The business of beer: tax and legal considerations for growing breweries and brewpubs

The craft beer industry has grown significantly in the past number of years. With the expansion of current breweries and the emergence of new breweries come business obstacles and decisions to be made. At these times of development and growth, it is crucial that sales and use tax compliance is not overlooked.

Almost all states impose a sales tax or privilege tax on the sale of tangible personal property. Use tax is the complement of sales tax and is owed by the purchaser when the retailer did not charge sales tax or when a lesser rate was charged.

Sales and use tax tips:

  • Always file your returns. If you do not file on time, penalties may be imposed and the statute of limitations stays open for those unfiled periods.
  • Review out-of-state, online, and credit card purchases. If a vendor does not charge tax on a good or service that is taxable, you will be liable for the use tax.
  • Collect and maintain sales tax resale exemption certificates from distributors and bars that sell your product. Most sales are presumed taxable unless documented.
  • Charge sales tax to customers (and remit) on sales of swag, such as key chains, mugs, and pint glasses (clothing is exempt from sales tax in select states).
  • If you withdraw inventory for personal and promotional use, you may be subject to use tax.

Exemptions from tax:

  • Many states offer an exemption for materials used, stored, or consumed in the beer production process for manufacturers.
  • An exemption also exists in many states for utilities purchased that are used in the production process.
  • Machinery and equipment used for manufacturing and production of your product to be sold at retail often has an exemption from sales and use tax or may be taxed at a lower rate in certain states.

To take advantage of these exemptions, you will need to provide the vendor with an exemption certificate in almost all states. Other states require the tax be paid at the time of purchase and a refund claim be filed. If vendors charge you tax on these types of purchases, you can often apply for a refund directly from the State.

Sales tax audits for this industry are on the rise, so it is important to understand your sales and use tax responsibilities.

For more information on this topic, or to learn how Baker Tilly food and beverage specialists can help, contact our team.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely.  The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.