Federal Excise Tax Overview

Craft Beverage Modernization and Tax Reform Act

On December 20, 2017, the 115th United States Congress passed legislation that includes a two-year provision of the Craft Beverage Modernization and Tax Reform Act (CBMTRA), which lowers the federal excise tax (FET) for breweries, wineries and distilled spirits producers. The following information will help small and independent breweries determine how the change will affect their businesses.

Short survey: How Do Lower Federal Excise Taxes Impact Your Brewery?

How CBMTRA could impact your brewery

Under the bill, the federal excise tax (FET) will be reduced to $3.50/barrel (from $7/barrel) on the first 60,000 barrels for domestic brewers producing less than 2 million barrels annually, and reduced to $16/barrel (from $18/barrel) on the first 6 million barrels for all other brewers and all beer importers. The bill would maintain the current $18/barrel rate for barrelage over 6 million.

Additionally, CBMTRA allows the transfer of beer between bonded facilities. Previous law states that beer may be transferred between commonly owned breweries without payment of tax. Under the new bill, all breweries will be able to transfer beers between bonded facilities without tax liability, something that will benefit small unaffiliated brewers and give them the flexibility to collaborate on new beers without facing a tax liability.

Who will be allowed to transfer?

  • Independently owned breweries where the transferor has divested itself of all interest in the beer so transferred, and the transferee has accepted responsibility for payment of the tax.
  • Breweries that are owned by the same person/entity.
  • A brewery that owns a controlling interest in another brewery.

New tax rate is now in effect

CBMTRA went into effect on January 1, 2018. As of now it is set to “sunset” on December 31, 2019. The Alcohol and Tobacco Tax and Trade Bureau (TTB) provided their guidance. The BA will continue to monitor developments at TTB and within the broader alcohol beverage industry so that we can provide additional information as soon as it becomes available.

Ensure you’re in compliance

This is a good time to check your brewery’s existing tax compliance system, including recordkeeping, bonds (if applicable), and payment schedules.

Next steps for your brewery

Making CBMTRA permanent is a priority for the Brewers Association. BA staff will continue to lobby on the issue and there are many ways that you can help:

  • Keep track and share information with the BA. Make note of the changes that you make in your brewery, employees that you hire, new equipment that you purchase etc. Participate in surveys like the Beer Industry Production Survey (BIPS) and let us know how many barrels you are producing, what type of entity your brewery is registered as (LLC, LLP, pass-through, etc.) and other things that can help us when we are advocating on the Hill.
  • Invite your members of Congress to visit your breweries.
  • Participate in Hill climbs with your state guild and the Brewers Association.