Tags: beer | tax | excise | wholesale

CNNMoney: Beer Taxes Aren't Created Equally

Image: CNNMoney: Beer Taxes Aren't Created Equally

Friday, 14 Jun 2013 10:05 AM

By Michelle Smith

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If you want to drink beer in America, you have to pay taxes. Some states only charge a few cents, but CNNMoney reveals that some states want quite a bit more. And the state's take is only part of the pricey equation.

State excise tax, also known as the "sin tax," is often considered a consumption tax and it is placed on select items. The goal is to raise revenue and decrease consumption of things deemed harmful to the environment and society. The extra revenue raised is used to pay for government services related to the product.

In the case of beer, the tax is generally charged per gallon.

Editor's Note:
The IRS’ Worst Nightmare — How to Pay Zero Taxes

According to the Federation of Tax Administrators, the median U.S. state tax on beer at the beginning of the year was 19 cents.

At under a dime per gallon, states such as Wisconsin and Colorado have some of the lower tax rates. Wyoming's beer tax is even lower. The 2 cents per gallon, or a penny per six pack, it charges has been the same since 1935, CNNMoney reports.

States in the highest realm of beer taxes include Alaska, Alabama and Georgia. But Tennessee claims the crown for taxing beer. The combination of its state excise tax and a wholesale tax brings its beer tax rates to $1.17 per gallon, or about 66 cents per six pack, according to CNNMoney.

High beer taxes have become such an issue in Tennessee that it gave rise to the Beer Tax Reform of 2013. Critics argue that the problem in the state is that the 17 percent wholesale tax is not volume-based, but rather price-based.

According to Fix the Beer Tax, Tennessee's beer sales have declined 5 percent over the past decade, while the wholesale tax has increased more than 30 percent.

In addition to pushing up the costs for consumers, Fix The Beer Tax explains that the price-based taxing method directly affects companies in the beer industry, such as distributors and wholesalers, and it unfairly penalizes that state's young craft brewing industry.

And it is not just states that are tapping the wallets of beer drinkers. CNN Money says Uncle Sam's excise tax is about 58 cents per gallon for large brewers, which equals about 33 cents per six pack. There is also the possibility that the costs are further boosted by a local excise tax, state sales tax and local sales tax.

In fact, CNNMoney said, The Beer Institute calculates that the cocktail of taxes make up 40 percent of beer's retail price.

"This is an invisible tax that consumers don't know they're paying," Beer Institute President Joe McClain tells CNNMoney. "The people who enjoy beer the most, those middle-class Americans, are feeling the bite of that tax more."

Editor's Note: The IRS’ Worst Nightmare — How to Pay Zero Taxes

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