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OLR Research Report


August 14, 2009

 

2009-R-0291

MICROBREWERY LAW

By: Daniel Duffy, Principal Analyst

You asked if other states have laws specifically concerned with microbreweries.

SUMMARY

We identified eight states that have laws specifically concerned with microbreweries and four that provide excise tax exemptions for relatively small brewers. Montana has both types of laws. In states without specific laws, microbreweries must operate according to the same rules established for major brewers.

Microbreweries are generally described to be breweries that produce up to 15,000 barrels per year. But none of the seven states set 15,000 barrels per year as the upper limit of a microbrewery's production. Instead, they set an upper limit that ranges from a high of 60,000 barrels to a low of 10,000 barrels.

The laws determine whether microbreweries can sell to wholesalers, retailers, or both. They also determine whether microbreweries can sell directly to consumers for on- or off-premises consumption. In some cases, the law allows them to do so but only if they hold additional permits.

Washington allows microbreweries to sell their products at qualified farmers' markets under certain conditions.

We have not included laws primarily concerned with brewpubs. Although some states (like Connecticut) may allow a brewpub to sell limited amounts for off-premises consumption, its focus is on on-premises sales. We are enclosing a related OLR report on brewpubs (2005-R-0193).

MICROBREWERIES

The term “microbrewery” means a small brewery. But states use various terms to describe a small brewery. They range from microbrewery through “small brewery” to “craft brewery.”

Further, the states do not establish a uniform boundary between microbreweries and other, larger concerns. Although industry sources generally describe a microbrewery as one that produces up to 15,000 barrels a year, state laws set different limits. Table one displays the seven states we identified with laws specifically on microbreweries and the production limits they set.

Table 1: Microbrewery Production Limit

State

Production Limit (Barrels)

Arizona

20,000

Indiana

20,000

Kentucky

25,000

Maine

50,000

Missouri

10,000

Montana

60,000

Nebraska

10,000

Washington

60,000

States also vary in how they allow microbreweries to sell and market their products. Some states allow microbreweries to distribute their products directly to retailers. (In this they are like Connecticut, which allows all beer brewers to sell directly to retailers (CGS 30-16)). Other states require microbrewers to sell through wholesalers.

In some states a microbrewer can sell directly to the public without additional permits (called licenses by some states). In the others a microbrewer must obtain separate permits allowing on- or off-premises sales. In Connecticut, a brewer may obtain an additional permit allowing on-premises sales.

The states also vary in the degree to which they grant advantages to microbreweries to foster their growth. Indiana's law is designed in a way that apparently allows both microbreweries and brewpubs to obtain the same permit. But apart from allowing the holder to also hold both on- and off-premises permits, it does not confer on microbreweries any advantages. On the other hand, Washington allows microbreweries to operate in all three levels (manufacture, wholesale, and retail) of the industry and allows microbreweries to sell their product under certain conditions at qualified farmers' markets.

Four states provide excise tax exemptions for microbreweries. Table 2 displays the states and the tax exemptions.

Table 2: Excise Tax Exemptions

State

Excise Tax Exemption

Minnesota

Full exemption for first 25,000 barrels for small brewers

Montana

Excise tax rate increases progressively until 20,000 barrels

Michigan

$2.00 exemption for first 30,000 barrels for small brewers

Texas

25% exemption for first 75,000 barrels

STATES

Arizona

Arizona issues a “domestic microbrewery license” (Ariz. Rev. Stat. 4-205.08). The license allows its holder to:

1. sell beer for on- or off-premises consumption,

2. sell and deliver beer through licensed wholesalers,

3. sell and deliver beer to duly licensed out-of-state concerns, and

4. serve samples.

A microbrewery must produce at least 161 barrels (5,000 gallons) but may not produce more than 20,000 barrels (620,000 gallons) each calendar year.

A microbrewery may sell at retail at the brewery. It may sell other types of alcoholic beverages if it also holds a license allowing on-premises consumption. It may sell and deliver its beer to other licensed retailers, but not more than 93,000 gallons (3,000 barrels) each year. The law allows the owner of a microbrewery to also own other establishments selling alcoholic beverages for on-premises consumption.

Indiana

Indiana allows a brewer that does not brew more than 20,000 barrels (620,000 gallons) a year to:

1. sell and deliver beer to retailers;

2. own a restaurant and hold the permits required to sell beer, wine, and distilled spirits;

3. transfer beer directly to its restaurant through kegs or piping; and

4. allow passage between the restaurant and the brewery (Ind. Code 7.1-3-2-7).

The law also allows these microbrewers to sell and deliver beer directly to consumers at their homes, but limits the size of these delivers to one-half barrel. The beer may be delivered in bottles or any other type of container allowed under Indiana law.

Kentucky

Kentucky allows microbreweries to:

1. act in all respects as a brewer,

2. serve samples up to one pint per patron, and

3. sell to licensed distributors (Ky. Rev. Stat. 243.157).

Microbreweries may also hold retail on- and off- premises licenses. A microbrewery may not brew more than 25,000 barrels (775,000 gallons) per year.

Maine

Maine allows “small breweries” to produce up to up to 1,612 barrels (50,000 gallons) per year. Its holder may:

1. offer samples;

2. sell at the brewery to licensed retailers beer in bottles, cases, or in bulk for off-premises consumption; and

3. hold a second license allowing on-premises consumption at a different location (Me. Rev. Stat. 28-A 1355).

Michigan

Michigan gives a tax credit to eligible brewers against the $6.30 per barrel excise tax (Mich. Comp. Laws 436.1409). The credit is $2.00 per barrel for the first 30,000 barrels brewed each year. An “eligible brewer” is a brewer or brewpub that brews up to 50,000 barrels (1,550,000 gallons) per year.

Minnesota

Minnesota allows “qualified brewers” to claim a full exemption from the state's $4.60 per barrel excise tax for the first 25,000 barrels (775,000 gallons) sold each year up to a maximum exemption of $115,000. A qualified brewer is one that brews less than 100,000 barrels (3,100,000 gallons) each year (Minn. Stat. 297G.04)

Missouri

Missouri allows microbreweries to (1) hold up to 10 licenses to sell alcoholic beverages for on-premises consumption and (2) sell to duly licensed wholesalers (Mo. Rev. Stat. 311.195). A microbrewery may brew up to 10,000 barrels (310,000 gallons) per year.

Montana

Montana allows a brewery that brews less than 60,000 barrels (1,860,000) gallons per year to sell and deliver its beer to wholesalers, retailers, and the public (Mont. Code 16-3-214). It limits the amount that may be delivered to one retailer to the case equivalent of eight barrels per day and the total amount to all retailers to 10,000 barrels per year. It allows a brewer that does not brew more than 10,000 barrels to offer samples and to sell up to 48 ounces to individual customers per day (Mont. Code 16-3-213).

Montana has a progressive excise tax structure. Its excise tax is:

1. $1.30 per barrel on the first 5,000 barrels brewed each year,

2. $2.30 per barrel on the next 5,000 barrels,

3. $3.30 per barrel on the next 10,000 barrels, and

4. $4.30 per barrel on all barrels above 20,000 (Mont. Code 16-1-406).

Nebraska

Nebraska allows “craft breweries” (either a microbrewery or a brewpub) to produce up to 10,000 barrels (310,000 gallons) per year (Neb. Rev. Stat. 53-123.14). They may also sell to licensed distributors and at retail for on- or off-premises consumption.

Texas

Texas has a partial exemption from the excise tax for the first 75,000 barrels (2,325,000 gallons) brewed each year (Tex. Code 203.08). The exemption is equal to 25% of the excise tax on beer, which is currently $6 per barrel.

Washington

Washington licenses microbreweries, which it defines as a brewer that brews fewer than 60,000 barrels (1,860,000 gallons) per year (Wash. Rev. Code 66.24.244). In addition to brewing, the license allows its holder to sell its beer at wholesale and at retail. A microbrewery operating as a wholesaler or retailer must comply with applicable wholesale and retail laws. A microbrewery may not have more than one warehouse away from the brewery.

Washington explicitly allows microbreweries to list on their websites information related to retailers who sell or promote the brewery's products, including direct links to the retailers' websites. Further, it allows retailers to link to the brewery's website (RCW 66.24.420).

Washington allows microbreweries to sell their products at farmer's markets, but puts conditions on it. The market must be a “qualifying farmers' market,” which it defines as one that:

1. is a regular assembly of vendors at a defined location to sell agricultural products grown or produced in Washington directly to consumers;

2. has at least five vendors who are farmers selling their own products;

3. has a total combined gross annual sales of vendors who are farmers that is more than that of vendors who are processors or resellers;

4. the total combined gross annual sales of vendors who are farmers, processors, or resellers is more than that of vendors who are not; and

5. does not include a vendor who is a franchisee.

DD:ts