February 22, 2019

Industry beaming over Lamont's proposed tax cut for breweries

Photo | Foxwoods Resort Casino
Photo | Foxwoods Resort Casino
Branford's Stony Creek Brewery last year opened a location at Foxwoods Resort Casino.
HBJ Photo | Steve Laschever)
Joy and Ben Braddock, co-owners of Hartford's Hog River Brewing Co.

For a proposed state budget that could generate over $1 billion in new revenues, one industry that may see a tax cut under Gov. Ned Lamont's two-year spending plan is craft breweries.

Among the many tax changes, the Democratic governor's $43 billion state budget reduces the state's alcohol excise tax at craft breweries by 50 percent.

While breweries and other purveyors of beer are subject to paying traditional sales tax, they are also required to pay an alcohol excise tax of 24 cents per gallon of beer sold, or $7.20 per barrel (typically 31 gallons). The existing excise tax excludes sales to licensed distributors.

Lamont's measure would cut the current excise tax rate in half for breweries to 12 cents per gallon, handing a major victory for beer makers in the state looking to expand their tap rooms and workforces, in addition to other budding entrepreneurs looking to enter the industry.

In fiscal year 2018, more than 47.7 million gallons of beer were produced in Connecticut, which generated over $11.4 million in alcohol excise tax revenues for the state, according to the Connecticut Department of Revenue Services' latest annual report.

Phil Pappas, executive director of the Connecticut Brewers Guild, which represents 55 of the state's 80-plus operating breweries, applauded Lamont for proposing the "pro-jobs, pro-consumer measure."

"As the budget process moves forward, we will continue working with the governor, state lawmakers, and our industry partners -- including distributors, restaurants and retailers -- to modernize our state's alcohol laws by making them more consumer-friendly and business-friendly while maintaining the three-tiered system," Pappas said in a statement.

The guild, which also has 11 associate members and represents four breweries in planning, also supports decreasing the excise tax for beer across all industries.

Chris Willett, co-founder and head brewer at Milford Point Brewing Co., said his brewery is one of many in the state that will be more encouraged to hire new workers under the cost-cutting proposal.

Officials from Hartford Distributors Inc. also told Hartford Business Journal they support the governor's proposal to slash the state's excise tax for breweries.

The lower brewery tax also drew praise from Carroll J. Hughes, a lobbyist and executive director of the Connecticut Package Store Association, who would also like to see the measure extended to local producers of wine and spirits.

Lamont's brewery-friendly pitch surfaces as the state's brewery industry has grown rapidly in recent years. Local brewery growth has ranked among the top 10 nationally, driving the state's beer market into a $745.7 million industry in 2017, according to the Brewers Association, which represents over 70 breweries in Connecticut.

Lamont's proposal also contrasts with several bills that were raised earlier this year that drew the ire of craft brewers, including a measure that would have disallowed breweries from offering both on-site and off-site sales, which would have forced taprooms across the state to close. Those bills were quickly pulled from consideration.

While the lower tax for breweries would drum up savings for local beer producers, Lamont's budget would add dozens of items and services to the state's 6.35 percent sales tax in an effort to raise $292 million and $505 million in new tax revenues in each of the next two fiscal years.

This story has been updated to include comments from Carroll J. Hughes

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