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Help with profit margin in Michigan?


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Are there any MI distillers that could help explain the price breakdown for inside and outside sales? I know how much my bottle/label/cork and juice cost but need to know what taxes are added by the Fed/State/Distributor . This would be for a 750ml bottle that retails for $30 both on the store shelf and at the distillery.


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The federal system is easy. $13.50/proof gallon. If your spirit is 80 proof = $2.14/750ml bottle. 100 proof = $2.67/750ml bottle etc.

Michigan, being a control state has some of the highest and most complicated taxes around. The state buys your liquor from you, then sells it to your distributor and you pay them almost as much back in taxes. You will need to work backwards from your desired retail price to find what taxes will be owed. The MLCC system works by you submitting a per case quotation, basically, what you want to charge the state to buy your spirits. You submit a quote X. then then state marks that up 65% and takes that for profit. They then take that number (X*1.65) and mark that up another 12% (also taken for various taxes). This is then the state minimum price that you see on store shelves. Thus if you say a case will cost them $24. This computes to $2/bottle. The intialmarkup is $3.30 and then the addition 12% brings you to $3.69/bottle. However, if you want your state minimum price to be $30/bottle (more realistic, the $2 was just an example), your intial case quote would be $194.75. Each bottle would be $16.23. After markups the shelf price comes to $29.99. Bottom line: State taxes come to $13.76/bottle. A little ridiculous, no?

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Sorry, Shindig. I screwed up some calculations on the state side of things as I was trying to do that off the top of my head. I sat down at the office this morning and checked my work realizing I used some of the wrong formulas. My original number is off but not by much. Once you submit a case quote to the state they approve it and send you a tax rate schedule, but the gist is as follows (Rounding to three decimals as the state does):

Case quote/12 = PER BOTTLE QOUTE X

Per bottle quote with 65% markup is BASE PRICE = 1.650X

Licensee discount is 17% of BASE PRICE = .17*1.65X = .281X


The SCHOOL AID TAX is 4% of the BASE PRICE = 1.650X*.04 = .066X

The GENERAL FUND TAX is 4% of BASE PRICE = 1.650X*.04 = .066X

The CONVENTION FACILITIES TAX is 4% of BASE PRICE = 1.650X*.04 = .066X

Thus the total tax rate per bottle owed is MLCC SHARE+SCHOOL AID + GENERAL FUND + CONVENTION FACILITIES = .369X+.066X+.066X+.066X = .567X

or 56.7% of your per bottle quote. Please confirm this with your tax rate schedule but those are the numbers I use. Believe me, this is the state's convoluted language they are using, not mine.

Now, to determine your state minimum price you can use the MLCC's calculator found at

http://www.cis.state.mi.us/mlcc/excel/shelfpri.xls%C2'> They use some different arithmetic from what is found on the tax rate schedule but these numbers are mostly for liquor stores to use. Bottom line is a case quote of $191.35 will get you a shelf price of $29.99. Calculate your taxes then off of a case quote of $191.35.
Distributors must charge you at least $8.32 per case of spirits but the state reimburses you $6.97 for every case they buy thus you will be paying the distributor $1.35 per every case.Theoretically, you may enter into a distribution contract with your ADA and negotiate that they will charge you $10 a case and then you will be paying ($10-$6.97=$3.03) per case. This contract negoation is up to you and the number may be higher or lower but at minimum $8.32/case. Direct sales out of your tasting room avoid this case fee, but you still must sell your spirit for no less than the state minimum.
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I found this today online. Thanks!!!!

Acquisition Price

The acquisition price is set by the producer of liquor (with approval by the MLCC) and is what the MLCC as the state wholesaler pays. Our example uses a 750 milliliter bottle. The price is established on a per case basis and is public information. A case of Bottle X costs the state $229.76—and contains 12 bottles, each costing $19.15.

Base Price

The base price is the acquisition price plus a 65 percent markup applied by the MLCC.2 In the process of establishing the base price, the MLCC converts the per case acquisition price to a per bottle price and utilizes a rounding formula. In our example of Bottle X, this conversion results in a bottle price of $31.60. The base price is significant for a number of reasons beyond the 65 percent markup that goes to the MLCC:


1. The base price is used to calculate a number of state taxes that are applied to each bottle of liquor sold in the state. These taxes are generally called the “four specific” liquor taxes:

4% convention and facilities3 (base price x 4%) or $31.60 x .04 = $1.26

4% School Aid Fund4 (base price x 4%) or $31.60 x .04 = $1.26

4% General Fund5 (base price x 4%) or $31.60 x .04 = $1.26

1.85% substance abuse tax6 (base price x 1.85) or $31.60 x 1.85 = $0.58 (off-premise only)

The total taxes on Bottle X are $4.36

2. The base price is also used to calculate the minimum licensee profit, or “licensee discount” (base price x 17%7). In this case, the licensee discount on a bottle of Bottle X is $31.608 x 17%, or $5.37. In other words, on off-premise licensee pays the state $35.96 - $5.37, or $30.59, for each bottle. Since on-premise licensees do not have to pay the 1.85% substance abuse tax (they must, however, pay the other three specific liquor taxes), an on-premise licensee pays the state $30.01 for each bottle of Bottle X.

Out of the 65 percent markup that goes to the MLCC, the MLCC pays for administrative operations, the licensee discount (in this example $5.37), and the state’s share of the ADA fee (in this example, $0.69 per bottle). After deducting the licensee discount and the state’s share of the ADA fee, but prior to deducting its administrative expenses, the MLCC share of Bottle X equals $6.38.


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