Brewers Want to Cut off Beer Tax Growth in Tenn.

NASHVILLE, Tenn. (AP) — The brewing industry wants Tennessee lawmakers to declare last call on the state's ballooning beer taxes.

A bill unveiled Wednesday wouldn't cause the state to lose its ranking as having the highest-taxed beer in the country, but it would halt future increases tied to rising costs and inflation.

Rich Foge, president of Tennessee Malt Beverage Association, said beer sales in the state have declined 5 percent over the last decade, while wholesale beer tax collections have risen 30 percent over that same period.

"There's a tipping point," Foge said. "This thing is ramping up so fast, it's dragging down the whole industry."

Beer in Tennessee is subject to three taxes. Brewers pay federal and state taxes per barrel, and then a 17 percent tax is charged to wholesalers based on price. Consumers pay as much as 9.75 percent in sales taxes on top of the previous charges.

Kentucky is the only other state with a similar tax arrangement based on the sales price of beer. The Tennessee measure would convert the 17 percent local tax to a levy based on volume, meaning the tax would remain at a constant of about $34 per 31-gallon barrel, regardless of the price of beer.

Sponsors envision no loss in $125 million revenues cities and counties currently collect from beer, but the measure would halt the steady growth in tax collections in future years. The measure is sponsored by Rep. Cameron Sexton of Crossville and fellow Republican Sen. Brian Kelsey of Germantown.

Standardizing the tax would ease pressure on the price of higher-end beers, but would also result in cheaper brands costing more.

"They're willing to have those beers go up some to reform this tax," Foge said. "The beer industry is united by this effort."

But legislative leaders didn't immediately rush to support the proposal. House Majority Leader Gerald McCormick said the measure will get a fair hearing, but said lawmakers will think carefully about upsetting revenues for local governments.

"I'd rather have us not have the highest tax in anything," said McCormick, R-Chattanooga. "But if we do, I'd rather it be beer and liquor than anything."

While the beer industry has embraced the idea of overhauling whey they call an archaic tax, it was been resistant to similar arguments about archaic laws made by supporters of proposals to allow wine to be sold alongside beer in supermarkets and grocery stores.

Foge called those issues unrelated, but pointed out that state taxes on wine aren't based on the price. He said the tax on a gallon of wine is $1.21, while the tax on a gallon of premium beer like Bud Lite averages $1.37. The tax on craft beers and imports us about $1.86 per gallon.

"So the beer tax is surging past what the wine tax in Tennessee," he said.