NYS tax credit for microbreweries

A ruling in March 2012 concerning Massachusetts-based Shelton Brothers resulted in a huge change in New York State Liquor Authority policy that negatively impacted NY microbreweries (craft breweries producing no more than 60 million gallons of beer annually). Essentially, the NYSLA was required to lift the 12-year excise tax exemption and re-imposed the label registration fee ($150 per label) from which microbreweries were previously exempt. For a microbrewery producing about 40,000 barrels per year, this would amount to an additional $100,000 dollars in annual expenses.

With at least 90 craft breweries providing thousands of jobs and contributing $200 million in economic activity each year, the effect on the NY economy would be huge.

These changes would also produce an additional $3 million for the state in excise tax. Despite this advantage, (and with a big push from lobbying by the New York Brewers Association), in June, Governor Andrew Cuomo announced an agreement on legislation that reverse the impact that the changes in March caused to craft breweries. Essentially, the new legislation would support the industry in four important ways:

  1. Tax benefit: microbreweries will be eligible for tax credits against personal income and business taxes for beer made in New York – 14 cents a gallon for the first 500,000 gallons, and 4.5 cents for the next 15 million.
  2. Exemption from annual SLA label fee: any brewery (regardless of location) that produces 1,500 barrels or less annually will not be required to pay the $150 label fee to the NYSLA. This fee is typically paid annually for each label used.
  3. Creation of a farm brewery license: this new license would allow craft breweries to operate similarly to farm wineries. To qualify for the license, the brewery must be made primarily from locally grown farm products. The percentage of locally grown ingredients will increase slowly over time: through 2018, 20% hops and 20% all other ingredients must be grown or produced in NYS. The percentage requirement will then increase to 60% and eventually 90% by 2024. The farm brewery license would allow farm breweries to sell NYS-labeled beer, wine, and liquor at their retail outlets, and farm wineries could sell NYS-labeled beer for off-premises consumption. Farm breweries can operate restaurants, conference centers, inns, bed-and-breakfasts and hotels on or adjacent to the farm. Farm breweries and wineries could conduct tastings of NYS-produced beer and wine at their premises. The farm breweries would also be allowed to sell related products, such as beer making equipment and supplies, food that compliments beer tastings, and souvenirs.
  4. Tax filing exemption for farm operations: currently, all NY beer, wine and liquor wholesalers must report annual sales made to restaurants, bars and other retailers. Since the purchases from farm wineries, distillieries and breweries account for a small percentage of total wine and beer sales, there is little benefit to the NYS Tax Department, and the added expense of filing the reports places an additional burden on these small businesses. The businesses are already required by law to keep sales records for the Tax Department to obtain upon request, but the new legislation would not require farm wineries, distilleries or breweries to file annual reports.

These changes essentially offset the March 2012 ruling and show support for local businesses, which is an essential contributor to the NY economy. As Senator Joseph A Griffo stated, “This agreement marries one of New York’s oldest and largest industries – agriculture, with one of the state’s fastest growing – craft breweries.” Senator Mark Grisanti said that “Government should support small businesses as they are a catalyst for economic growth, job development and tourism.”

We agree. Tracy Jong Law Firm focuses on empowering small businesses by providing the tools necessary to succeed in this uncertain economy. In a time when it is so easy to be disappointed in our government, it is a positive sign to see NYS support small businesses in an industry that is having a growing impact in so many ways.