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Tax rate under new Tenn. law makes high-alcohol brewing ‘not feasible,’ says Ghost River’s Skypeck

June 08, 2011 By: mike Category: Breweries, Craft beer, Government, Memphis

Chuck Skypeck speaks at BoscosChuck Skypeck, left, speaks to members of the Bluff City Brewers & Connoisseurs.

Tennessee state legislators trying to woo craft beer giant Sierra Nevada Brewing Co. to East Tennessee approved a bill last month allowing breweries to make and sell high-alcohol beer.

But the tax rate on producing high-alcohol beers under the new law makes it “not feasible” for craft breweries in Tennessee to produce those beers, according to veteran Memphis brewer Chuck Skypeck.

Speaking Tuesday night to the Bluff City Brewers & Connoisseurs homebrew club, Skypeck said beer brewers would have to apply for a “distiller’s license” and pay a distiller’s tax — about 30 times the state tax on lower-alcohol beers — to produce high-gravity beers.

Right now, when we produce a barrel of beer here, we pay $4.29 a barrel — that’s for 31 gallons — to the state. We’ve got a federal excise tax, too. If we make a high-alcohol beer … our (state) tax on that would be $4.40 a gallon. Do you know what that is? 55 cents a pint,” said Skypeck, founding partner of Memphis’ Ghost River Brewing and Boscos.  “… Until the tax situation changes, it’s just not feasible.”

High-alcohol beer is defined under state law as beer between 5 and 20 percent alcohol by weight and has only been available in liquor stores.

Skypeck, who spoke Tuesday at Boscos, said he is “pretty optimistic” that the tax rate will be addressed by the legislature “because we’re not going to be able to sell any of that product at that tax rate,” and the state, in turn, won’t be collecting much tax revenue.

And it could come up again fairly soon, since the law was enacted under the banner of economic development, specifically to attract Sierra Nevada to Tennessee.

They’ll figure it out when Sierra comes back and says, ‘We’re not paying $4.40 (in taxes) per gallon.’ There’s no way they’re coming to Tennessee paying that rate.”

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