Beer brewers across the state are supporting legislation that will change the way Tennessee's wholesale beer tax is structured.
“Tennessee beer drinkers are already paying more than their fair share, but this is getting out of control,” Scott Turner, president of Ajax Turner Co. Inc., said in a prepared statement. “We are completely out of step with the nation’s 49 other states. In addition to higher taxes, this is having a detrimental effect on economic development and consumer choice.”
Business leaders said that the current policy is hindering employment growth.
“I want to hire more people and invest more money in my business, but because of the tax, it makes it more difficult to do so,” Linus Hall, owner of Yazoo Brewing, said in a prepared statement. “We’re growing, but just not as fast as we could have to keep up with consumer demand. The margins are just too small because of the 17 percent tax.”
The legislation proposed, called the Beer Tax Reform Act of 2013, would change the way that tax is determined for wholesale deliveries, changing it from a price-based formula to a charge for the volume of beer sold, The Tennessean reported.
Rep. Cameron Sexton, R-Crossville, and Sen. Brian Kelsey, R-Germantown, are sponsoring the legislation, which would maintain the current levels of funding that local governments get from the tax, according to a news release.
Sexton said that the goal of the reform is for revenues to reflect beer sales but at the same time ensure that local governments keep the current revenue levels they get from the tax.
“Our state’s wholesale beer tax needs reform," Sexton said in a prepared statement. "Right now, the tax is working against Tennessee. The world has changed—Tennessee has changed—a great deal since the wholesale tax was established in 1954. The policy should be modernized to reflect changes in the market, such as the growth of craft brewers, to encourage rather than discourage economic investment."
Kelsey said that the state's beer sales have gone down 5 percent in the past decade, while revenues from the wholesale tax are up by 30 percent.
"It doesn’t make sense to tax any product like that," he said in a prepared statement. "Punitive taxes are always unacceptable.”
Under current law, Tennessee gets a 17 percent tax on the price of beer sold to wholesalers.
The new law would make it so that there is a flat tax charge per barrel of beer, The Tennessean reported. A barrel is 31 gallons.
The new method would get Tennessee in line with the 49 other states and how they tax beer, according to the news release from BeerPulse.com.
Local revenue won't be lost under the new proposal because the new tax method maintains the wholesale tax revenue at current levels while slowing the growth in revenues that are created by the 1954 price-based model.
In 2005, Tennessee had the fourth-highest beer tax in the country, also according to BeerPulse. Since then, it has surpassed Georgia, Alabama and Alaska to become No. 1. And it's 12 percent higher than Alaska, which is at No. 2, according to the news release.
The current arrangement hurts consumers and competitiveness in several ways, according to BeerPulse:
—It is currently more profitable for a craft brewery in Tennessee to ship products to consumers in other states.
—It limits consumer options because other breweries ship through Tennessee to other states to avoid the expense of selling in Tennessee.
—It prevents new companies from locating in Tennessee. Officials said that Sierra Nevada wanted to locate here, but opted for North Carolina instead because they could save money on taxes there.
Updated @ 9:26 a.m. on 2/5/13 to correct a typographical error.