Oklahoma Excise Tax Has Brewers Worried

As beer legislation continues to be a frequent topic in state capitols in support of smaller brewers, Oklahoma is looking at increasing taxes on breweries within its borders.

Legislators are pushing three bills that will reform how beer is taxed and regulated within Oklahoma. The most controversial is House Bill 1858, which proposes to eliminate any sales tax on beer 3.2 percent ABW (alcohol by weight) or lower, but increase the excise tax more than 300 percent, from 35 cents a gallon to $1.42 cents a gallon for beer brewed in-state.

The burden of taxation would then be placed on breweries, which could either raise prices to compensate at the risk of alienating consumers, or leave prices as they are and see their profits slashed dramatically.

According to the League of Oklahomans for Change in Alcohol Laws, or LOCAL, the new tax proposal is an unfair and detrimental displacement of taxation from point-of-sale to the manufacturing end of business. “When business becomes less lucrative through burdensome regulation on the manufacturing end, there will be job cuts—both direct and indirect jobs,” said the group in a post on its website. “Companies will shrink. Breweries are no exception. It is in Oklahoma’s best interest to pass fair laws that encourage business growth, especially in craft beer where brewery jobs support 45 other jobs.”

The bill’s primary sponsor, State Rep. Howard Wright, argues that removing the sales tax will mitigate the effects of the excise tax increase. “It’s not a tax increase, it’s a break-even. The current sales tax plus the excise tax per ounce is going to be approximately the same as what the 45 dollars would be without the sales tax,” he said.

Wright cites a problem with retailers evading payment of the sales tax as the reason for HB 1858. But according to Wes Alexander, director of sales of and marketing at Oklahoma’s Marshall Brewing, the brewers shouldn’t be held responsible. “Oklahoma’s sales tax system is the current and correct system for collecting taxes due at the retail level on low-point beer,” he wrote in an opinion column at www.tulsaworld.com. “Enforcement of our existing tax code is the job of state agencies,” Alexander said.

HB 1858 is currently in its second round of House and Senate committee hearings, along with two other beer-related bills.

Senate Bill 424 proposes to allow brewers to sell beer higher than 3.2 ABW on premise, which would help smaller brewers grow, and Senate Bill 383 would allow liquor stores, the only legal retailers of stronger beer, to sell it cold. Currently, only convenience stores have a monopoly on refrigerated beer sales, although they can only sell lowpoint (3.2 ABW) beer.

Both Senate bills have passed out of the committee on business and commerce, and HB 1858 has passed out of the Budget Revenue and Taxation committee; all await a full Senate hearing as
Oklahoman brewers and wholesalers whose livelihoods may depend on the outcome continue to follow the bills’ progress closely.