Brewing Up Tax Savings
Published on by Barnes Dennig in Tax Services
Indiana craft breweries could see lower taxes in their future, thanks to a new bill recently introduced in the Indiana Senate[1]. The bill would significantly lower the state excise tax on beer, from $0.115 per gallon to $0.035 per gallon. However, to qualify for this lower excise tax rate, at least 20% of the hops and barley in the beer must have been grown in Indiana. This provision is intended encourage partnerships between Indiana farmers and breweries.
Although this bill will only affect Indiana breweries, taxes are a major expense for breweries across the country. On average, more than 40% of the retail price of beer in the United States goes toward federal, state, and local taxes[2]. We will continue to follow the progress of this bill.
Fortunately, there are additional ways for brewers to lower their tax bill. One often overlooked tax incentive is the Research & Experimentation (R&E) tax credit. Brewers who innovate and develop new products and processes may qualify for federal and state R&E credits. The federal R&E credit has been permanently extended and may now offset Alternative Minimum Tax (AMT) for certain qualified small businesses. The R&E credit is a dollar for dollar offset of tax to incentivize US businesses to invest in research and development.
Examples of R&E Activities in the Brewing Industry:
- Testing varietals of barley and hops grown in varying climates and seasons to preserve product continuity and quality.
- Testing hopping techniques.
- Developing new or improved yeast strains or fermentation procedures.
- Testing prototype batches.
- Testing of new or improved designs to improve shelf life.
- Process improvement – Increasing capacity, speed, efficiency, safety, and productivity with new and improved brewing methods, automation, or bottling equipment.
Contact Us
For more information on tax planning and federal or state R&E credits, and how your business can qualify for them, contact Cheryl A. Ganim, CPA by clicking here, or call 513-241-8313.
[1] Indiana Senate Bill no. 288
[2] http://www.beerinstitute.org/policy-issues/excise-tax/
