Some Sane Thought From Colorado! Cut Taxes for More Growth!!

Proposed tax cuts could save Fort Collins brewers big bucks.

beer tax

Greg Kus delivers beer for New Belgium Brewery to Wilbur’s Beverage in Fort Collins. /
beer tax

Greg Kus, a delivery person for New Belgium Brewery, removes 12-packs froma palette as he delivers beer to Wilbur’s Beverage. A bill proposed by U.S. Sen. Mark Udall of Colorado would reduce the excise tax paid by breweries. /

Colorado beer by the numbers

• 139 licensed craft breweries
• 85 brewpubs
• 54 manufacturer breweries
• 75 planned breweries
• In 2011, Colorado craft brewers donated an estimated $1.2 million of value to nonprofits.
• Durango ranks first for city breweries per capita with one brewery per 3,480 people.
• The Colorado Front Range is the largest craft brewing market in the United States with 74 breweries in operation.

Other local breweries

• CooperSmith’s Pub & Brewing produces 2,000 barrels of beer in Old Town annually. The local brewpub pays $14,000 in excise tax, which means the brewery stands to save $7,000 under the proposed cut.
• New Belgium Brewing Co. produced around 712,000 barrels of beer in 2011. It currently pays just less than $2 million in Colorado excise taxes on those barrels. Under the proposed law, it would pay half that and save $1 million.
• Odell Brewing Co. produces about 59,000 barrels in 2011, of that 70 percent or 41,300 barrels remained in state. That means Odell stands to save $144,550 with the proposed tax cut.
• Fort Collins’ Anheuser-Busch facility produces about 10 million barrels and would save $9 on each barrel produced and sold in Colorado under the proposed cut.

Proposed excise tax cuts

First 60,000 barrels produced by small brewers:

Current law: $7 per barrel
Udall bill: $3.50
Kerry bill: $3.50
First 60,000 barrels produced by large brewers:

Current law: $18
Udall bill: $9
Kerry bill: $18
60,001-2 million barrels produced by small brewers

Current law: $18
Udall bill: $9
Kerry bill: $16
Current law: $18
Udall bill: $9
Kerry bill: $18
2 million-plus barrels produced by small brewers

Current law: $18
Udall bill: $9
Kerry bill: $18
2 million-plus barrels produced by large brewers

Current law: $18
Udall bill: $9
Kerry bill: $18

Breweries are growing at such a rapid pace that they often invest everything they earn in keeping up with demand. But a bill out of Colorado would help brewers keep more money in their pockets to grow their business.

A tax cut being floated by U.S. Sen. Mark Udall of Colorado proposes letting breweries keep more money to invest back into the local economy and spur further growth in the already growing industry.

Udall’s Brewers Excise and Economic Relief Act calls for cutting the excise tax on a barrel of beer from $18 to $9 for big brewers and from $7 to $3.50 for small breweries.

Fort Collins, home to eight craft brewers and one macrobrewer, stands to see thousands of dollars remain in the community if the bill becomes law.

Colorado is the largest beer producing state in the country, and the beer industry is responsible for more than 100,000 jobs in production, manufacturing, commodities production and retail distribution, according to Udall.

In Colorado, liquor excise tax is levied on the liters or gallons first sold, used or consumed in Colorado. Alcohol beverages shipped outside of Colorado by a licensed manufacturer or wholesaler are exempt from Colorado’s liquor excise tax, according to the Department of Revenue.

“Our craft-brewing industry is injecting millions of dollars into Colorado’s economy and creating thousands of new jobs. These aren’t your dad’s beers — Colorado’s risk-taking, adventurous brewers have made Colorado the Napa Valley of beer. I am committed to working with our brewing community to ensure that our thriving craft beer business remains strong and growing,” Udall said in an email.

Fort Collins impact

Many Fort Collins breweries still are in their startup phase, trying to keep up with demand and grow responsibility.

When it comes to operating a brewery, while the industry is booming, every penny counts. Current law defines a small brewer as producing 60,000 barrels a year, which includes most of the breweries in Fort Collins.

Smaller breweries such as Fort Collins’ Funkwerks, which produces about 700 barrels, stand to see some return by only paying $3.50 in excise tax per barrel under the proposal. That means Funkwerks would save $2,450 a year because it expects to produce about 1,000 barrels next year.

Brad Lincoln, co-owner of Funkwerks, said saving nearly $2,500 a year would help the new brewery continue to grow by adding new equipment. Funkwerks is in the process of adding three new tanks, which will double the brewery’s capacity.

Still in its early stages, every penny counts for the brewery, and Lincoln said any sort of tax break is huge.

“I enjoy tax breaks, and from a business standpoint, I think it’s a good deal for us,” he said. “But we are still in our start-up phase; it would be helping us help small brewers like us.”

Grimm Brothers Brewhouse in Loveland produced 900 barrels in 2011 and is expecting to produce 3,000 this year. That means they would save between $3,000 to $10,000 annually based on the excise tax cut.

Russell Fruits, Grimm Brothers beer evangelist, said that money saved would go toward a new fermenter and lead to hiring more employees. Currently, nearly 100 percent of what the brewery makes goes back into the company, Fruits said.

“Colorado and nationwide have seen a huge boom in breweries,” he said. “They are popping up with 20 percent to 40 percent growth models. Any break we can get will allow us to be on better footing, increase more jobs and production.”

Beer big money

Colorado’s craft-brewing industry injects $446 million into the state’s economy, according to a study released this year by Colorado Brewers Guild.

The University of Colorado Business Research Division compiled the data for the Colorado Brewers Guild, which indicates that as of March, Colorado had 139 licensed craft brewers totaling $101.8 million in income, with a $179.2 million total employment effect. The study cost the guild an estimated $10,000, according to CU.

Nine of those breweries are in Fort Collins, including New Belgium Brewing Co., the largest craft brewer in Colorado and third largest in the country, behind Sierra Nevada and Boston Beer Co.

Fort Collins’ breweries contribute $83.2 million to the Larimer County payroll and support 938 direct jobs, according to a 2011 study by Colorado State University’s Regional Economics Institute and the Beverage Business Institute.

Collectively, Colorado brewers contributed nearly $446 million in output in 2011, with an estimated additional $9 million going to the state from the excise tax. This tax burden is unique to Colorado brewers and is in addition to the other taxes all Colorado businesses pay.

Paul Gatza, director of the Brewers Association, said considering brewers pay the same taxes as other businesses, they are unilaterally opposed to excise taxes on beer.

Gatza said they are in support of Udall’s bill along with legislation that has been introduced in both chambers of Congress seeking to enact a graduated beer excise tax rate of $3.50 and $16 for America’s small brewers.

With the cut in the excise tax, Gatza said it will help brewers add capacity and employees faster, in turn helping the economic recovery. Currently, craft brewers employ 103,000 people nationwide and 13 percent of beer production comes out of Colorado, the top beer producing state in the country.

“It’s all about the situation the country is in,” Gatza said. “We need more people working and more jobs to get us out of the hole we’ve created for ourselves, basically.”

Despite the brewing industry’s continued success and growth, the cut is necessary, according to Udall, because excise taxes increase the cost of production for brewers, and this one is specific to brewing companies.

Making it cheaper for brewers to make beer reduces the front-end production costs and allows them to produce more, and thus sell more, beer. This bill aims to cut regulation to help an important Colorado industry do better and continue its growth, according to Udall.

Udall’s staff is working with committee staff and others to identify opportunities to offset the bill’s yet-to-be-determined costs.

In terms of the chances of success for the bill, Udall plans to continue to work closely with Colorado’s thriving craft-beer businesses to get legislation passed. Sen. John Kerry also has introduced similar legislation, which Udall is co-sponsoring. Both bills have bipartisan support.(Coloradoan)

 

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