A packed bar on a Wednesday night is not a rare sight in Nashville, but this past week revelers at Yazoo Brewing Company were congregating for a common cause: the reformation of an archaic policy that gives Tennessee the distinction of having the nation’s highest beer tax.
Under the current structure, the 17 percent wholesale beer tax is based on the price of the brew, not volume sold. This means that beers with higher price points — typically, microbreweries and craft beers — are taxed higher, putting a strain on the small Tennessee-based businesses that produce them. And as beer prices increase with inflation and rising prices of raw materials, the amount of tax increases.
Yazoo hosted the kickoff party for a statewide campaign launch for the Beer Tax Reform Act of 2013. The act, filed Jan. 30 by Sen. Brian Kelsey (R-Germantown) and Rep. Cameron Sexton (R-Crossville) proposes that the wholesale tax to be calculated on volume instead of price. This adjustment would prevent the beer tax from increasing steeply each year.
Don Sergio, who owns Calfkiller Beer with his brother, Dave, brews and distributes out of Sparta, Tenn. Sergio explained that the current tax structure makes little sense for a small business like his. “Being our own distributor in the local market, which includes Cookeville, half of the beer we produce goes there,” Sergio said. “So in turn, every month the amount of taxes we pay to the city outweighs what we can afford to pay ourselves.”
Craft brewers experience inflation in their raw supplies like any other business, and as the tax rises with those costs, it makes it difficult for them to effectively grow their companies and compete with larger breweries like Anheuser-Busch or Miller Coors. Increased costs are passed on to the distributors, and on to local bars and restaurants.
“These high taxes put a strain on the ability for us to grow the business or to have extra funds for things that are unexpected,” Sergio said. “We are not picking on Cookeville — this is a state tax — but for us Cookeville is the place we sell the most beer. I know it sounds crazy and unfair, but it is true. I hope that people will see how ugly the tax structure is in Tennessee. Dave and I have an ultra-small business. We need a cap so it doesn’t keep going.”
When addressing the crowd, Kelsey remarked that he supports this bill as a fiscal conservative. “It’s about jobs, more choices for consumers, more jobs for brewers and lower taxes for taxpayers.”
Sexton said the tax reform makes sense because it’s the method by which wine and liquor is taxed, and the bill wouldn’t disrupt revenue and would still take care of local governments. “Right now, it’s a penalty on small businesses,” he said.
With more than 400 brewers, distributors, and beer aficionados in attendance, the movement celebrated a spirited start to their campaign.
“You can see from the turnout that there is a lot of interest in fixing beer tax policy in Tennessee this year,” Yazoo’s Linus Hall said. “Tennesseans need a fairer beer tax that encourages more local breweries and better beer selections in the state, instead of the current tax structure that in fact does the exact opposite.”