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tax break for small distillers


daveflintstone

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Well, why not?

Click here for the story about legislation introduced in the senate to reduce the tax rate for small breweries, by half.

Where is the Distilled Spirits Council on this? I will gladly sign up and pay a $500 membership fee if they can expand this to include small distilleries.

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Well, why not?

Click here for the story about legislation introduced in the senate to reduce the tax rate for small breweries, by half.

Where is the Distilled Spirits Council on this? I will gladly sign up and pay a $500 membership fee if they can expand this to include small distilleries.

You won't see DISCUS getting behind this issue... not that it's not a great idea for us, but it would go against their big money donors.

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This could be a great opportunity. If anyone locates a link to the proposed bill please post it here.

It might be possible to lobby the sponsors, explain our situation and encourage them to amend the bill to include language for small distillers when it gets to the floor. This could be a lot easier than starting with a new distillery specific bill.

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House bill 4278 is to reduce excise tax on beer up to 60,000BBL's, as shown on your attachment. This is being spear headed by Dan Koptman of the St. Louis Brewery here in my town I have talked to him about riding on this house bill to reduce tax for craft distillers. he felt that it would not fly and wanted to keep it concise and only for breweries. That being said he felt the distillers as a group need to organize in define what is a craft distiller is and aproach this the same way the brewers have. Part of this is finding someone in the ways and means to sponser this type of bill. It's a lot of politics!

Also when I was approached by DISCUS to join, I ask him about this effort and what they might do for us in this area to reduce our tax rate. He told me that there is a snow balls chance in hell that legislation will pass and now is not the time to ask for a reduction in taxation. However the Brewers association is very positve that this will go thru dispite his comments.

My suggestion is if we want action to reduce our tax then we have to organize and get involved with our legislators and present our case together. Anyone interested?

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My suggestion is if we want action to reduce our tax then we have to organize and get involved with our legislators and present our case together. Anyone interested?

Let me know how I can help out. I'd be interested.

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House bill 4278 is to reduce excise tax on beer up to 60,000BBL's, as shown on your attachment. This is being spear headed by Dan Koptman of the St. Louis Brewery here in my town I have talked to him about riding on this house bill to reduce tax for craft distillers. he felt that it would not fly and wanted to keep it concise and only for breweries. That being said he felt the distillers as a group need to organize in define what is a craft distiller is and aproach this the same way the brewers have. Part of this is finding someone in the ways and means to sponser this type of bill. It's a lot of politics!

Be prepared for years of work if starting from ground zero. However, an amendment can be added by any legislator (if I remember high school civics correctly) and it can make changes quickly- it doesn't mean the whole bill fails if the amendment fails. Love the brewers, but we need to look out for our own interests just as they are only looking out for theirs. You want to cut time and get it done? Go the amendment route.

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I thought this discussion sounded very familiar...

Melkon Khosrovian had a thread regarding this not too long ago. There is even a proposal listed and some discussion.

PROPOSAL TO REDUCE FEDERAL EXCISE TAXES FOR SMALL PRODUCERS

http://adiforums.com/index.php?showtopic=200&view=&hl=Melkon%20Khosrovian%20&fromsearch=1

It seems that now would be a great time to get a consensus and forward this to the powers that be (or anyone else that will listen).

If you know anyone specific, try to get them to drop this in as an amendment.

Todd

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Be prepared for years of work if starting from ground zero. However, an amendment can be added by any legislator (if I remember high school civics correctly) and it can make changes quickly- it doesn't mean the whole bill fails if the amendment fails. Love the brewers, but we need to look out for our own interests just as they are only looking out for theirs. You want to cut time and get it done? Go the amendment route.

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Yes you are right it takes years to get everything lined up and the right people to sponser a bill and more importantly find the right support. And yes an admendment added at the time of the vote is often done and this would be the right bill in my opinion, however when I talked to Dan who is heading up this initiative he did not want to offer any help to us he feels these are two majorly differant industries. The question is does anyone have any type relationship with their elected official to be in our corner. We need to have someone like that to be there when we need them to act in our behalf.

The other part of the equation is even though we want lower taxes, there needs to be an offset to lowering that tax. Will it bring more jobs, will it bring more people to open craft distilleries and have a larger gain in overall tax collected? Bottom line is we have to have a strong reason to lower this tax and what overall benefit will this make.

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The other part of the equation is even though we want lower taxes, there needs to be an offset to lowering that tax. Will it bring more jobs, will it bring more people to open craft distilleries and have a larger gain in overall tax collected? Bottom line is we have to have a strong reason to lower this tax and what overall benefit will this make.

Well I would assume the reason is the same as given for the small breweries.

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For small businesses, it's the same across the board. Don't matter whether it's a brewery, winery, distillery. Small means you pay more for everything since you cannot achieve the same economies of scale as a larger producer. All your raw materials are more expensive. Instead of being able to buy a million bottles at a time, you buy a pallet or two. You have to use generic off the shelf bottles, because you can't afford the quantities necessary for a custom bottle. Nearly all the non-control states require you to use a distributor, by law, who'll mark your product up more than 100% and let it sit in a warehouse because they can make more in 5 minutes selling yet another vodka than they will in a year of selling your product, assuming they want to bother at all in trying to sell it. We're often making unusual niche products that don't have a broad appeal, and since we're prohibited by state law from selling direct to license holders in other states, we're not able to reach our special customers very easily.

Also, distilleries (all sizes) are very good job multipliers. I think the number I read somewhere was 1.3. That;s fairly high I think. By promoting distilleries, you promote farms growing grain and raising beef and pork and chicken. All natural, not factory farmed because we support the family farm.

Because of our inability to manifest economy of scale, all forms of taxes and insurance become greater burdens on our bottom line. 99% of what we do is similar to a microbrewery, yet our worker's comp rates are the same as a roofing contractor (at least in NY this is true), which limits our ability to hire workers. For a $10/hour full time employee, NY wants $2400/year/employee.

Senator/Representative, don't you want to help small business?

Maybe I could think up some more reasons, but it's early in the morning.

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  • 3 weeks later...

Be prepared for years of work if starting from ground zero. However, an amendment can be added by any legislator (if I remember high school civics correctly) and it can make changes quickly- it doesn't mean the whole bill fails if the amendment fails. Love the brewers, but we need to look out for our own interests just as they are only looking out for theirs. You want to cut time and get it done? Go the amendment route.

Ways and Means Members of the 111th Congress

Democrats Republicans

Sander M. Levin, MI-12 Acting Chairman

Charles B. Rangel, NY-15

Fortney Pete Stark, CA-13

Jim McDermott, WA-07

John Lewis, GA-05

Richard E. Neal, MA-02

John S. Tanner, TN-08

Xavier Becerra, CA-31

Lloyd Doggett, TX-25

Earl Pomeroy, ND-at large

Mike Thompson, CA-01

John B. Larson, CT-01

Earl Blumenauer, OR-03

Ron Kind, WI-03

Bill Pascrell Jr., NJ-08

Shelley Berkley, NV-01

Joseph Crowley, NY-07

Chris Van Hollen, MD-08

Kendrick Meek, FL-17

Allyson Y. Schwartz, PA-13

Artur Davis, AL-07

Danny K. Davis, IL-07

Bob Etheridge, NC-02

Linda T. Sanchez, CA-39

Brian Higgins, NY-27

John A. Yarmuth, KY-03

Dave Camp, MI-04 Ranking Member

Wally Herger, CA-02

Sam Johnson, TX-03

Kevin Brady, TX-08

Paul Ryan, WI-01

Eric Cantor, VA-07

John Linder, GA-07

Devin Nunes, CA-21

Pat Tiberi, OH-12

Ginny Brown-Waite, FL-05

Geoff Davis, KY-04

Dave G. Reichert, WA-08

Charles W. Boustany Jr., LA-07

Dean Heller, NV-02

Peter J. Roskam, IL-06

We could all submit a proposal to our Representitive. I read some good ideas for the proposal on this thread. Someone could write a letter and we could all copy and paste it to the proper Rep.

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  • 2 months later...

I wouldn't count on Charlie Rangel's help on this. Check the thread on the investigation into his sweetheart deal with DIAGEO.

We've been working with Sen. Gillebrand (NY) office and Congressman Hinchey (NY) on this for about a year now. We are attempting to get the case before the Ways and Means Committee and the Ag Committee. As commented earlier in the thread CONTACT YOUR FEDERAL LEGISLATORS and keep on them about it. A single letter or email won't do a thing to help the cause. Persistence counts. Be the squeaky (and polite/diplomatic) wheel.

R

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  • 5 weeks later...

Met yesterday in DC with two Legislative Assistants for Senator Gillibrand at the Russell Senate building to discuss reduced excise tax for micro producers. They agreed the issue was appropriate and the proposal reasonable and agreed they will work with Congressman Hinchey's office to propose a bill to give micro spirits producers quid pro quo with the micro brewers and wineries who pay 20% the rate of excise tax the big producers pay.

At this point we have open correspondence and agreement in principle with the offices of Gillibrand and Hinchey, and have opened a dialog with Chuck Schumer's office as well. Hinchey's office has prepared a summary description of the bill they may introduce. It mirrors the wording and intent of the proposal developed by Melkon (thanks Melkon for that great supporting documentation).

In fact, both Senatorial offices agreed the precedent is in place already with beer and wine discounts and both agreed it was appropriate to expand that discount to include micro spirits producers. They understand the barriers ot entry and the enormous costs for the entrepreneurial distiller starting up and trying to get product through the Federal and State mazes and into the marketplace. They agreed we as an emerging industry need help in the form of Excise Tax relief to encourage the growth of the industry.

Want to help reduce your Federal Excise Tax rate by 80%? Contact your Fed Congressman/woman and Senators and get them on board. Again, remind them this is NOT about alcohol, it is about:

  • Fairness in the marketplace (parity with wine and beer micro producers):
  • Economic Development in rural and agricultural regions;
  • Expansion of Agricultural opportunity for America's small and medium farm operations;
  • Tourism opportunities;
  • Jobs, Jobs, Jobs!!! (this particular point was raised more than once as a priority issue);
  • Re-Establishment of a traditional American Craft industry and its relationship to American agriculture.

This work is being consider NOW. Contact your Legislators NOW.

R

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Yes, this is going on NOW with a consideration to reduce the excise tax for small brewers by half in a graduated tax scale. I would think it would be a good opportunity to introduce language to the effect that equivalent tax reductions be afforded small distillers.

House Resolution 4278

Senate Bill 3339

Here's a link to the Brewers Association site with model letters to Senators and Representatives, which could be (somewhat) adapted to be applicable for distillers.

EDIT: I see these were mentioned further back in the thread. ;)

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Here's my (adapted) sample letter so far... I'm stealing Ralph's great bullet points... I'd love to hear what some of you might add to this to spice it up.

-----------

September 19, 2010

Representative (XX)

(Address)

Washington, D.C. 20515

Dear Rep. (XX),

As you are aware, H.R. 4278, a bipartisan bill introduced by Representatives Neal and Brady, is under consideration to create a graduated beer excise tax rate of $3.50 and $16 for America's small brewers. I urge your co-sponsorship of the resolution. Moreover, please allow me to point out the opportunity this presents to extend similar support to the burgeoning Craft Distiller industry, which currently enjoys none of the excise tax benefits afforded microbreweries and small winemakers.

The small brewers excise tax rate enacted by Congress in 1976 helped to nurture the development and growth of the craft beer industry in America by establishing a reduced, graduated excise tax rate for microbrewers. To that end it has been a huge success. Now more than 100,000 jobs are created by microbreweries, $3 billion paid in wages and benefits, and $2.3 billion in tax revenue is generated. And with the growth of microbreweries across the nation, the impact on tourism, agriculture and trade has been extremely positive.

However, while these benefits were extended to microbrewers (and similar benefits to small wineries), small distilleries have enjoyed no such benefits. Now, with H.R. 4278 proposing to further reduce excise tax rates for microbrewers, small distillers still remain completely outside the context of the proposed legislation.

Like with the craft beer industry of two decades ago, today there is an unprecedented growth of craft distilleries. Where there were just a handful of small distilleries only a decade ago, now they number over 300, and growing at a rate of 10% or more per year! What was once a proud, distinctively American craft industry -- lost during the Prohibition era -- is experiencing an astounding resurgence. Despite the steep barriers to entry (equipment is very expensive and the hurdles involved in obtaining local, state and federal permits are prohibitive), these small businesses are having a significant positive impact on:

• Economic development in rural and agricultural regions, or in neglected urban areas;

• Job creation;

• Support for small and medium agricultural producers;

• Tourism opportunities;

• Re-establishment of a traditional American Craft industry whose products are now recognized amongst the world’s finest;

• ...and, of course, generating local, State and Federal tax revenues.

According to an economic study conducted by John Friedman of Harvard University on behalf of the Brewers Association, H.R. 4278 would stimulate job creation quickly and at a low cost to the federal government. Extending these excise tax reductions to craft distilleries would not only expand the job-creation benefits the resolution is expected to produce, but would ensure enormous future benefits by fostering the rapid growth of America’s craft distilling industry.

Breweries and distilleries have much in common. With the exception just one step in the production process -- the distillation process itself – there is little difference between the two. A distiller must first create a “beer” from which a whiskey (for example) is distilled. Given this simple fact, why should there not be parity between small craft distillers and microbreweries (or small wineries) when it comes to excise tax reductions?

Again, please consider co-sponsoring H.R. 4278, and please propose the inclusion of the growing craft distilling industry in the legislation.

If you have any questions, please contact me at XXXX. Thank you for your time and consideration.

Sincerely,

Chris Martin

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Please read this letter to Senator Gillibrand's office from LAKE PLACID SPIRITS. It is a good example how to format your letters to your own Federal Legislators on the two issues noted in Mike's letter to Mr. Cardinal. NOW IS THE TIME, CONTACT YOUR FEDERAL LEGISLATORS:

From: Mike at Lake Placid Spirits [mailto:info@lakeplacidspirits.com]

Sent: Tuesday, September 14, 2010 2:40 PM

To: Cardinal, Jon (Gillibrand)

Cc: Ralph Erenzo; annsoleary@msn.com

Subject: International Trade opportunity from small distillery producers

Dear Jon

We were given your contact details by Mr. Ralph Erenzo of Tuthilltown Spirits who is leading an effort to gain input for small craft distillers across the country.

In view of President’s Obama’s stated future goal of new and incremental US Exports, Lake Placid Spirits, LLC would like to comment on the following issues:

a) International Trade enhancements through review and simplification for small craft producers

B) Reduced excise tax for startup and small producers

Lake Placid Spirits is located in the middle of the Adirondack Park where manufacturing is non-existent and Essex County NY has the highest rate of business failure in NY State.

Around the globe, distilleries utilizing local agricultural produce equal jobs. As local distillery brands develop into regional and national brands a direct result is new tax revenue and the possibility of export sales.

Go back 90 years and prior to the advent of Prohibition over 1000 distilleries operated in New York State alone. Lots of jobs now up in Canada making best-selling whiskey’s drinking by Americans customers.

50,000 pounds of local Tucker Farms potato’s, located on the North Slope of the Sentinel Range, in Gabriels, NY were grown for Lake Placid Spirits to use in a potato vodka.

As a hands on craft producer our goal is to use traditional, local agricultural produce. The purchase of feedstock’s for distillation and manufacturing by small producers adds value to the efforts of the agricultural sector.

In Northern New York State we are losing family farms at an alarming rate. Over time, as we grow our product offering, production expertise and volume we will be able to support elements of NNY agriculture with sustainable annual purchases.

Incremental tax revenue is generated by small producers and legislation should be designed to assist local small producers and startups who, if successful, “graduate” to a higher industry standard tax category.

As a ‘thought-starter’ consider:

This legislation and regulatory update should be considered as self-liquidating as it opens US products to new markets and only creates win-win possibilities.

End markets for local agriculture, local brands, local jobs, tourism possibilities and the possibility of increased exports.

Thanks for your time and attention to this message.

Sincerely,

Ann Stillman O’Leary

President

Lake Placid Spirits, LLC

Mike McGlynn

Manager

Lake Placid Spirits, LLC

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I, too, just sent out three letters to Senators Webb and Warner (D-VA) and Congressman Periello (D-VA).

Thanks, Chris Martin, for the sample letter - great example to spice up!

Just a thought - with the elections coming up, one may wish to contact the opposing candidates to see their stance on this issue.

Sharon

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Guy raises the question of "content" in the proposal. The proposal made by the Committee, led by Melkon had a very high production number for a "micro" distillery. All discussion on total volume during the leadup to the proposal capped production at 65,000 proof gallons. The larger numbers were added in an effort to entice some of the larger Micros (I know, contradiction in terms), but the number was scaled back when such as TITOS did not elect to participate. For my own part, I think the lower number, 65K is more appropriate. We know from our own experience that the terms "micro" or "craft" or "artisan" are difficult to apply to operations with volumes reaching 1,000 proof gallons. The numbers went back and forth during the discussions in the thread and the final figure which seemed acceptable to all participating was the 65K cap. That is what is being proposed. Up to that point, the proposed rate would be 20% of that paid by those making over that amount. A top cap figure would also be included, passed which a so-called micro would graduate to the next level and ALL their production would be taxed at the 100% rate.

Please all, keep contacting your Federal Legislators. This is perhaps the most important Federal work we can do for all us. Don't let up.

R

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  • 2 weeks later...

Here is the proposal we are fielding for reduced Federal Excise Tax for micro producers:

Small-scale spirits producers need a similar reduced-rate federal excise tax structure to continue to innovate, create U.S.-based manufacturing jobs, support U.S. agriculture, support tourism through visitor centers and tasting rooms, and compete effectively in the marketplace with reasonably-priced handcrafted spirits.

This differential is particularly critical as distribution channels for spirits consolidate and the economic downturn makes marketing handcrafted spirits more challenging.

The following structure is proposed to bring balance to small distilled spirits producers:

 Tier one/medium- and large-scale producers — 100% rate

 Tier two/small-scale producers — 20% rate

Tier Two would rise or fall in relation to Tier One whenever excise rates are adjusted.

Reduced excise tax rates should apply to the first 60,000 proof gallons of spirits sold if producers sell no more than 100,000 proof gallons per year. Producers pay the lower tax rate on the first 60,000 pg, the higher rate on production from 60,000 - 100,000 pg. Once production passes the 100,000 gallon mark the full tax rate applies to all the goods produced by that producer.

Reduced rate apply to:

 Brands directly owned by producers

 Brands manufactured for third parties

The above proposal was the result of two years of effort by the ad hoc Tax Committee of the ADI and is the outcome of discussions here and in the field with micro producers in the US.

At this point, we have received a draft of the "Proposal" from Congressman Maurice Hinchey (D-NY), here is the preliminary statement upon which the proposed legislation will be built:

Proposal: To provide a reduced rate for small-scale spirits producers similar to the reduced-rate federal excise tax structure granted to micro-breweries and small wineries.

Tier 1 distilleries would, by definition, produce over 100,000 proof gallons per year and would pay 100% of all excise tax on all gallons.

Tier 2 distilleries would pay 20% of the federal excise tax on gallons produced up to 60,000. From 60,000- 100,000 gallons they would pay 100% of federal excise tax and production could not exceed the 100,000 gallon threshold. These reduced rates would apply to brands directly owned by producers and brands manufactured for third parties.

We are informed by the Legislative Assistants at both Senator Gillibrand and Congressman Hinchey's offices they anticipate some resistance but since there is precedent already set in law giving the proposed discounted rate to the beer and wine producers, it is entirely reasonable to expect the micro spirits producers' proposal will have legs. Now it's up to all you out there in the spirit world to continue to communicate with your Federal Legislators and get them to sign on this proposal when the bill is introduced.

Note: The amount agreed by ADI membership and published in the newsletter in the definition of a Micro Spirits Producer as a maximum was actually 65,000 pg. We have addressed this with the Congressman's office and the number is to be 65,000 pg as published.

This issue was raised at the DISCUS so-called Micro Distillers Council. The reported response to the producer who raised the issue, "he was nearly shouted out of the room" by the DISCUS CEO. This is an example of how our interests will occasionally diverge from those of DISCUS.

And keep your fingers crossed.

R

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This issue was raised at the DISCUS so-called Micro Distillers Council. The reported response to the producer who raised the issue, "he was nearly shouted out of the room" by the DISCUS CEO. This is an example of how our interests will occasionally diverge from those of DISCUS.

Ralph, Good work on this stuff, and we're working with our legislators too on this, using your example as lead.

As for the DISCUS meeting, I was at that meeting too, and it wasn't quite as dramatic as mentioned. DISCUS did make it clear that their interests lie with the big alcohol companies (and why not? They contribute MILLIONS per year to DISCUS, and we contribute peanuts), and that on tax breaks for small distillers, they would have no position in favor of it.

You're definitely right, sometimes DISCUS will help the small distillers (with press, lobbying against HR 5034, etc.), and sometimes our interests will diverge. That's OK, I think.

Scott

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