Paying taxes can be one of the most complicated tasks for a brewery. I highly recommend consulting with a competent tax professional when you calculate and pay your taxes. The guide provided below is a very limited description of the different types of taxes that a brewery is likely to encounter. The first article in this guide discusses paying federal excise taxes. You should remember that you will also have to be concerned with paying state and local taxes or possibly other federal taxes (especially if you plan to export your product outside the United States).
Federal Excise Taxes
According to 26 U.S.C. § 5051(a)(1)(D), which outlines the Imposition and Rate of Tax for distilled spirits, wines, and beer, “A tax is hereby imposed on all beer brewed or produced, and removed for consumption or sale, within the United States, or imported into the United States.” This tax is the Excise tax and is collected by the Alcohol and Tobacco Tax and Trade Bureau (“TTB”). Notably, this tax does not typically include beer removed for sale outside the United States or for a purpose other than sale or beer consumed on-premise. In order to pay excise taxes, a brewery must have an Employee Identification Number (“EIN”) issued from the IRS. I recommend you obtain an EIN early in the planning stages, at that will be required to open a bank account or obtain credit or a loan in the name of the company.
The standard excise tax rate for a brewery is $18/barrel (about $0.05 per 12 oz. bottle/can). If a brewery makes less than 2,000,000 barrels per year, however, it may qualify for a lower excise tax rate on its first 60,000 barrels. In order to qualify, the brewery has to, in the Brewer’s Notice, inform the TTB that its production is less than 2,000,000, and the brewery must be fully compliant with all federal rules and regulations. Assuming your brewery qualifies for this lower rate, your first 60,000 barrels of beer sold will be taxed at $7/barrel (about $0.02 per 12 oz. bottle/can). All barrels sold above 60,000 barrels will be taxed at the standard $18/barrel.
Note: Update-to-date rate information can be obtained here.
The standard frequency for a brewery to pay excise taxes is semi-monthly (24 payments per year). A smaller brewery, however, can qualify for quarterly payments (4 payments per year). To qualify for less frequent payments, the brewery must not expect not to be liable for more than $50,000 in excise taxes (~7143 barrels) that year and have paid more than $50,000 in excise taxes during the previous year. Note: paying quarterly may greatly increase the amount required for your brewer’s bond.
Filing Your Return
Breweries should complete and file an Excise Tax Return and pay the appropriate amount within 14 days of the end of the previous filing period. The TTB publishes a schedule for the time periods for filing excise tax returns.
Many breweries (27% of all excise returns) file and pay their excise tax returns electronically through Pay.gov. In order to use this site, a brewery must create an account by providing relevant information about the brewery. Breweries that make less than 50 removals of beer during a single month can enter payment information on the government’s form. Breweries with more than 50 removals must provide an attachment outlining the payments owed here.
The TTB is fairly responsive to breweries who are trying to pay their excise taxes. Breweries that are encountering issues or have questions should contact the TTB National Revenue Center (NRC) toll free at 877-882-3277 / 877-TTB-FAQS or by email at TTBInternetQuestions@ttb.gov.