tax break for small distillers

[Ralph at Tuthilltown]

Agreed. Tuthilltown Spirits has already paid our dues and taking our seat at the table so to speak (notwithstanding a seat at the "kids' table"). And also agree totally, DISCUS has the duty to look first after it's primary membership, and we ain't it. I think it benefits the small distiller making a serious go of it to join the DISCUS Craft Distilleries club, it comes with some very important benefits.

That said, and at the risk of repeating myself (who, me?) I'm going to go off a bit on this; DISCUS is not the appropriate Agency of the small distillery movement. A separate distinct organization with its own management, financing and voting membership (of DSP owners) is necessary for the micro producers to be fully represented. Clearly we will plant a much smaller footprint on the marble floors of the Capital when we represent ourselves sans DISCUS. However (and don't think for a moment that DISCUS does not know this) we, all of us individuals and partners, we who have put our own money and time and effort (my update on the old "blood sweat and tears" thing) into our small businesses, we are the Faces, the PEOPLE of the spirits industry. The multinational corporations comprising the DISCUS memberships are suits and attorneys (not disparaging either, I have both). When we talk to our Legislators we are the voices of real people with real families and employees with families. Our partners are the local farmers who grow our grain or fruit or herbs. For many of us our entire families are involved. Hell, Wasmund has his sainted Mother pacing the malting floor pulling a rake. This fact, the fact of our Humanity is a massive counterbalance against the weight of any corporation.

This is why the independent Micro Producers must take an active role in organizing and working together, speaking as one on important issues that affect our businesses. It's why they must also get political, there, I've written it, it's in print, the dreaded mandate: "Get political." But in it's simplest form it's just perhaps a half hour of time writing a letter, or just picking up the phone and calling a Legislator's office to voice your concerns as a voting, tax paying citizen and employer.

I had an earlier experience with this sort of thing in the competition sport climbing world, when World Cup and World Championship Competition Climbing were being invented; the work done by a Committee of the Union of International Alpine Associations (UIAA). When the sport wanted to get into the Olympics, it required a separate governing body not beholding to any other governing body/organization. The Committee (I was the American Delegate) advised the UIAA it needed to break away. The UIAA refused to allow it, afraid it would lose control over the group. The UIAA would not allow the Competition Committee to set up its own bank account or take on contracts (dreams of TV revenue in their heads); all necessary to get Olympic recognition so a sport would come under consideration for inclusion. It went on for years and may be still unresolved. Sport Climbing never did make it to the Olympics, for better or worse. All this with Not-For-Profit sporting organizations.

In this case there is "profit" to be considered, considerable profit. The stakes are very high. A tightly held national governing agency controlled by and for profit making members will have the final word over its committees or councils or advisory boards. Given the right and opportunity to control, the parent organization will always exert its final control when it deems fit. It must.

In my opinion, the fairest way forward would be for ADI to organize itself as THE independent national representative body for the Micro Spirits Industry; and that it should then become a full voting member of DISCUS and serve as the de facto "Advisory Council" for DISCUS.

The tax issue is a major step forward. Getting it passed will establish Micro Distilling in Federal Law and the Tax Code as a real thing. The additional benefit will be street cred for the nascent industry. It can be done. There is precedent. It is about the right things: jobs, agriculture, economic development; the timing is good.

At this point it seems the best DISCUS can do for us on this issue is to do nothing. If the organization will not take up the staff with us, I hope they will stand down entirely and voice no opinion at all, overt or otherwise.

[Ralph at Tuthilltown]

Small Spirits Makers' Equal Tax Act

Source: American Distilling Institute

Dec 16th

Attention all Craft and Potential Distilled Spirits Producers: We're trying to change the taxes for small producers in the next two years.

Please send:

1) your congress districts

2) your incoming congress people

3) and let us know if you're licensed

4) where you are located

to James Day flaglerspirits@gmail.com

Goal

To help support the recent expansion and to encourage further growth of small U.S.-based spirits manufacturing by creating a reduced federal excise tax rate for small-scale distilled spirits makers that mirrors the current reduced tiers for small 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, consumers in America and abroad are beginning to experience innovation and quality in spirits similar to what took place with micro-brewers in the 1980s-1990s and independent winemakers in the 1970s-1980s. (Today, many of these brands - such as Sam Adams, Anchor Steam, Mondavi and Kendal Jackson - are not only trend leaders but also sizeable businesses.)

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 make and sell artisan products without the economies of large-scale production. Today, small-scale beer producers pay 39% of the full federal excise tax that medium and large producers pay. Similarly, small producers of average-proof wine (<14% alcohol) pay 18% of the full rate.

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, small spirits makers pay the full rate - $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, 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 undersigned propose the following structure 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. ...

For the full proposal email:

Melkon Khosrovian

melkon@modernspiritsgroup.com

213.949.3569

Modern Spirits LLC

168 W Pomona Ave