New Jobs, New Equipment: Investing After Beer Tax Reform

With the passage of the Craft Beverage Modernization & Tax Reform Act by Congress on Wednesday, many breweries across the country will have two years of lower federal excise taxes to deal with.

Those taxes will be cut in half, from $7 per barrel of craft beer down to $3.50 for breweries that produce less than 60,000 barrels of volume per year, starting January 1, 2018 for two years.

That relief can mean a sudden boost of income that a brewery wasn’t planning on keeping, meaning investing in the future for growth is planned.

It means new employees will be hired soon by Daredevil Brewing in the Indianapolis suburb of Speedway, Indiana.

Daredevil co-founder and owner Shane Pearson said he thinks there are a few ways to look at the tax bill as it has two items that greatly impact a smaller to medium sized brewery.

“First, the reduction… means our margin on distributed half-barrel keg improves by about three percent,” he explained. “That goes straight to the bottom line. For a production brewery like ours that distributes about 75 percent of what we make it makes a large difference to our wholesale business.

“We will brew around 10,000 barrels in 2018 so if we look at the reduction, it pays for a full time employee or a few part time employees.”

Pearson also pointed out that the bill also includes a provision that allows breweries like Daredevil to expense 100 percent of capital investments up to a $1 million.

“We already were planning a major upgrade to our canning equipment in 2018 and with the update to the law it becomes a much better ROI for our business,” he said.

Solemn Oath Brewing president John Barley said with his Naperville, Illinois brewery slated to produce 8-9,000 barrels in 2018, the change is significant.

“Growing as we are, offsetting a part of a salary to keep us going is awesome and very helpful for where we are as a business,” he said Wednesday. “Rather than deciding between some small equipment we’ve had an eye on or helping offset a salary for someone new to the team, we now have a stronger option to do both.”

Bob Pease, president and CEO of the Brewers Association praised the tax change, saying it could mean $142 million in savings for more than 6,000-plus breweries across the country. In a release, he added that expectations are that breweries will use these savings to invest in their breweries, expand their operations, create more jobs and hire more workers.

“The men and women of the Brewers Association have been working on this for a while,” Barley said, “it’s great to see them put their membership in a stronger position heading into what I think will be a pivotal year for craft beer.”

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