Beer in California: A Pot of Gold

How you celebrate St. Patrick’s Day will vary depending on the country you reside in and the local culture. But no matter where you live, you’re sure to see a lot of green and people enjoying a beer or two. If you happen to be enjoying a beer on St. Patrick’s Day (designate a driver!), taxes are likely the farthest thing from your mind. But the numbers matter, and ultimately affect jobs, wages and growth in the industry.

California is home to the largest number of craft brewers in the nation. These breweries produce nearly 3 million barrels of beer each year, providing jobs and tax revenue throughout the state.

Graph of Number of Craft Breweries and Production by State, 2013. 383 Craft Breweries Producing ~2.95 million barrels.

In particular, one study found that the craft brewing industry in San Diego County provides an economic impact that is more than 1 ½ times greater than the economic impact of Comic-Con International, San Diego’s largest annual convention. Nearly 3,000 jobs have been created or sustained by San Diego’s craft brewing industry, and brewery tourism in the area is on the upswing. Clearly, by any measure California’s craft brewers are leading the way in this industry.

Craft brewers face many challenges in producing beer that is competitively priced compared with other mass produced beer available on the shelves.  Besides production costs, taxes can account for up to 40% of the final cost of a beer.  Currently, California levies the 29th highest excise tax of $0.20 per wine gallon, equivalent to one gallon ($6.20 per barrel), on beer brewed and sold in the state regardless of the brewer size with out-of-state sales qualifying for a credit or rebate.

Graph showing percentage breakdown of taxes in a cup of beer. Federal and state excise taxes. When you combine the federal excise tax of $18 per barrel with state duties, it amounts to four cents of every dollar spent on beer. Sales, wholesale, hotel, over-the-bar and local excise taxes. State and county taxes account for four cents of every dollar spent on beer. Federal and state business taxes. Brewers, distributers, and retailers are subject to the same taxes every other business pays. This accounts for 32 cents for every dollar spent on beer.

The Washington, D.C. based Beer Institute keys taxes as the biggest driver of beer prices. During an attempt to balance the budget in 1991, the federal government doubled the beer tax from $9.00 to $18.00 per barrel as part of a luxury tax package that included yachts, private planes and jewelry. Many craft breweries run smaller operations than the breweries that existed at the time the tax was instituted. Our breweries in California add to the widely diversified economy of our state, and many aspiring brewers look to California creations for inspiration and current trends.

Happy St. Patrick’s Day to everyone, especially our homegrown breweries here in California.

Happy St. Patrick’s Day. This St. Patty’s Day how much of your green is in every beer? Federal and state excise taxes. When you combine the federal excise tax of $18 per barrel with state duties, it amounts to four cents of every dollar spent on beer. Sales, wholesale, hotel, over-the-bar and local excise taxes. State and county taxes account for four cents of every dollar spent on beer. Federal and state business taxes. Brewers, distributers, and retailers are subject to the same taxes every other business pays. This accounts for 32 cents for every dollar spent on beer. Information provided by the National Journal.

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