purposes.
“There was authority in the tax code to recalculate a retail price to bring it down and then charge tax on that price at 6%,” he said. “They did the same thing here for brewery taprooms, and so you’ll take 25% of the retail price and then you’ll charge 6% on that retail price. The other way to do the math is you’re paying 1.5% on a pint.”
There will still be an increase on the amount of taxes breweries must collect and remit, but it will not be as steep as before under the Department of Revenue decision.
“It just won’t be as unequitable compared to other retailers,” he said. “The way the tax code is set up, retailers pay it on the wholesale price. The Department of Revenue want to charge us on the end-use retail price.”
Zeller noted that the bill is not an effort to get out of paying taxes; it’s just an effort to pay the same tax rate as other similar businesses.
“Breweries already have unique taxes assessed against them,” he said. “They have a production tax called the malt beverage excise tax. No other producer in the commonwealth has such a tax. Wineries and distilleries do not pay malt beverage excise taxes.”
Zeller said the bill was scheduled to go to the state Senate this week for consideration, and he’s optimistic it will eventually be signed into law.
“It passed the House 196-0, so we believe that bodes well for its ultimate passage,” he said.
