There are two kinds of taxes for booze that I could find: excise and sales. There are two entities which charge this tax: federal and state.
Federal taxes
| Federal Excise Tax | ||
|---|---|---|
| beer | $18/barrel | $0.38/6 pack of 12 oz |
| wine under 14% | $1.07/wine gallon | $0.21/750 mL |
| wine 14%-21% | $1.57/wine gallon | $0.31/750 mL |
| wine 21%-24% | $3.15/wine gallon | $0.62/750 mL |
| wine natural bubbles | $3.40/wine gallon | $0.67/750 mL |
| wine artificial bubbles | $3.30/wine gallon | $0.65/750 mL |
| hard cider | $0.226/wine gallon | $0.04/750 mL |
| liquor | $13.50/proof gallon | $2.14/750 mL at 80 proof |
| Note: for beer, wine, and cider there is a reduced tax on the first xyz units, see link for details. | ||
There is no federal sales tax on alcohol, nor any other direct taxes that I could find.
Massachusetts taxes
| Massachusetts Excise Tax | ||
|---|---|---|
| beer | $3.30/barrel | $0.07/6 pack of 12 oz |
| wine under 14% | $0.55/wine gallon | $0.11/750 mL |
| wine 14%-21% | $0.55/wine gallon | $0.11/750 mL |
| wine 21%-24% | $0.55/wine gallon | $0.11/750 mL |
| wine natural bubbles | $0.70/wine gallon | $0.14/750 mL |
| wine artificial bubbles | $0.70/wine gallon | $0.14/750 mL |
| hard cider | $0.03/wine gallon | $0.01/750 mL |
| liquor | $4.05/proof gallon | $0.64/750 mL at 80 proof |
Sales Tax 6.25%
Bottle deposit: $0.05 per bottle, but not considered a tax because you can return the bottles for a refund. Relevant for beer but not wine nor liquor.
Combined taxes
6 pack of value beer: $6 price tag. Total including sales tax: $6.38. Pre-tax: $5.55. Including deposits: $6.68.
Total tax: $0.38 + $0.07 + $0.38 = $0.83.
Total tax percent: 15%
Total MA tax percent: 8%
6 pack of snoot beer: $9 price tag. Total including sales tax: $9.56. Pre-tax: $8.55. Including deposits: $9.86.
Total tax: $0.38 + $0.07 + $0.56 = $1.01.
Total tax percent: 12%
Total MA tax percent: 7%
Bottle inexpensive normal wine: $8 price tag. Total including sales tax: $8.50. Pre-tax: $7.68. No deposit: $8.50.
Total tax: $0.21 + $0.11 + $0.50 = $0.82.
Total tax percentage: 11%
Total MA tax percentage: 8%
Bottle not-inexpensive normal wine: $20 price tag. Total including sales tax: $21.25. Pre-tax: $19.68. No deposit: $21.25.
Total tax: $0.21 + $0.11 + $1.25 = $1.57.
Total tax percentage: 8%
Total MA tax percentage: 7%
Bottle not-cheap champagne: $30 price tag. Total including sales tax: $31.87. Pre-tax: $29.21. No deposit: $31.87.
Total tax: $0.67 + $0.14 + $1.87 = $2.68.
Total tax percentage: 9%
Total MA tax percentage: 7%
750 mL bottle mid shelf 80 proof booze: $30 price tag. Total including sales tax: $31.87. Pre-tax: $27.22. No deposit: $31.87.
Total tax: $2.14 + $0.64 + $1.87 = $4.65.
Total tax percentage: 17%
Total MA tax percentage: 9%
So, good ladies and gents of BMG (and EBIII): what am I missing? Are there other taxes I haven’t considered? Do I have old and incorrect excise tax information for the feds or the commonwealth? Is my arithmetic incorrect? Is my neighborhood liquor store misinformed and misinforming?
Methinks you’re BIAS.
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p>There is nothing “snooty” about La Fin du monde.
I just can’t keep up with it, it keeps getting better and better. Time keeps on slipping slipping slipping into the present…
I plan ahead. Sometimes I even buy things weeks before I consume them.
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p>Jeebus.
Or you’ll buy your booze elsewhere.
since it’s on my walk from the office to the home. Tried to ask as innocently as I could about it. The sign read beer 35.3%, wine 35.?%, liquor 42.?%. The conversation went something like this:
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p>stomv: I was here yesterday and I saw the huge tax… what’s that all about?
vendor: Those are the taxes now!
Yeah, I went home and read about it, but the sales tax is only 6.25%. What’s the rest of it?
Sin tax.
You mean excise tax?
29%.
Really? The federal excise tax is $18 a barrel, which is about a quarter per 6-pack, and the state’s is $3.30 a barrel, closer to a dime per 6-pack. Thirty five cents plus 6.25% isn’t anywhere near 35.3%.
It’s different for different alcohol content, and they don’t go by barrels.
Sure — federally beer is one rate, wine has three rates, champagne has two rates, and liquor uses proof gallon. A barrel is 31 gallons. Still, those are the rates. Do you think maybe there’s another tax that I’m missing, because I can’t seem to come up with more than 15% federal AND state?
I’m done with this conversation. Customers keep asking me about this.
Nobody did anything about it before they passed it…
I’m not against paying a total tax in the range of 10-15% and I certainly didn’t mean to upset you; I saw the sign and wanted to understand the tax, that’s all. Have a nice night.
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p>Now, on the one hand, the store is spreading misinformation that feeds the “Taxachusetts” myth, and specifically calls out Governor Patrick, as if he is two branches of government.
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p>On the other hand, it’s my local. I believe in supporting local independents, and I don’t have a car. Beer and wine get heavy.
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p>Maybe a letter from the MA DOR would help?
similar to the Texas Deceptive Trade Practices Act?
Laws against false advertising? that kind of thing?
Sounds pretty much like our current Congress and Nancy Pelosi seeing the visage of George Lincoln Rockwell, Storm Troopers and Swastika’s at Town Hall meetings. I guess this guy is massaging the truth to fit his own political philosophy. Common tactic.
You mean, now? All right, let’s see what we got here…
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p>Maybe the liquor store was including the gas tax and income tax and counting the cigarettes and porno mag as tax, too…
The excise rate is applied at the wholesale level. The price of beer is posted in the store, but the MA and Fed excise rates have already been applied. And then the 6.25% sales tax is applied to the total that includes the retailer’s price, the MA excise amount, and the federal excise amount. A sales tax upon an excise tax – pyramiding in tax talk.
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p>In a perfect economic hypothetical world, the $6 six pack should actually cost $5.61 but the $0.33 federal excise rate and the $0.06 MA excise rate bring the total to $6. Then the 6.25% sales tax is applied to that $6 total and the $0.30 bottle deposit is added on bringing the total you pay to $6.68 for that 6 pack that the store should sell for $5.61. I guess it’s arguable that since MA mandates the bottle deposit payment and since MA uses the bottle deposit law as a source of revenue that it’s not entirely unreasonable, even if technically inaccurate, to call the bottle deposit amount a tax. But that’s still only a 19.07% tax.
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p>There are many additional registration and license fees that wholesalers and retailer of alcohol must pay to both the state and federal government. I suppose they could be adding up all the other fees associated with selling alcohol in MA and calling those amounts taxes too. But I don’t know where the 39.4% number comes from, it seems very inflated.
Anyways, this tax was poorly thought out. It’s an outrage that we have to pay a sales tax on something that is already taxed. Imagine going to town hall to get a dog license or a building permit, and then having to pay a sales tax on that! If the state wanted to increase the tax revenue on alcohol, it should have just raised the excise. At least then, we wouldn’t be paying a tax on a tax.
As a side note, this could end up hurting Massachusetts. In the past two decades, there’s been a great deal of growth in craft breweries. Sam Adams, Harpoon, Wachusett, Mayflower Brewing, and Berkshire Brewing, come to mind. Although not all of those beers, are brewed in Massachusetts, there are still administrative jobs here. By adding a percentage-based sales tax to these already pricey beers, there’s a good chance that some consumers will switch over to less pricey, non-Massachusetts made beers. (The Bud brewery in Merrimac, New Hampshire, might benefit from that!)
Count me in on voting “Yes” on the ballot question to undo this mistake. Same goes for rolling the sales tax back to 5%.
RE: tax on tax. They could have simply increased the excise tax by 6.25% and then exempted that part from the sales tax. Exact same revenue to the state, but no “tax on tax” — but more complex programming for cash registers. Thus, the first paragraph is irrelevant.
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p>RE: side note. Sam Adams is certainly not (any longer) a craft beer. By 1996 they were making 1.2 million barrels a year. The fact is that a 6.25% tax (applied to both value and snoot beer) will result in a twenty cent additional difference in price. As per my simplistic example:
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p>Instead of a $3 difference pre-sales tax, there’s now a $3.20 difference. You really think that somebody was willing to pay an extra $0.50 per beer for craft beer, but won’t pay an extra $0.53? Really? That’s just plain unlikely.
Before the recent change MA collected an excise tax instead of a sales tax on alcohol. If MA wants to collect more revenue from alcohol sales then the easiest thing to do would be to just raise the excise tax rates. Instead MA kept the excise rates where they were and got rid of the exemption. So now we have 2 levels of tax on one product, one implemented at the wholesale level and another implemented at the retail level. Tax pyramiding is bad policy in general because it hides the earlier layers of tax in the cost of the goods. So it’s less transparent and it requires two layers of compliance (registration, collecting the tax, filing returns, record keeping, auditing, etc.)
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p>If MA wanted to collect more revenue from the sale of alcohol then there was an easier way to do it and a harder way to do it. MA chose the harder way.
but I disagree. Here’s why:
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p>1. Liquor stores already know how to collect sales tax. They do it for glassware, cork screws, church keys, etc. Adding it for booze isn’t particularly difficult.
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p>2. Excise is a flat rate. That means the same 81 cents (state and federal) is collected on a $10 bottle of champagne and a $1,000 bottle of champagne. I don’t think it’s fair that cheap liquor is taxed at a higher rate than the expensive stuff.
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p>The federal gov’t doesn’t do sales tax; excise is their game. Given the feds’ system, doing a parallel state system is fairly trivial. The state effectively asks for the federal forms and uses those quantities to recalculate, much like the W-2s are used in state taxes. But, a flat per-unit tax, with no regard to price, makes no more sense than charging a flat tax of $0.50/clock, be it a cheapo alarm clock or a grandfather clock.
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p>My preference would be to eliminate the excise tax but to have a higher sales tax for alcohol — on the order of 10-15%. I just think it’s reasonable to pay higher rates for the so-called sin taxes.
You allude to it below when you talk about “the social cost of drunk driving, liver disease, alcohol fueled violence, etc.” But a cheap alcohol and an expensive alcohol will have the same effect on the social costs you talk about. So should MA be trying to cover the costs associated with alcohol, or should MA abandon the attempt to link the alcohol tax to the costs of alcohol and instead try to make the alcohol tax more progressive?
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p>And the federal excise tax forms will cover excise sales in the entire US, while the MA returns will cover only MA. It’s much more complicated than just having the MA DOR ask for a company’s federal excise return.
Here is the federal return: http://www.ttb.gov/forms/f5000…
Here is the MA return: http://www.mass.gov/Ador/docs/…
The MA return is much longer and asks for much more information.
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p>But after looking at the MA alcohol excise tax law, MGL ch. 138 sec. 21(g), I found this interesting tidbit:
So 16.7% of the alcohol excise taxes go into the MA pension fund. So if we were to increase the excise rates then it would be less $ to the general fund, but more into the pension fund. Then we don’t need to get rid of the abuses in the pension system!
You make a really interesting point about the social costs. Do rich drunks have higher social costs? I don’t know, but the social costs of a $1000 bottle of champagne certainly aren’t 100 times that of a $10 bottle of champagne.
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p>Still, the idea of paying as a function of price isn’t really much different than the idea of paying x% of your income in tax instead of every person being responsible for paying $y in tax. So, maybe the idea of both a “per volume” and a percentage do make sense.
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p>As for the forms, hats off for pulling them up. The federal form is fewer pages, but it’s not particularly easier. The MA form just breaks things out and has many lines for each item, whereas the federal form requires that the brewer calculate all that, just not write it down on that particular form. So, not buying the “fed is easier” gambit… it’s essentially the same information on both, the MA form is just more verbose.
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p>As for the MGL, that’s really interesting too. Irrelevant and strange are other words to use. I’m not sure why they linked that particular revenue stream to pensions; it’s rather arbitrary. I also have no idea when that law passed. If we were to increase the excise rates there’s no reason why this portion of the law couldn’t be amended, so your ifs are candy, my buts are nuts.
The excise and sales taxes are both really just a tax on consumption. It’s a question of how we should measure consumption of alcohol. I don’t really have a problem with measuring it by price or by volume, either are legitimate ways to measure the consumption of alcohol. But it would be easier to pick one or the other instead of having multiple layers to measure it both ways.
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p>I suppose the excise by weight could have arisen because alcohol breaks down neartly into different categories better than most products (beer, wine, hard liquor). But recent new alcohol products have even brought that into question. CA recently changed the classification of flavored malt beverages (like Mikes Hard Lemonade, Smirnoff Ice, etc) from beer to hard liquor. So maybe it would be easier to just go by price to avoid classification issues. But then MA should just get rid of the excise tax altogether.
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p>Historical notes – in 1975 the law was changed so that the excise tax went into a fund specifically for debt service, with any balance remaining at the end of each year after 1981 transferred into another fund specifically for mass transportation. In 1987 the law was changed to transfer the balance into the pension fund. I don’t know what debt service, mass transportation, or pensions have to do with the wholeselling of alcohol, but for the past 30+ years lawmakers have dedicated some or all of the excise tax to specific underfunded areas.
“The excise and sales taxes are both really just a tax on consumption. “
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p>If the excise tax is flat, then it’s a tax on consumption with a complete disconnect to price. In this way, it’s a tax on ‘units’ and not ‘economic activity’.
A tax based on price is disconnected from volume. A tax based on volume is disconnected from price. If you’re more concerned with raising revenue and progressivity then you would probably favor a consumption tax based on price. If you’re more concerned with making sure that consumers of alcohol bear the costs of the social ills of alcohol then you would probably favor a consumption tax based on volume. I don’t think either are necessarily flawed or inaccurate measures, it just depends on what your goal is.
… but, in general, divorcing tax from price does two arguably bad things:
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p>It gets regressive results (See Stomv’s $1,000 champagne example. Even a flat tax on income is less regressive.
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p>It divorces taxes from GDP, arguably making it very difficult to manage the economy by making revenue much harder to model.
One of the reasons I like to use a percent (instead of a per volume) is that it naturally tracks inflation.
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p>As for ease, since the Feds use an excise tax and since liquor stores charge sales tax for other items in the store, I just don’t buy that the two-tax system is a substantial burden on the total efforts of alcohol industry accountants and tax preparers. If the Feds got rid of their excise tax, then maybe it might make sense. Heck, it might be the case that the “easiest” thing to do w.r.t. excise is to make the state alcohol excise tax x% of the federal tax. It would look like:
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p>1. Enter Federal Excise Tax Obligation
2. Multiply Line 1 by 0.x _____
3. Pay the amount in line 2.
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p>If the state excise tax on alcohol worked like that, would you still oppose both an excise and a sales tax, where the combined revenue is the desired rate?
…an argument for legislation that converts the excite tax to a sales tax (revenue neutral or otherwise)?
I think the idea of different sales taxes on different products will get real ugly real quick. It’s a pandoras box that no legislator wants and no consumer wants. If sales tax were pre-included in the price it might resolve some of those concerns.
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p>I think even if it were to happen, it would work like this:
2009:
– sales tax non-booze 6.25%
– sales tax booze 6.25%
– excise tax booze per volume
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p>2010:
– sales tax non-booze 6.25%
– sales tax booze 8%
– NO excise tax booze per volume
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p>2012:
– sales tax non-booze 6.25%
– sales tax booze 6.25%
– NO excise tax booze per volume
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p>People would be so frustrated by the extra sales tax after the price sticker that they’d knock it back down to the exact same rate as other products. Logical and efficient: meet visceral and instinctive.
Last year they produced 1.9 million barrels of beer, which brings them under the Brewer’s Association (and the IRS) definition of “craft brewer.” They are expected to be kicked out of the Brewer’s Association next year when they report this year’s annual numbers and go over the 2 million barrel mark.
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p>From the Washington Post (May 20, 2009)
I thought that the 60,000 was the cutoff, not 2,000,000.
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p>As for “craft”, the point was to give smaller brewers a brake. Sammy-Boy is no longer a small brewer. He’s all growed up ==sniff==.
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p>Heck, raise the per-barrel fee from $18 to something a little higher, and give every brewer a discount on the first 60,000 barrels, regardless of their volume. This way the large brewers pay much less on their first 60k, but their next many million at a slightly higher rate than now make up the difference. Nobody who makes 2.01M barrels gets punished, and everybody, big and small, is technically treated the same for each additional barrel.
(and I don’t know why it landed at the bottom of the thread the first time)
Eabo won’t answer/address the point at hand…just pushing his phony agenda
They use all of the taxes that they pay in coming up with that number. I gave Power Wheels a six when s/he said that. I thought I had it covered. So there I covered it.
explanation
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p>
Anzalotti claims 37% of the retail price of alcohol goes to state, federal, and local taxes and fees. Did Pateakos question it?
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p>Does it include:
* taxes on payroll
* taxes on property
* taxes on energy and fuel
* licenses/permits
* taxes on profit
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p>The number is disingenuous. The only tax specific to alcohol is the excise tax, which is six cents per beer. Any other taxes they pay make them no different from any other business, and in the fact that alcohol was sales tax exempt made the total effective tax rate on alcohol less than virtually every other non-essential good.
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p>The fact is that the beer, wine, and liquor industry had a sweetheart deal where their product was taxed less then end tables, golf clubs, fingernail clippers, or lawn mowers. With the removal of the sales tax exemption, their product is now slightly more taxed… never mind the social cost of drunk driving, liver disease, alcohol fueled violence, etc.
Say, $5.99 for, say, a cheap imported desert wine with 21% alcohol content. The EU version of Mogen David. in a 750 ml bottle. I’ll convert everything to gallons, just for simplcity. Or .198129039 of a gallon, so a retail price per gallon of $30.23.
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p>Sales tax on the $30.23 would be $1.89
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p>Ma excise would be $4.05. Right?
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p>Fed excise would be $3.15. Your number.
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p>There is a harmonized tariff on imported wine. It’s 26.4 cents per liter according to this source. So converting using 0.264172052 (liters to gallons), that’s almost exactly $1.00 per gallon.
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p>Sum of the taxes and tariffs divided by $30.23 is 33.37%, and that’s not counting the foreign taxes and it’s not inconceiveable that the country of origin tax could add 7 to 8% at least.
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p>So, cherry-picking like hell, it’s looks possible to get to 41.7% on the cheap, high alcohol, imported desert wine.
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p>As for “the governor’s taxes”, well, some are, most aren’t. Maybe he had a small print disclaimer at the bottom of the sign.
We’ll use dessert wine (not to be confused with that sandy stuff in Northern Africa), which is certainly not a common choice for wine — if the percent of space dedicated to it at a wine shop is any indication, $7-$15 750 mL under 14% reds and whites get most of the space.
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p>But, here we go:
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p> – Retail per gallon $30.23. Check.
– Sales tax $1.89. Check.
– MA excise? No check. Using the table on this page, dessert wine seems to show up twice. It’s still wine, so $0.55/wine gallon seems to apply. Yet unlike the under 15% at 60F wine exclusion, the over 15% ABV doesn’t have the exclusion. So, I offer:
Option A: $0.55
Option B: $4.05
– Fed excise: $3.15. Check.
– Imported wine tariff (not paid by the American merchant, but rather the EU exporter): $1.00. Check.
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p>Under Option B, and “cherry-picking like hell” while ignoring that the entity who pays the tax is indeed relevant, you got there.
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p>But if, in fact, Option A is the correct taxation scheme, then we’re at $6.59 per $30.23 retail. Since to be fair you’ve got to use the non-taxed portion as the denominator, the pre-tax value is $25.53, making the tax 26%, with only about 8% state tax. I suspect Option A is correct because the state tax seems to be between 1/4 and 1/2 of the federal excise tax for all items down the line. Why would this particular wine be 4/3 of the federal excise tax? Just seems unlikely.
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p>P.S. No small print.
With respect to wine then, the key question is what’s the Mass excise on high alcohol imported wine. No idea.
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p>So, look at beer. 1/2 keg, 15.5 gallons, Light at $37.99 per 1/2 keg.
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p>$9.00 federal excise
$1.65 mass excise
$2.37 sales tax
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p>That’s 34.27%. True, not 39.4%, but neither do I know if your local merchant had a keg of Red, White and Blue beer in the back for $32.13, in which case, you’re there.
On cheap beer in bulk, you can get there. In 2007 (see copyright message on page). I called Blanchard’s, and they confirmed that a keg of Natural Light was 15ish gallons, but $43.99. So, your estimates turn out to be high by about 4%.
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p>Still, you’re there. That is, there are some products (cheap beer in a keg, possibly cheap imported desert wine) which creep up to that high percentage. Certainly, we’ve got to cherry-pick them, as that high a percentage is the extreme, not the median, mean, or any other norm. This is because the more expensive per unit volume, the cheaper the tax gets because the excise tax is per volume, not per price. So buying in smaller units (cans instead of kegs), buying in small supplies (a 40 oz instead of a 1984 oz), and buying premium beer instead of value beer all result in a lower tax percentage because some of the tax is not a function of price.
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p>side note: that site uses 1/2 keg to be 15.5 gallons, but my understanding is that a barrel is 31, a keg 15.5 gallons, a 1/2 keg 7.75, etc. This doesn’t appear to impact the calculations by a factor of 2 because their labels on the price list and their unit explanation at the bottom are in sync.
Somehow I think the Federal portion of the tax doesn’t really fall under the heading: “THE GOVERNOR’S TAXES:”
Just wanted to say thanks to stomv for taking the time on this one (and also to the commenters who contributed worthwhile posts… even gary!)
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p>There’s a valid debate to be had about the role of taxes in our society and the appropriate level for the taxes we pay. Sloganeering and misinformation are not part of that debate. Only once we get past reactionary crap such as this will we be able to have the important discussion.