Day 13: Beer and Taxes
In numerous posts and interviews to date, I’ve mention how HB 660 can be a win for the state as we face massive budget deficits. Today’s post begins to scratch the surface on that idea.
Let’s start by assuming HB 660’s passage, and we have one Texas brewpub (which we will call San Antonio Brewpub and Grill) that is now allowed to distribute and let’s say there is one small production brewery (which we will call Austin Brewing Co.) that decides to change their license to a brewpub. Here are the baseline assumptions we will start with:
San Antonio Brewpub and Grill:
- Annual Production (BBLs): 1,000
- Annual Gross Sales: $3,000,000
- Annual Payroll: $800,000
- Total Assets: $1,000,000
- Total Tax Liability (Federal + State + Local): $362,740
Austin Brewing Co.
- Annual Production (BBLs): 4,000
- Annual Gross Sales: $1,000,000
- Annual Payroll: $325,000
- Total Assets: $800,000
- Total Tax Liability (Federal + State + Local): $188,260
How I came up with the total tax liability number:
- Federal Excise Taxes = $7/bbl produced
- State Excises Taxes* (for “Ale”) = $6.14/barrel produced
- State Sales Tax* = 6.25%
- Local Sales Tax* = 2%
- Federal Payroll Tax = 7% (6.2% SS, 0.8% Federal Unemployment)
- State Payroll Tax** = 1.2% (State Unemployment + Disability).
- Local Property Tax = 2.6% of assets (I used the rate we pay as a brewery in the NISD in San Antonio)
- State Franchise Tax*** = 0.5% of Gross Sales – Payroll for brewpub, 0.575% of Gross Sales – Payroll for production brewery
*Technically a packaging brewery might not pay State Excise or Sales Taxes. If the brewery sells to a distributor, the distributor pays the excise tax, and in any event the retailer will pay the sales tax. I still included these figures as they will be tax revenues for the state one way or another.
**This rate varies per employer depending on their history of unemployment claims, but I used a typical figure
***No state franchise tax is due for businesses under $1 million in revenue, so going from $999,999 in revenue per year to $1,000,000 actually costs a business $5,750 in franchise tax liability
Now let’s assume that post HB 660, San Antonio Brewpub and Grill invests an additional 500,000 to increase production to 2,000 barrels. Total revenue rises to $4,500,000 and payroll increases to $1.1 million. The resulting tax liability for SAB&G would be $543,730, an increase of $180,990.
Austin Brewing Co. invests $800,000 in their facilities and switches their license to a brewpub. Annual production increases 5,000 barrels and total revenue and payroll expense increase to $3,000,000 and $800,000, respectively. The resulting tax liability for ABC is $433,050, an increase of 244,790.
Just on these two hypothetical situations, $425,780 in new tax revenue is created.
Let’s fast forward to 5 or 10 years in the future when SAB&G and ABC are doing very well. They’ve each grown to 25,000 barrels a year and $9.5 million of gross annual sales through the combination of the brewpub and off-premise sales. Payroll has increased to $1.9 million per year, and each now has $4,000,000 in assets. The total tax liability between the two breweries now is $2.8 million, an increase of $2.2 million over pre-HB 660.
You can see how the success of breweries quickly adds up to tax revenue for the state. The calculations above are simply back-of-the-envelope calculations and are undoubtably somewhat inaccurate, but they give you an idea of what the state can gain from the passage of this bill. Multiple the numbers of above by 10 or 20 and we are making a real difference.
Around the Web
KABB Fox29 (San Antonio) did a great story on HB 660 that aired last night featuring myself and Representative Villarreal. Also featured are Assistant Brewer John Lee, bartender Byron Mezzetti and various unsuspecting brewpub guests.
Speaking of John Lee, this isn’t HB 660 related, but the Brewers Association had “A Toast To” story on him earlier this week.