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Little Chicago beer party: Suds supporters rally against tax

Jennifer Sprouse • Feb 22, 2013 at 10:56 PM

Many people filtered into One 12 Downtown on Friday, and not because of the half-price sushi, but rather for beer.

Adorned with campaign support stickers, local beer brewers, distributors and connoisseurs rallied in support of a statewide campaign that would reform how the state’s local wholesale beer tax is structured.

The Beer Reform Act of 2013, a bill that will be sponsored by state Rep. Cameron Sexton, R-Crossville, and state Sen. Brian Kelsey, R-Germantown, is intended to reconstruct the tax from beer sales to volume produced.

According to a Tennessee Malt Beverage Association news release, Tennessee has the highest effective beer tax rate –– 17 percent –– which is the result of a policy that was established by the state in 1954.

Friday night’s rally was a part of a series of rallies that have been held around the state.

“We hope that all this activity and enthusiasm translates to votes ... and that the lawmakers will listen to their constituents and vote to convert the 17 percent tax to a volume tax. It’s a revenue-mutual proposition. The local governments won’t lose any revenue, it’s just going forward. Growth will be tied to sales and volume and not to price,” Rich Foge, president of the Tennessee Malt Beverage Association, said.

At Friday’s rally, Sexton said he hoped to educate those in attendance about the reform proposal, as well as the problems with the 17 percent beer tax.

“The subject might be beer, but it’s a bigger picture, which it’s a tax-structure problem that we have in Tennessee on a wholesale tax that we charge on the price of beer,” Sexton said. “What’s really happening is, our tax structure does not help growth in this industry — it’s actually hindering growth. We’re wanting to take it from a price to a volume, just like wine and liquor are taxed in the state of Tennessee.”

He said that right now, craft breweries and manufacturers of specialty beers are more likely to go out of state to distribute their beer instead of staying in Tennessee because of the increased costs.

“If someone makes beer in the state of Tennessee, it is cheaper for them to ship it to Virginia or North Carolina and sell it and they’re able to have a higher margin than they are to sell it in downtown Johnson City,” Sexton said. “When you have a tax structure (where) they can make more money going out of state than what they can in state, (then) there’s an issue. When this tax was put in place in 1954, this industry looked vastly different that it does today.”

He said the craft beer industry has grown from 2 percent to 6 percent nationally, but, again, the tax structure is prohibiting its growth throughout the state.

“(Craft beer brewers have) found something that other people like and they’re excited and they want to go promote it. But when they get out there, they find out that ... you have a state excise tax, a federal excise tax, then you have on top of it a wholesale tax and then there’s a sales tax when it goes to market, they can only charge so much before they price themselves out of the market,” Sexton said.

“They have to keep their price line at a certain level, where the only way to do that is to reduce their margins, which means then they can’t distribute, they can’t hire (and) it’s harder to make ends meet. We just want to have fairness in this tax structure and have it just like it is on wine and liquor and reward entrepreneurs, instead of hindering them and making it more difficult for them to bring their product to market.”

Ernie Dunn, Kingsport resident and one of the founders of the Tri-Cities Beer Alliance, said while he does brew his own beers, he came to the rally Friday with a consumer mindset.

“This is actually quite important to me ... as a consumer. What some people may not realize is that these 60-70-year-old laws actually affect the choice I have when I go to the beer store or go to the grocery store,” he said. “I’m not able to get all the things I would like to have or all of the things I would spend my money on, because Tennessee’s taxes prohibit those brewers from shipping their beers into the state based on price alone.”

Dunn said he came to the rally to hear where the plan for the proposed legislation is at this point in the campaign, but said he is hopeful this push to restructure the beer tax will open up other beer-related issues.

“If we can get the prices down, get the taxes down, then eventually we can loosen up some of the other Prohibition-era laws, stuff that was written 50 and 60 years ago for a different time,” he said. “Tennessee’s changed in the last 100 years. I’m not sure everybody knows that, but it has and this is the first step toward catching up to the rest of America.”

Foge urged those in attendance at the rally to visit www.fixthebeertax.com to learn more about the campaign, as well as to write their local legislators to voice their support.

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