Tax Law Theater (More Entertaining Than You Expect)
It's been at least three months since we've had a beer tax post--far too long, don't you think? Today's post is mainly just a recap of a fascinating little drama that played out when the importer Shelton Brothers (who bring you at least half the exceptional imports you drink regularly) decided to wade into New York's tax laws. Like any lawsuit, the details are confusing and oblique, but essentially, Shelton Brothers managed to strike down a tax break the state gave to local small breweries. Oregon has one of these, too, as I assume many states do. So:
Guess how popular the lawsuit made Shelton Brothers? Today they responded in BeerAdvocate, violating several rules of damage control with this beautiful lead-in:
Yep, that's going to settle everyone right down. (The whole piece is embroidered with inflammatory name-calling and thinly-veiled derision--and is therefore an excellent read.) Their arguments are two: first, that the thing they really cared about was having to spend $150 a pop to register beer labels--from which small NY breweries were exempt--and second that the tax thing was unfair to them, so suck it, Empire Staters. Seriously:
In conclusion: 1) many times sellers of good beer are not on the same team with regard to tax law and sometimes makers of good and bad beer are; 2) companies are fools not to pursue their own self-interest even when that may make them unpopular with rivals, but 3) since they function at least partly through the goodwill of their consumers, it would behoove them to at least look like they're not total jerks.
Good times.
What does this mean for local brewers? Well, let’s take an in-state brewery like Captain Lawrence, whose new brewery has a capacity of about 40,000 barrels per year. Any of that beer sold in New York State is now subject to a new state excise tax rate of $4.34 per barrel. The previous rate? Zero. Captain Lawrence brewer Scott Vaccaro estimates on his site that the rule change will subject his beer to about $100,000 in added expense each year.
Guess how popular the lawsuit made Shelton Brothers? Today they responded in BeerAdvocate, violating several rules of damage control with this beautiful lead-in:
We’ve heard that there's been a bit of banter about the recent New York Supreme Court ruling, mostly by ill-informed and emotionally fraught bloggers. (Keep those death threats coming, folks!) The facts here are really quite simple, though the legal and financial issues are apparently a bit difficult to comprehend.
Yep, that's going to settle everyone right down. (The whole piece is embroidered with inflammatory name-calling and thinly-veiled derision--and is therefore an excellent read.) Their arguments are two: first, that the thing they really cared about was having to spend $150 a pop to register beer labels--from which small NY breweries were exempt--and second that the tax thing was unfair to them, so suck it, Empire Staters. Seriously:
It really isn’t for us and other out-of-state brewers and importers to say whether New York should keep its beer taxes or do away with them, as long as we outlanders are not the only ones paying the taxes while New York brewers go tax-free. If it really is a matter of whether Brooklyn’s head brewer gets a bonus or not, New York has to decide whether it wants to give him and his colleagues that money, or use it for other essential services, like education, fire and police protection, etc., etc...
If any New York brewers tell you now that they can’t raise their prices, even so slightly, because that will make their beer more expensive than beer from their small out-of-state competitors, that is nothing but an unwitting admission that up until now they’ve just been pocketing the savings they enjoy from that unfair tax exemption, rather than passing it along to consumers in the form of lower prices.To which, you will be unsurprised to learn, there was plenty of reaction. (PR note #1: if the response to your clarification is how jerky the clarification was, you've failed.) One of the reactors was a Mr. Garrett Oliver of the Brooklyn Brewery,
I pointed out that I like many of the beers he imports, that I have helped promote them (as most of us have, in some way or other), and that I've poured them in numerous tastings. Why, I wondered - talking, as I thought I was, to him alone - would he want to do a thing like this? Even if his statements regarding tax law are correct (and I have no idea whether they are), many states have situations that in some way favor in-state brewers. Frankly, it never occurred to me to think of them as unfair. I will not go down this path and print bits and pieces of Mr. Shelton's response; I would, however, characterize it as inflammatory. Mr. Shelton and I have had many heated arguments, often to the wee hours, all over foreign capitols; it's a running joke at this point.I have a strong sense that all the reactions are not yet in.
In conclusion: 1) many times sellers of good beer are not on the same team with regard to tax law and sometimes makers of good and bad beer are; 2) companies are fools not to pursue their own self-interest even when that may make them unpopular with rivals, but 3) since they function at least partly through the goodwill of their consumers, it would behoove them to at least look like they're not total jerks.
Good times.