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Federal Excise Tax Reduction - Small distilleries

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Fellow distillers,

As we all know, the excise rate that we pay on our production is exactly the same as any other producer of distilled spirits. The rate of $13.50 per proof gallon is constant, and has no allowance for smaller production. Conversely, breweries 60,000 barrels and under pay an excise tax 60% less that of a large producer. Wineries under 100,000 gallons pay a tax rate up to 84% less than larger producers. As small distillers, we are paying more than our fair share.

I'd like to see this become an ADI project, which I will volunteer to coordinate. I think we need a letter on the issue on ADI letterhead, signed by each and every small licensed DSP, requesting a lower excise tax rate for production under a certain level. This can be added to individual letters from the distilleries themselves. This "packet" should then be circulated to each and every one of our Congressmen and Senators. Plenty of elections coming up, and plenty of opportunities to raise the issue in many different forums.

We can also approach some lobby groups, agriculture for example, to attempt to gain support.

Our government is never too keen on reducing tax income, but if we make this a small business, agriculturally based issue, we may just gain some traction.


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I'm all for lower taxes.

Just a thought about pitching this idea - small wineries and breweries aren't 'assessed' at a lower tax rate - they get a 'small producers credit'. I'd try to get the small producers credit extended to cover spirits.

There's one other alcoholic beverage that doesn't get the credit - naturally produced (bottle fermented) sparkling wine (or cider).

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I'd like to think with precedent identified it should be an easier road, but we (ADI) would have to agree on a 'small producer' threshold in terms of production that would be on par with where it is set for the other manufacturers. This is one of those situations where you have to do all the work before proposing it if you have a chance of it going anywhere.

Could you link to the small producer regs for the others?

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This is a good, and necessary, undertaking for ADI.

That said, as with all our advocacy programs, we have zero budget to implement it.

We're open to everyone's thoughts on this. One idea that has been tossed around is a re-structuring of dues into a more "tiered" nature, as is done with many trade organizations:

Commercial Distillers with DSPs (or truly serious about getting one) = highest (for exactly the reason of advocacy on their behalf)

Supporting Members: 2nd tier

General Members: 3rd tier

Or we can create a second entity (LLC) that is dedicated to advocacy into which funds can be channeled either through a portion of membership dues (as outlined above), and by direct contribution, such as an endowment.

We have created such entities in the past, and in other contexts, but they were highly dependent upon a few major donors.

Thoughts, people?


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Good point. Wording is everything.

The link to the TTB tax rates is on the TTB site. Easy to find. http://www.ttb.gov/tax_audit/atftaxes.shtml

Let's do some math - For a brewery - 60,000 barrels would equal 14,880,000 16 ounce servings. For a winery - 100,000 gallons would be about 2,560,000 5 ounce servings. So the distillery equivalent at a 1.5 ounce serving would be about 30,000 gallons of production on the winery side or 174,375 gallons of spirit at the brewery level. Quite a range!

Also it appears the "reduction" should be somewhere between $8-$12, depending on whether you model after beer or wine.

And although I support anything that supports this industry, I'm not sure if we could organize properly in any short period of time. May be best to go grass roots right now, and back it up with more formal approaches later.


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I think there's some value in tiering the ADI dues. I've got a DSP - but can't use it due to troubles with my State. I have a hard time justifying full ADI dues against other organizations that cover my other products. A lower rate would be tempting.

Second thing to watch for - is the ADI a registered non-profit? Depending on its exact classification, it might be limited to how much lobbying it can do. I think it can coordinate the efforts of its members, regardless.


I flattened it to pf-gal - about 150k pg for breweries and about 20k pg for wineries.

What counts as 'small' is almost as fun a topic as 'what counts as craft' (but that's another thread). In WI, we [wineries] lost the argument with the wholesalers, who managed to hold the definition down to 25k gal - a number they got from a specialty wine _retailers_ website. We tried using the existing WI small brewer definition, and then the Federal levels you mention. Alas, no luck.

With the Federal tax credit, it's the first x gallons that get the credit - nothing bars you from making more.

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I think it's a great idea! I also think it won't be very easy to get done and will likely take years- but now is the time to start. Will it really cost us anything? If we have access to congress/senate members friendly to the idea I doubt we'd need to hire attorneys. Maybe I'm dreaming.

I have used the services of my congressman's office in the past and have a contact there- the congressman's very tax payer friendly and has been in office for 30 years so he knows his way around. I'd be happy to initiate a conversation to see if he would have interest in helping/guiding us to get this done.

As for quantity, if the definition of craft distiller Ralph came up with is going to be adopted by ADI then we should stick to the amount defining us (I think it was 50,000 gal)- consistency is important whatever the number is.

I think the next thing we need to establish is why should we be given a tax credit? Off the top of my head I'd say one of the top reasons is that under the government mandated three tier system, small producers are at a disadvantage as we do not have the money to access markets that the big guys do.

Thoughts? Anyone know what the beer producers used as an argument?

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