If you have been paying attention to what is happening in the brewing industry in Pennsylvania, you’ve noticed that there has been much discussion about the imposition of sales tax on beer manufactured in Pennsylvania and how that might affect consumer prices. There was a lot of uncertainty about how new regulations from the Department of Revenue will be instituted and how sales tax will be charged on beer produced within the state. You may have read my post Sales Tax on Breweries back in the fall when we knew that it was coming but nobody was certain how it would ultimately be implemented. Now we have some guidance. As part of the 2019-2020 budget for Pennsylvania, the General Assembly was able to include some language that clarifies from a legislative standpoint (as opposed to internal regulations that the Department of Revenue was applying) how sales tax will be charged.
The issue that made this particularly difficult was the potential for inconsistencies in the amount of tax imposed, based on how the beer was sold. For instance, in my previous post, I used the example of a $40 keg of beer that is sold at wholesale. For a restaurant or other brewery buying that keg at wholesale, sales tax is paid and remitted to the Department of Revenue based on the $40 wholesale price, so $2.40 would be remitted for sales taxes. Contrast that with the same keg of beer that is sold on site by the brewery that produced it. If that brewery does not wholesale beer, under the guidelines issued by the Department of Revenue, the brewery would have to impose sales tax on each pint of beer sold from that keg. Assuming approximately 120 pints of beer are sold from that keg and each pint is sold for $5.00, the brewery would have to charge and remit a total of $36.00 in sales tax. With this new legislation, there should now be some consistency in terms of how sales tax is charged, regardless of whether a brewery wholesales its beer or whether they sell it entirely at their own property.