Craft brewers find new tax on beer hard to swallow
A new tax on beer sold directly by the state's craft breweries could pour onto customers, with local brewery owners calling the tax “deceitful” and “misleading.”
Beginning Tuesday, taprooms are legally obligated to collect the “use tax” on sales directly to customers. The tax was signed into law by Gov. Tom Wolf in June.
According to information from the Brewers in PA organization — a guild of craft breweries around the state — the tax is on items whether they're consumed on or off site.
The tax is tabulated by multiplying 25 percent of all sales by the local sales tax.
For most of the state, including Butler County, the tax will be 1.5 percent. In Allegheny County, the tax is 1.75 percent, based on the 7 percent sales tax.
Brewers in PA notes the cost cannot be passed on to the consumer directly by adding the tax on a sales receipt. However, breweries are allowed to raise prices to meet the new tax level.
Dan Kos, owner of Missing Links Brewery in Renfrew, noted the initial version of the tax bulletin put out by the state Department of Revenue in 2018 sought to collect a 6 percent sales tax for every dollar of beer sold. It was scheduled to go into effect on July 1, 2019.
He said Brewers in PA worked with the legislature to find an alternative that would not negatively affect the growing craft beer industry, which he noted is behind only California as the largest in the country. The economic impact has been estimated at about $5.8 billion annually, he added.
“The Legislature did the best it could to get away from a full 6 percent per pint,” he said.
Nick Salkeld, head brewer and owner of Stick City Brewing in Mars, said while he hasn't had a chance to fully assess the impact of the tax, adjustments surely will need to be made. However, he said he expects the impact to be relatively minor.
“Our goal is not to penalize our customers,” Salkeld said.
However, John Lasher, founder and head brewer at Cellar Works Brewing in Sarver, said customers might notice an increase in prices.
“As a small, relatively new brewery, our margins are tight as it is,” he said. “The tax itself is one thing, but falsely labeling it as a 'use tax' is just deceitful.”
He said not being able to show the tax on receipts forces the brewery to “eat the tax or raise our prices, while they hide behind the 'use tax' label.”
“It's very unfortunate,” he said.
Salkeld agreed, saying he is disappointed with how the tax was implemented.
“I don't agree with that and consider it misleading,” he said. “Call it what it is: a sales tax.”
Kos said his brewery's prices were likely to increase in the near future without the tax, as production and ingredient costs have increased. However, he said he doesn't anticipate the increases will have a negative impact on customers who see a slightly larger bill.
“It won't make anyone walk out of a place,” he said.
