OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

HB-5928

AN ACT ESTABLISHING A MANUFACTURER PERMIT FOR FARM BREWERIES.

As Amended by House "A" (LCO 5934)

House Calendar No.: 80


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 18 $

FY 19 $

FY 20

Department of Revenue Services

GF - Revenue Gain

Minimal

Minimal

Minimal

Consumer Protection, Dept.

GF - Revenue Gain

300

Up to 600

Less than 1,200

Note: GF=General Fund

Municipal Impact: None

Explanation

The bill results in a minimal revenue gain in sales tax and alcoholic beverages tax, along with permitting fee revenue, by creating a farm brewery manufacturing permit. The actual revenue gain is dependent upon (1) the number of establishments that would qualify for the permit and (2) the size of the establishment's production.

It is anticipated that most of the revenue gain would occur in FY 20 and beyond due to the nature of the cultivation of associated crops. The bill requires a farm to grow at least 25% of the hops and barley it uses in the manufacturing process within the first year of the issuance of the permit, and 50% for the second year and beyond. One farm is currently producing at or near this level and another may be approaching it. However, such crops take multiple years to cultivate. There may be a lag in the time needed for additional farms to meet the required production thresholds in the bill.

To the extent that additional farms are currently producing at or near this level, the timing of the fiscal impact may occur sooner than FY 20.

The impacts to the sales tax listed above would also result in corresponding impacts to the Municipal Revenue Sharing Account and the Special Transportation Fund.1

Additionally the bill results in a revenue gain of $300 in FY 18 and $600 in FY 19, based on one currently operating farm brewery, another in development, and a Department of Consumer Protection permit fee of $300. In FY 20, the revenue gain may rise to $1,200 if there are two additional permittees.

House “A” may lessen the permit revenue gain and increase, minimally, the revenue gain to sales and alcoholic beverages taxes. Permit revenue may be lowered because the amendment increased the farm brewery production limits. To the extent a farm brewery produces between the original bill's limit (50,000 gallons) and the amended bill's limit (75,000 gallons), and would have otherwise been required to hold a $1,100 beer manufacturer permit, the potential revenue loss is $800 per such brewery. At the same time, if such a brewery would not have otherwise qualified for a beer manufacturer permit but will produce more than 50,000 gallons, there could be a revenue gain to both permit fees and sales and alcoholic beverages taxes. House “A” results in further potential revenue gain to sales and alcoholic beverages taxes by raising the bill's limit on farmers' market purchases of farm brewery beer.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to the number of establishments that would qualify for the permit, the size of the establishment's production, the volume of farm brewery sales at farmers' markets, and inflation.

1Current law transfers 0.5 percentage point of the Sales Tax into the Municipal Revenue Sharing Account and the Special Transportation Fund each in FY 18 and beyond.