How is Your Oktoberfest Beer Taxed?

Tax News

It’s believed that Benjamin Franklin once said “Beer is proof God loves us and wants us to be happy.” As a big fan of beer, I like to think that Ben Franklin had it right.

If that’s the case, the state and local governments don’t want you to be happy. Or at least they may be putting a price on your happiness!

Alcohol, including beer, is often taxed at a different rate than other products in the market. The Tax Foundation released the results of a study in 2015 that showed the tax rate on beer varied wildly across the United States. The lowest tax rate was in Wyoming, which taxed beer at just 2 cents per gallon, and the highest was in Tennessee, which taxes beer at a staggering $1.29 per gallon.

In fact, the way a state and local government taxes beer varies. Some states will tax on a strict volume basis. Others treat it like a sales tax and collect a percentage based on the sales price at the register or through wholesalers. Even others will charge you case and bottle fees, which are independent of any recycling deposits that may also be collected.

That’s just on beer. Taxes on other alcohol, such as distilled spirits and table wine, are often even higher.

Maryland is a state that levies a higher sales tax on alcohol compared to other products. The typical state sales tax is 6% on purchases whereas it levies a 9% tax on alcoholic beverages.

Rhode Island is a state that abandoned its sales tax and levies a state excise tax on vendors. Vendors pay $1.40 per gallon of wine, $0.10 per gallon of beer, and $5.40 per gallon of liquor.

That’s just at the state level!

The Federal government levies an excise tax too. The Alcohol and Tobacco Tax and Trade bureau of the U.S. Department of Treasury has listed a table of tax fee and rates for your viewing pleasure. The Federal excise tax is levied on producers of alcohol. This is likely done to make collection much easier but you will still feel the pinch downstream.

Beer is taxed at $18 per Barrel (31 gallons) and five cents per 12 oz. can, with different tiers for different size producers. Unless you are a producer, you won’t pay these taxes directly but they will be integrated into the price you pay at the register.

In some cases, you’re paying more in tax than you are in the materials that go into making that tasty Oktoberfest brew you’re enjoying!

Before we all get fired up about the excise tax on alcohol, remember that those taxes go to pay for many of the services you enjoy on a daily basis. They help pay for the roads used by the delivery trucks and the emergency services that keep things moving on the road. Taxes aren’t always the most fun to pay but without them we’d be in a much harder place.

So as you celebrate this Oktoberfest, think about how delicious the beer is and not the taxes you paid to get it!