MillerCoors and Bud vs Pa Brewers

A controversial sales tax provision, part of a proposed liquor bill reported from committee, which was unanimously removed on the Senate floor, has created a serious post-session fight.

HB 1497, which passed the House back on June 29, 2017, was gutted last week by the Senate’s Law and Justice Committee.  New language was inserted. A sales tax provision would give  brew pubs the right to collect and pay sales tax on the wholesale cost of beer, rather than on the purchase price at the register as distributors must do.

This practice of paying, in effect, a 1/3rd  lower sales tax based on wholesale instead of on the retail price, adopted more than 20 years ago for retail licensees, now particularly advantages grocery and convenience stores over all small business retail sellers.  This is because the food merchants are able to create the impression that they are not collecting sales taxes. This difference was always an issue, but became critical when the court allowed food merchants to sell beer for takeout.

State Senator Chuck McIlhinney (R-Bucks), who offered the amendment to withdraw the language on the Senate floor, issued a press release making several points:

  • The Brewers of Pennsylvania asked for the language.
  • He supported giving them the language.
  • The proposed language “raised other issues for stakeholders and other lawmakers, and it would have been impossible to resolve all of those issues in such a short period of time.”

The current fight is because the Senator’s press release directly contradicted another issued earlier by Dan LaBert, executive director of the Brewers Association:

“The Brewers of Pennsylvania were successful today in beating back a last minute push by Big Beer and the Pennsylvania Beer Alliance to immediately implement an unfair sales tax rate at taprooms throughout the Commonwealth.”

The amendment, as written, only benefitted the Pennsylvania Brewers who have members with an on-premises license used to sell beer to retail customers. The Senator said he offered to change the law at their request.  Executive Director LaBert said, in effect, this ain’t so, that really it was Big Beer who promoted the amendment to create a competitive disadvantage for themselves and their customers, such as distributors.

This week, Bud, MillerCoors and the wholesalers put out a letter setting forth these facts and said Mr. LaBert was in error; it truly was the Pa Brewers who wanted the special deal.

Meanwhile, it is distributors who have the strongest right to complain.

  • Our customers pay the sales tax and we collect it based on the purchase price, as does virtually every retail business. This now creates a perception on the part of customers that our competitors do not collect sales tax while we do.
  • When this exception allowing payment on “wholesale” – essentially a discount – was created for R, H and E licensees, we competed in substantially different markets since we could not sell less than a case.
  • It is this consumer “confusion” that the Department of Revenue says it wanted to remedy for the GP licensees with it’s 2018 Tax Bulletin, which the Pa Brewers labeled a “money grab”.  The Department reacted by suspended its ruling.

Between now and the spring will be a “cooling off” period.  Legislative leaders have indicated that they will not reconvene before the end of session, leaving this and other issues to welcome the new incoming members of the General Assembly.

In the meantime, it is distributors who are collecting sales tax in the exact same way as every other retailer in Pennsylvania, except about 10,000 others in the beer business.

Perhaps it is time for all of us to take those pens that are being used to write press releases to develop a plan that will put all retailers on the same level playing field – collecting sales tax on the retail price at the point of sale.  If the General Assembly really wants to promote fairness and better competition in the marketplace, this is the assignment.