Zac Triemert

As a follow up to the discussion from the DEFINING "CRAFT" DISTILLERY thread, here's a one-page position document for all of us to discuss, finalize, gather support for from fellow spirits makers and take to our federal legislators ASAP to create a new, lower federal excise tax tier for small-scale spirits maker. The structure below closely follows the TTB's existing format.

As I only had a short window to put this together, please double-check all facts and figures before we take this to broader audiences.

______________________________________________________________________

Small Spirits Makers' Equal Tax Act

Goal

Encourage the growth of hand-crafted spirits production in the U.S. by creating a reduced federal excise tax rate for small-scale distilled spirits makers, similar to the current reduced tiers for beer and wine producers.

Background

The distilled spirits industry has enjoyed a renaissance of local, artisan production of unique spirits over the last five years. Our numbers have swelled from less than 40 licensed makers in 2003 to more than 150 in 2008. Because of our efforts, U.S. and even some overseas consumers are beginning to experience innovation and quality in spirits products they can find in the marketplace that mirror what beer lovers enjoyed with the birth of micro-brewers in the 1980s-1990s and wine lovers with the emergence of the independent winemakers in the 1970s-1980s.

What made the growth of small beer and wine makers possible -- other than hard work and passion -- was a reduced federal excise tax rate that allowed them to compete with much larger producers who benefited from the economies of large-scale production. Today, small-scale beer producers pay 39% of the $18 per barrel in federal excise tax for the first 60,000 barrels they make if they produce less than 2 million barrels per year. Similarly, small producers of average-proof wine (<14% alcohol) pay 18% of the $1.07 per gallon in federal excise tax for the first 100,000 gallons they remove provided they make no more than 150,000 gallons per year.

To put this in context, small beer producers pay $0.02 vs $0.05 in federal excise tax per 12 oz can, while small wine producers pay $0.04 vs $0.21 per 750 ml bottle.

By contrast, spirits makers -- large or small -- pay the same $13.50 per proof gallon or $2.14 per 80-proof 750 ml bottle of spirits.

Proposal

Small-scale spirits producers need a similar reduced-rate federal excise tax structure to continue to innovate and compete effectively with large-scale producers. We the undersigned producers propose the following structure to bring balance to small distilled spirits producers that mirrors the excise rates of small beer and wine producers: Tier one/regular -- 100% rate, Tier two/small-scale -- 20% rate.

Proposed Distilled Spirits Excise Tax Rates

Distilled Spirits.............Proof Gallons*.............750ml Bottle

Regular Rate................$13.50.......................$2.14 (at 80 proof)

Reduced Rate**............$2.70.........................$0.43 (at 80 proof)

* A proof gallon is a gallon of liquid that is 100 proof, or 50% alcohol. The tax is adjusted, depending on the percentage of alcohol of the product.

** Reduced Rate -- For the first 60,000 gallons of spirits if producers make no more than 100,000 gallons per year.

Producers who support this legislation

1. Modern Spirits LLC 168 W Pomona Ave, Monrovia, CA 91016

I am in complete support of the proposed excise tax legislative change and am willing to help however I can.

Thank you,

Zac Triemert

Co-President

The Solas Distillery

17070 Wright Plaza

Omaha, NE 68130

403-763-8868

It's been a frustrating day. The State Fire Marshal gave us his blessing on our distillery more than a year ago, but somehow the City Fire Marshal over-rides his authority (??) and basically told us 'NO'. After many drafts of discussion on our production and storage, he said that we could continue the conversation if we can show that 40% alcohol by volume is a "combustible liquid" and not a "flammable liquid". I've had to scrap the idea of storing any barrels on-site; off-site will have to do. The definition of a "combustible liquid" according to the International Fire Code (2003) is a "liquid having a closed cup flash point at or above 100F (38C)".

Questions: Does anyone have an MSDS that shows the flash point on 40% abv spirits at 100F or above?

Is there any other source that shows this?

Thanks,

Zac

Zac Triemert

Co-President

The Sòlas Distillery

Omaha, NE

Rusty,

Thanks for the help!

Zac

Our Fire Marshal would like to see an MSDS for the spirits that we are going to store in an oak barrel, about 130 proof. Does anyone have a source for an MSDS for spirits at this alcohol concentration?

Thanks,

Zac Triemert

The Solas Distillery

Omaha, NE