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Georgia Attempts to Tighten Breweries Sales Freedoms

Georgia breweries are really struggling with the powers that be. Over the past year, the state’s small breweries lobbied hard in conjunction with the Georgia Craft Brewer’s Guild, to try and allow direct sales. (That’s where you can go to the brewery and buy a pint, or bottles to-go.) There are quite a few states that allow this. Actually, almost every state has a work-around, except Georgia and Mississippi.

What the breweries wanted? Direct sales.

After the beer wholesalers and bureaucrats got involved? A watered down, almost completely confusing mess of a “law change” called SB63.

As of July 1st, 2015, Georgia’s breweries can sell tours that come with souvenir bottles, but no beer can be sold by the brewery to the consumer. That change comes with limitations – 36 ounces of free samples on site, and up to 72 ounces of beer (sealed) to-go, per day.

Let’s talk taxes. This is where things get messy. Small breweries already pay an excise tax (aka production tax) on the beer. When the consumer arrives at the brewery, he/she pays 8% sales tax for the tour. Think we are done paying taxes? Nope. Remember the free beer given away per person, per tour? The brewery must also pay a “use tax” on all the free beer given away.

That use tax is what the value of that beer is if sold to the public. To the consumers the brewery is NOT allowed to sell to.

It also raises the question – What is the fair market value of beer that is given away for free? Is that not zero? If it is, that “use tax” is zero as well.

Georgia SB63 opened the door, even just a little bit, to put to-go beer in the hands of brewery tourists. Additionally, special small batch bottles could be released at the brewery on special days. (Almost like Lost Abbey Veritas, Surly Darkness Day, 3 Floyds Dark Lord Day, Wicked Weed Angel Releases… you get the idea.)

Since July 1st, Georgia’s craft breweries have done just that. Almost all breweries have tours that reflect beer sampling, and the ability to choose the size of your free beer and souvenir. Not a perfect situation, but better than before.

Guess what. Despite the above, the Georgia Department of Revenue ever so quietly attempted tightened the rules again on Friday. A new policy bulletin was updated on the DOR website, with some more annotations to the rules. The DOR is telling small breweries that the price has to be the same for the person who samples, and the person who samples and takes beer home.  You can’t change your tour price because your souvenir beer (read: special bottle release) is more expensive:

  1. (Q3)  Can a manufacturer charge varying fees for facility tours?Yes. However, the basis for varying fees may not be due to differences in the volume or market value of alcohol provided to tour attendees. Fees may vary based on the furnishing of non-alcoholic promotional items, the day of the week, live entertainment, etc. However, a manufacturer who furnishes beverage alcohol in the course of a tour must not vary prices based on the change in relative market value or volume of the alcoholic beverages furnished.For example, a manufacturer must charge the same rate for a tour where one tour attendee elects to sample free beverage alcohol during a tour and the second attendee elects to sample free beverage alcohol and receive a free beverage alcohol souvenir.

Sources tell Beer Street Journal that this new annotation comes after pressure has been place on the DOR by Georgia’s biggest distributors, who are upset that special bottles that have been recently released by local breweries, didn’t hit distribution. It’s an indirect demand for total control of the brewery’s product. If we site the most recent release examples, that’s less that 1,000 special release bottles from two breweries. Total. Yet, the distributor are raging about the holiness of the three-tier system, and fair business practices.

If you are still with me this far, basically, after months of hard work in the Georgia Senate, the breweries of Georgia finally were thrown the tiniest, most pathetic bone by the lawmakers. The breweries found a way to work with the law and bring extra money into their small business. What the Georgia Department of Revenue is doing doesn’t seem procedurally sound. A re-intereptation of this capacity should warrant an open, 30 day public commentary,  which the small breweries have not been afforded.

Something tells me, the real battle for Georgia’s small breweries has just begun.

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