Last week, craft distilleries warned Washingtonians that many of the small-batch booze brands they love could go under when a major tax break expired Jan. 1.
A 2017 law cut distillers’ federal excise tax bill by 80% for two years. Industry groups warned that if the break were allowed to expire, as many as 30% of craft distilleries could go out of business, putting local jobs at risk.
The hullaballoo, though, appears to have worked: Congress is poised to extend the tax break for a year as part of a massive year-end legislative package, keeping small distillers’ tax bills low — and craft cocktails in the hands of bar-hoppers nationwide.
The new legislation is embedded in a 2,300-page package of bills federal lawmakers are hoping to have signed before Dec. 20 to avoid a government shutdown. The House approved the package Tuesday. The Senate is expected give its thumbs-up Thursday.
“We all were celebrating. I raised a glass with some friends of my favorite Washington whiskey,” said Nathan Kaiser, owner of 2bar Spirits in Georgetown and vice president of the Washington Distillers’ Guild, a trade organization. “This allows for a lot of the distilleries to get a little breathing room, to plan for and hope for the next year.”
In addition to distillers, craft beer brewers, cider makers and vintners benefit from the tax break. Distillers, though, said they were most affected because of strict state laws governing how they can sell their product.
Last week’s vocal outreach was instrumental in getting the extension up for a vote at a time when Congress is preoccupied with impeachment proceedings, Kaiser said. He said distillers plan to lobby for the tax break to be codified for the long term.
“It’s on us to make sure our senators and representatives understand the importance of this tax break, otherwise we’re going to be facing the same situation in 2021 as we were facing in the eleventh hour of this year,” Kaiser said. “This doesn’t only affect small craft distilleries. It affects farmers, bottlemakers, labelmakers and bars.”
Washington is home to more small-scale distilleries bottling whiskey, vodka, gin and spirits than almost anywhere else in the country. In the past year, though, nearly one-quarter of those businesses have shuttered, forced under by the weight of start-up costs, stiff competition for shelf space in grocery stores and bars, and high state taxes on liquor, distillers say.
The federal excise tax break, distillers said, helped many meet payroll or grow their staff in an industry with razor-thin profit margins.
Jason Parker, the co-owner of Copperworks Distilling on the Seattle waterfront, said he had planned to lay off one of the two employees he hired last year if the tax break wasn’t extended.
“Now, I’m keeping all my employees after all,” he said. “But I still have reduced hours. I don’t know what’s going to happen after this one-year reprieve. We’re going to be cautious and optimistic, but not overly optimistic, for the next 12 months.”