State Excise Tax

[flyhigher87]

Hey guys,

   I am looking up state excise taxes and I have a question.  They all say per gallon is this a proof gallon?  I'm looking to make a cocktail drink at about 7% do i have to pay the same tax as a 40% spirit or is it a proof gallon and the tax is on the quantity of alcohol?  This is a make or break whether this is profitable or not

[Rum]

In Florida it is by wine gallons. The tax is broken into a few tiers depending on the strength of the product. It is paid at the distributor level.

[Silk City Distillers]

If in your state the wholesaler/distributor is responsible for collecting and paying excise taxes, in your case the excise tax would payable when bottles are transferred from the distillery to the tasting room.  This would be the equivalent "event" in that situation.

The way we work, the distillery invoices the tasting room and "distributes" to them.  Liability for the excise tax occurs as soon as the bottle moves out of the bonded area, regardless of when it's poured or sold.

This also keeps state and federal excise taxes synchronized, otherwise you are tracking both excise taxes separately.

[dhdunbar]

This is a state by state rule that cannot be generalized.  How can I stress this enough - ask the state taxing authority!  They will be glad to answer the question and do so correctly.  I'll bet its a per gallon basis, not proof gallon basis, unless it says proof gallon.  BUT I DON'T KNOW THAT.   So I'm starting 2019 with screaming capitals.  Ask the state.  They will tell you.

Silk City points out that in most states the wholesaler is the one who pays the tax, unless you are acting as the wholesaler, or are selling at retail through a tasting room.  But you still need to consider the tax because of the mark up that the wholesaler and retailer will take on the product.  What shelf price do you want?  You need to know the tax and the markups.  And I'd say that as a general rule, if you want to sell for about $27.00 a bottle, you would be much better off at $26.98 than you will be at $27.02.  Here, your wholesaler should be able to tell you the target price to the wholesaler to get the shelf price you are looking for.