The Controversial Craft Beverage Modernization and Tax Reform Act Will Have Wide Range of Impact on New Jersey Businesses
A controversial new federal tax law will have a wide range of impacts on New Jersey businesses. For craft brewers, the legislation is a clear win, thanks to the inclusion of the Craft Beverage Modernization and Tax Reform Act of 2017. The new law aims to update and modernize the excise tax and regulatory requirements for craft brewers, vintners, and distillers.
Due to an outdated and highly restrictive regulatory structure, the growth of the New Jersey craft beverage industry was substantially restricted. This changed when, in 2012, the state adopted new laws for microbreweries and brewpubs. The amended law increased the allowable annual production for brewpubs from 3,000 barrels to 10,000. The changes also authorized brewpubs holding a Restricted Brewery License to sell and distribute their beer to licensed wholesalers, whereas previously the beer could only be sold at an adjoining restaurant. With the grant of additional retail consumption licenses, a company can now operate as many as ten brewpubs in New Jersey.
The changes also impacted microbreweries holding a Limited Brewery License. Craft brewers can now sell beer for consumption on the premises in connection with a brewery tour, where they were previously limited to providing free four once samples. Patrons can also purchase 15.5 gallons or less (roughly a keg) for off-premises consumption, which is a significant increase over the two six-packs allowed under the prior law.
The license application fees for the Limited Brewery License range from $1,250 to $7,500 and are dependent upon production capacity. The fee to apply for a Restricted License is $1,250, with an additional $250 due for every 1,000 barrels produced beyond the initial 1,000 barrels.
Changes Under the Craft Beverage Modernization and Tax Reform Act
The goal of the Craft Beverage Modernization and Tax Reform Act is to fuel the growth of the craft beverage industry through tax relief and reduced regulation. Most notably, the federal excise tax will be reduced to $3.50/barrel (from $7/barrel) on the first 60,000 barrels for domestic brewers producing less than 2 million barrels annually. It will be reduced to $16/barrel (from $18/barrel) on the first 6 million barrels for all other brewers and all beer importers. The excise tax relief will be phased out over two years, unless extended via subsequent legislation.
The tax reform law also contains several non‐tax provisions that simplify regulation on craft brewers by:
Allowing for consolidated bookkeeping for brew pubs.
Expanding the list of ingredients that could be included in a beer without approval from the Alcohol and Tobacco Tax and Trade Bureau (TTB).
Allowing small, unaffiliated brewers to collaborate on new beers by giving them the flexibility to transfer beer between breweries without tax liability.
Exempting beverage producers from complex capitalization rules for aged products and level the playing field between U.S. businesses and their international competitors.
The Brewer’s Institute, a national trade organization for the beer industry, projects that the excise tax relief created under the new tax law could potentially create $320 million in annual economic growth for the industry. While larger beer companies like Anheuser-Busch will experience some tax relief, the new law will have the greatest impact on the country’s smallest brewers.
“There’s a lot of competition out there,” Kevin Sharpe, the founder and president of Dark City Brewing Co. in Asbury Park, told NPR. “Cutting our quarterly excise tax in half would give us this awesome amount of money lying around, so we could boost our quality control lab, buy more new, exciting hops, and hire more employees.”
Ryan Krill, a co-founder of Cape May Brewing Co. agreed. He has estimated that the new tax code provision will save about $50,000 on the New Jersey brewery’s 12,000 barrels. “The tax reform bill is really important to us because it reduces our beverage excise tax bill,” Krill told CNBC. “We pay federal and state excise taxes, and sales tax in our tasting room. This reduces the level of beer tax we pay, which is really exciting for us because we can take that money and invest in people, equipment and real estate.”
Does Your Homeowners Insurance Provide Adequate Coverage?
Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]
Understanding the Importance of a Non-Contingent Offer
Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]
Fred D. Zemel Appointed Chair of Strategic Planning at Scarinci & Hollenbeck, LLC
Business Transactional Attorney Zemel to Spearhead Strategic Initiatives for Continued Growth and Innovation Little Falls, NJ – February 21, 2025 – Scarinci & Hollenbeck, LLC is pleased to announce that Partner Fred D. Zemel has been named Chair of the firm’s Strategic Planning Committee. In this role, Mr. Zemel will lead the committee in identifying, […]
Novation Agreement Process: Step-by-Step Guide for Businesses
Big changes sometimes occur during the life cycle of a contract. Cancelling a contract outright can be bad for your reputation and your bottom line. Businesses need to know how to best address a change in circumstances, while also protecting their legal rights. One option is to transfer the “benefits and the burdens” of a […]
What Is a Trade Secret? Key Elements and Legal Protections Explained
What is a trade secret and why you you protect them? Technology has made trade secret theft even easier and more prevalent. In fact, businesses lose billions of dollars every year due to trade secret theft committed by employees, competitors, and even foreign governments. But what is a trade secret? And how do you protect […]
What Is Title Insurance? Safeguarding Against Title Defects
If you are considering the purchase of a property, you may wonder — what is title insurance, do I need it, and why do I need it? Even seasoned property owners may question if the added expense and extra paperwork is really necessary, especially considering that people and entities insured by title insurance make fewer […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
New Jersey Craft Beer Industry Toasting Craft Beverage Modernization & Tax Reform Act
Author: Scarinci Hollenbeck, LLC
The Controversial Craft Beverage Modernization and Tax Reform Act Will Have Wide Range of Impact on New Jersey Businesses
A controversial new federal tax law will have a wide range of impacts on New Jersey businesses. For craft brewers, the legislation is a clear win, thanks to the inclusion of the Craft Beverage Modernization and Tax Reform Act of 2017. The new law aims to update and modernize the excise tax and regulatory requirements for craft brewers, vintners, and distillers.
Due to an outdated and highly restrictive regulatory structure, the growth of the New Jersey craft beverage industry was substantially restricted. This changed when, in 2012, the state adopted new laws for microbreweries and brewpubs. The amended law increased the allowable annual production for brewpubs from 3,000 barrels to 10,000. The changes also authorized brewpubs holding a Restricted Brewery License to sell and distribute their beer to licensed wholesalers, whereas previously the beer could only be sold at an adjoining restaurant. With the grant of additional retail consumption licenses, a company can now operate as many as ten brewpubs in New Jersey.
The changes also impacted microbreweries holding a Limited Brewery License. Craft brewers can now sell beer for consumption on the premises in connection with a brewery tour, where they were previously limited to providing free four once samples. Patrons can also purchase 15.5 gallons or less (roughly a keg) for off-premises consumption, which is a significant increase over the two six-packs allowed under the prior law.
The license application fees for the Limited Brewery License range from $1,250 to $7,500 and are dependent upon production capacity. The fee to apply for a Restricted License is $1,250, with an additional $250 due for every 1,000 barrels produced beyond the initial 1,000 barrels.
Changes Under the Craft Beverage Modernization and Tax Reform Act
The goal of the Craft Beverage Modernization and Tax Reform Act is to fuel the growth of the craft beverage industry through tax relief and reduced regulation. Most notably, the federal excise tax will be reduced to $3.50/barrel (from $7/barrel) on the first 60,000 barrels for domestic brewers producing less than 2 million barrels annually. It will be reduced to $16/barrel (from $18/barrel) on the first 6 million barrels for all other brewers and all beer importers. The excise tax relief will be phased out over two years, unless extended via subsequent legislation.
The tax reform law also contains several non‐tax provisions that simplify regulation on craft brewers by:
Allowing for consolidated bookkeeping for brew pubs.
Expanding the list of ingredients that could be included in a beer without approval from the Alcohol and Tobacco Tax and Trade Bureau (TTB).
Allowing small, unaffiliated brewers to collaborate on new beers by giving them the flexibility to transfer beer between breweries without tax liability.
Exempting beverage producers from complex capitalization rules for aged products and level the playing field between U.S. businesses and their international competitors.
The Brewer’s Institute, a national trade organization for the beer industry, projects that the excise tax relief created under the new tax law could potentially create $320 million in annual economic growth for the industry. While larger beer companies like Anheuser-Busch will experience some tax relief, the new law will have the greatest impact on the country’s smallest brewers.
“There’s a lot of competition out there,” Kevin Sharpe, the founder and president of Dark City Brewing Co. in Asbury Park, told NPR. “Cutting our quarterly excise tax in half would give us this awesome amount of money lying around, so we could boost our quality control lab, buy more new, exciting hops, and hire more employees.”
Ryan Krill, a co-founder of Cape May Brewing Co. agreed. He has estimated that the new tax code provision will save about $50,000 on the New Jersey brewery’s 12,000 barrels. “The tax reform bill is really important to us because it reduces our beverage excise tax bill,” Krill told CNBC. “We pay federal and state excise taxes, and sales tax in our tasting room. This reduces the level of beer tax we pay, which is really exciting for us because we can take that money and invest in people, equipment and real estate.”
