Brewers continue to stir on sales tax policy
This week a member of the House Liquor Committee, referencing the Pennsylvania Brewers, published an opinion piece in Penn Live saying, “in late November, the state tax agency announced that it would be instituting a six percent tax on beer sold directly to consumers from breweries, starting July 1”.
Apparently, this references a decision by the Department of Revenue that brew pubs do not qualify as do R, H or E licensees, and, therefore, must collect sales taxes at the point of sale, rather than pay them on the wholesale cost. Distributors, of course, must collect on the retail price at the point of sale.
To be accurate, the Department of Revenue is not engaged in the process of “instituting” a new tax, which only the General Assembly can do, but of interpreting the current law, which has been in Pennsylvania since 1954, when sales taxes were first enacted at 1 percent.
Current law says simply, “everything is taxed at retail to the customer unless there is a specific statutory exemption created by the General Assembly.” An example of such an exemption is bottled water.
There is no exception created by the General Assembly for brew pubs.
The opinion piece makes the point that these craft brewers, who make and sell 3.7 million barrels of beer, deserve a similar exception. What he is really arguing is they ought to be able to compete in the local retail marketplace against distributors without collecting any taxes. These sellers represent 2/10th of one percent of the 2.07 billion barrels of beer that were sold in in the state during 2016-17. While this is small when viewed statewide, it will have a significant detrimental impact on any distributor when located within the same local market area. This is not fair.
Distributors now must compete against grocery and convenience stores that pay taxes on their wholesale cost and thus give consumers the impression that they do not collect any sales taxes.
To be fair, there are two options for the state in providing all those who sell beer a level playing field: no sales taxes, as this member apparently advocates, or collection by all at the point of sale based on the retail price.