When is a Brewer/Brewpub Eligible for the Lowest Federal Excise Tax Rate on Beer?
The lowest federal excise tax rate on beer is $3.50 per barrel. It is available on the first 60,000 barrels produced and removed from bond per calendar year by a brewer/brewpub that produces 2,000,000 barrels of beer or less per calendar year.
Certainly, most domestic beer manufacturers produce 2,000,000 barrels of beer or less per calendar year. But what does it mean to “produce” beer? TTB addressed this question in a recent newsletter.
According to TTB,
beer is considered to have been “produced” if it is lawfully brewed or produced at a qualified brewery premises, including beer brewed by fermentation or produced by the addition of water or other liquids during any stage of production. The entire volume of beer to which water or other liquids had been added will be considered “produced” for purposes of applying the reduced tax rates. Blending or combining two beers does not count as production for purposes of the reduced tax rate.
Conventional brewing by fermenting a wort is production. When that beer is removed from bond by the manufacturer, the federal excise tax will be $3.50 per barrel on the first 60,000 barrels.
Receiving bulk sugar beer and adding flavorings and other ingredients to create a “hard seltzer” is also production. When the hard seltzer is removed from bond by the manufacturer that produced the finished product, the federal excise tax will be $3.50 per barrel on the first 60,000 barrels.
Receiving flat beer and carbonating it, while a lawful activity, does not constitute the production of beer. A manufacturer that merely carbonates beer will owe $18 per barrel in federal excise tax when the carbonated beer is removed from bond.
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