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Five Issues That Impact Craft Brewers

In an article published by The New Brewer, Marc Sorini discusses five issues most likely to have a meaningful impact on craft brewers in the coming years, including:

  1. The Craft Beverage Modernization and Tax Reform Act’s (CBMTRA) new tiered excise tax rate structure, its extending benefits to foreign producers, and its authorization for brewers to transfer beer in bond between breweries of different ownership.
  2. The Sixth Circuit’s published opinion in Byrd v. Tennessee Wine and Spirits Retailers Association, affirming a decision finding that the “durational-residency” requirements imposed by Tennessee law for alcohol beverage retail licensees are unconstitutional under the “dormant” Commerce Clause.
  3. The TTB’s creation of a new unit within its Trade Investigations Division to focus on trade practice enforcement.
  4. The opinion in Mission Beverage Co. v. Pabst Brewing Co. from the California Court of Appeals, which found that “an existing distributor’s receipt of the ‘fair market value of the affected distribution rights’ under [the California statute] does not necessarily make that distributor whole.”
  5. The US District Court for the Northern District of California’s decision in a putative class action alleging that the labeling and marketing of a successful California-based craft brewery was false and deceptive.

Access the full article.

Originally published in The New Brewer, May/June 2018.




TTB Issues Further Alcohol Excise Tax Guidance

On Friday, March 2, 2018, Alcohol and Tobacco Tax and Trade Bureau (TTB) issued its next round of guidance concerning the alcohol excise tax provisions of the recently enacted tax law (Tax Act). TTB has not yet addressed some of the biggest ambiguities contained in the Tax Act, such as (i) how foreign producers can assign excise tax credits to US importers and (ii) how the “Single Taxpayer Rule” will work. Nevertheless, TTB continues to make incremental progress in interpreting the Tax Act.

The March 2 guidance features the following:

  1. A new TTB Industry Circular, No. 2018-1 (March 2, 2018), announces the creation of a temporary “alternate procedure” (aka, variance) allowing wine producers to tax determine and tax pay wine of the winery’s own production stored untaxpaid at another bonded wine cellar as if the wine were removed from the producing winery’s bonded premises. Prior law allowed wineries eligible for tax credits under the small winery tax provisions to transfer their credits to another bonded winery. So, for example, an eligible small winery could transfer bulk wine in bond to a larger bonded winery for bottling without losing the tax credits. The new tax law does not contain a similar transfer provision, leading to the prospect of small wineries losing their tax credits because they transferred the wine to a bonded winery that already used up its tax credits available under the Tax Act. The alternate procedure permits a winery to tax pay the wine as if it were removed from the producing winery’s premises, allowing it to take the tax credit. The temporary alternate procedure authorized by Industry Circular 2018-1 expires on June 30, 2018.
  2. Beer, wine and spirits removed from a brewery, winery or distillery but received in bond from elsewhere can benefit from the Tax Act’s reduced rates and/or tax credits only if the taxpaying brewery, winery or distillery “produced,” “distilled” and/or “processed” the beer, wine or spirits in question. Exactly what processing qualifies the taxpaying facility for the reduced rate or tax credits will depend on specific facts and the commodity at issue.
  3. TTB further qualifies the produced/distilled/processed requirement by indicating that any production process should be made “in good faith in the ordinary course of production” and not done for purposes of obtaining a tax advantage.

Please let us know if you have any questions about these developments.




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