Craft alcohol makers get a break with permanent excise tax

The secret is out! Warped Wing Brewing Company hosted their 7th annual Esther's Li'l Secret Launch Party & Reveal at the brewery's downtown Dayton taproom on Saturday, Nov. 7, 2020. Esther's Li'l Secret is the annual holiday collaboration between Warped Wing and Esther Price Fine Chocolates. Due to COVID-19 restrictions, the event was ticketed with six 90 minute time slots and limited seating capacity. The brewery's back entrance offered retail carryout sales of the 2020 Esther's Li'l Secret four-packs and bottles. Did we spot you there? TOM GILLIAM/CONTRIBUTING PHOTOGRAPHER
The secret is out! Warped Wing Brewing Company hosted their 7th annual Esther's Li'l Secret Launch Party & Reveal at the brewery's downtown Dayton taproom on Saturday, Nov. 7, 2020. Esther's Li'l Secret is the annual holiday collaboration between Warped Wing and Esther Price Fine Chocolates. Due to COVID-19 restrictions, the event was ticketed with six 90 minute time slots and limited seating capacity. The brewery's back entrance offered retail carryout sales of the 2020 Esther's Li'l Secret four-packs and bottles. Did we spot you there? TOM GILLIAM/CONTRIBUTING PHOTOGRAPHER

Credit: Tom Gilliam

Credit: Tom Gilliam

Local craft beer makers, wineries and distillers have been hit hard by the pandemic, but last week they dodged another economic hardship when Congress passed and President Trump signed the omnibus and stimulus package.

Inside the package was a permanent extension of the Craft Beverage Modernization and Tax Reform Act, which has allowed smaller-scale alcohol producers to keep their prices lower for the loving customers of their products.

It keeps in place an alcohol excise tax rate of $3.50 per barrel on the first 60,000 barrels for domestic brewers and wineries producing fewer than 2 million barrels annually. If not passed, the tax would have doubled to $7 a barrel.

The secret is out! Warped Wing Brewing Company hosted their 7th annual Esther's Li'l Secret Launch Party & Reveal at the brewery's downtown Dayton taproom on Saturday, Nov. 7, 2020. Esther's Li'l Secret is the annual holiday collaboration between Warped Wing and Esther Price Fine Chocolates. Due to COVID-19 restrictions, the event was ticketed with six 90 minute time slots and limited seating capacity. The brewery's back entrance offered retail carryout sales of the 2020 Esther's Li'l Secret four-packs and bottles. Did we spot you there? TOM GILLIAM/CONTRIBUTING PHOTOGRAPHER
The secret is out! Warped Wing Brewing Company hosted their 7th annual Esther's Li'l Secret Launch Party & Reveal at the brewery's downtown Dayton taproom on Saturday, Nov. 7, 2020. Esther's Li'l Secret is the annual holiday collaboration between Warped Wing and Esther Price Fine Chocolates. Due to COVID-19 restrictions, the event was ticketed with six 90 minute time slots and limited seating capacity. The brewery's back entrance offered retail carryout sales of the 2020 Esther's Li'l Secret four-packs and bottles. Did we spot you there? TOM GILLIAM/CONTRIBUTING PHOTOGRAPHER

Credit: Tom Gilliam

Credit: Tom Gilliam

“It’s a huge deal for us. It’s incredible news when you consider the hardship we’ve already faced this year,” Nick Bowman, co-founder of Warped Wing Brewing Co., told me Tuesday as he was making a home delivery of his company’s product. (We’ll get back to that later.)

Without the tax cut, beer brewers and most alcoholic-beverage producers would have been looking at a higher tax bill in January that would have either been forced upon customers or caused some brewers to close up shop.

Distillers faced a 400 percent tax hike without the legislation. The tax cut reduced the amount that distilleries paid on the first 100,000 proof gallons from $13.50 to $2.70 per gallon. A proof gallon is a gallon of spirits at 50% alcohol.

“As President of American Craft Spirits Association and a craft spirits producer myself during what has arguably been the toughest year in recent history to be a small business owner, I know firsthand the struggles we all face in forecasting our financial futures. This passage is a major, monumental moment and the culmination of nearly a decade of craft spirits advocacy efforts,” said Becky Harris, also president of Catoctin Creek Distilling Company.

Last year when the act was extended until Dec. 31, John Haggerty, Warped Wing co-owner, said there are few breweries in Southwest Ohio that produce more than 60,000 barrels of beer a year.

If not passed, it would have cost Warped Wing — the largest producing brewery in Dayton — up to $30,000 a year, Haggerty told me. Warped Wing produces around 8,000 barrels of beer a year from its original location at 26 Wyandot St. in Dayton.

Bowman said with the permanent passage it will allow Warped Wing to spend the money they would have had to pay in added excise taxes on reinvestment and allow it to grow again when things become more stable.

Warped Wing opened a second tap room and restaurant in Springboro this year during the pandemic.

“We’ve been in a kind of survivor mode this year. When the state closed restaurants and bars at the beginning of the pandemic, we lost 40% of our business,” Bowman said.

Bowman said Warped Wing had budgeted for the increase in taxes when it did its planning for 2021. He said with the permanent tax, it will allow the brewery to plan for the future.

The tax cut and other new Ohio laws in the past five years have allowed the craft beer industry, wineries and distillers to prosper in the Buckeye State. The region has seen an abundance of new breweries open. It’s estimated there are more than 300 craft breweries in Ohio today and more than 2,000 in the U.S.

For 2021, the Brewers Association estimates growth of 6-7% over 2020 in the craft beer industry, but production levels that will fall below 2019, meaning it will take craft brewers until 2022 to recover to its previous levels, and longer to fully return to the growth trend it had been following of 3-4% per year.

John Brown of Springboro was enjoying a Trotwood beer at Warped Wing in Springboro when asked about the excise tax.

“I don’t know much about it, but if it allows me to drink a couple more of these and support this business, I’m all for it,” Brown said as he toasted his partner.

Bowman said with the release of a COVID-19 vaccine there is some light at the end of what has been a dark 2020 tunnel.

“We’ll be hunkering down and continuing to look at ways to be innovative in our business,” Bowman said.

One of those ways Warped Wing has innovated this year is the reinstitution of home delivery by the craft brewer.

The co-founder was out delivering beer in Dayton neighborhoods on Tuesday when I spoke to him.

“You’ve got to be innovative if you want to keep your doors open,” Bowman said.

2020 was a tough year for breweries, but Bowman said he sees a lot of Dayton-area craft brewers fighting to make it work.

“It’s been a tough couple of months. I’m proud of what brewers have been doing to keep open for their customers,” Bowman said.

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