TAXES WHILE LIQUOR IS BEING MADE
Distilleries pay property taxes on land, buildings, equipment and also on their inventory. For every year a barrel of spirits ages in its warehouse, a distillery pays property tax to the US State in which it resides. These taxes go to State, County, and City governments, a fire or agricultural district, and perhaps a library. The largest part goes to public schools.
TAXES WHEN LIQUOR IS SOLD TO A DISTRIBUTOR
The Federal Government collects an excise tax from a distiller when it bottles a barrel of spirits and sells it. The rate is $13.50 per proof gallon. For example, excise tax on a 750-ml bottle of spirit that is 40% alcohol = 750 / 1,000 * 0.26417 (calculate number of gallons) * 0.4 * 2 (convert to proof gallons) * $13.50 = $2.14. According to a tour guide at Heaven Hill, that distillery pays $4 million per week in Federal excise taxes.
A Short Tax Lesson: Custom duties or tariffs are applied to foreign goods brought into the country. Excise taxes are applied to activities, products, or services that originate within the country’s borders that affect society and its infrastructure. Examples: Taxes on fuel and ground transportation go to maintain bridges and roads. Taxes on airline passenger and cargo flights go to maintain airports and pay air traffic controllers. Taxes on “things that are bad for you,” sometimes called “sin taxes,” are applied to products or activities that expose you to carcinogens or risk of addiction such as UV tanning beds, alcohol, tobacco, or gambling. Such taxes are a means of discouraging you from buying or using these things and theoretically go to programs that counteract their negative effects.
TAXES WHEN LIQUOR IS SOLD TO A RETAILER
A distributor pays another excise tax to the State on spirits purchased from the distiller. The rate varies by State and is paid either at the time of purchase or at the time of resale to a retailer. Sample State excise taxes on an 80-proof 750-ml bottle are zero in Wyoming, $1.78 in Minnesota, and $5.29 in Washington. Distributors may also pay their State an extra amount per ounce, per bottle, per case, or per gallon sold and the rate may vary by alcohol content.
TAXES WHEN LIQUOR IS SOLD TO YOU
Liquor stores, bars, and restaurants pay their State’s retail sales tax on alcohol sales and may pay an additional alcohol tax as well. Counties and cities may each add their own rates to these amounts.
Beer and wine sales are also taxed in the same relentless manner. Wine is taxed at a lower rate since it contains less alcohol; tax on beer is lower still for the same reason.
These taxes all roll forward and accumulate and end up in the price of a drink sold to you. Thus the $5.00 you just paid for a shot of Jack Daniel’s not only helps support your local pub, but parts of that amount go to Federal programs, your State’s programs, and eventually all the way back to the State where Jack Daniel’s originates. The schoolchildren of Tennessee thank you.
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“Be wary of strong drink. It can make you shoot at tax collectors … and miss.” — Robert A Heinlein