In the following podcast interview, Angelo Poletis, a Principal with SC&H Group’s Tax Services team, discusses different ways Maryland breweries can minimize the impact of the most costly ingredient associated with their perfect pour – taxes.
The craft beer industry continues to grow in Maryland. In fact, there are currently 50 breweries in Maryland, and more to come. Gov. Hogan recently proclaimed this month as being “FeBREWary,” where a number of events featuring beers from state breweries are scheduled to take place throughout Maryland.
But, as with any business, growth and expansion comes at a cost. Costs are the largest “byproduct” for any entrepreneur pursuing their passion. For breweries in particular, one of largest production expenses comes in the form of taxes. On average, more than 40 percent of what American beer drinkers pay for a beer goes toward taxes – making taxes the most expensive ingredient in your brew today.
Fortunately, you can bottle some of the high costs of doing business, and save the headaches for your consumers who may overindulge in your product. There are several cost savings strategies brewers can take advantage of to make taxes – and the cost of doing business – more palatable.
For instance, what if you could reduce your tax liability by 85 percent if you considered yourself a manufacturer? There are several tax savings opportunities Maryland manufacturers can take advantage of – and, perhaps, you could too –depending on how you view your business. A few examples of tax savings opportunities available to manufacturers are below.
- Manufacturers’ Exemption from Maryland Personal Property Tax: Brewing equipment, such as tanks, bottlers, canners, and casks, may qualify for personal property tax exemptions. Taxes are costly, and can take a large sum from your operating expenses. But, if you meet the criteria, and can apply for this exemption, significant opportunities exist to reduce your property and sales taxes. For example, a local brewer was able to reduce their personal property tax liability by $40,000 as a result of filing for this exemption.
- Domestic Production Activity Deduction: If you are manufacturing in the U.S. and are profitable, the IRS will give you a tax deduction of up to 9 percent of qualified production activities.
- Research & Development (R&D) Credit: If you are creating and testing new beer recipes, then you are technically doing research and development. For profitable breweries, the Federal Research and Development (R&D) Tax Credit allows a credit of up to 13 percent of eligible spending for new and improved products and processes.
These strategies are just a few of many options available to cut down on your most costly ingredient. By taking advantage of these tax credits, incentives, and exemptions, breweries can achieve tremendous savings to reinvest into the business – ultimately creating competitive differentiation.
SC&H Group can help you minimize costs and maximize value associated with creating your perfect pour. Stay tuned for more information from SC&H Group in the coming weeks on additional cost savings strategies available to regional breweries, distilleries, and wineries.
Savor the taste of savings with SC&H Group as an extension of your team. SC&H Group helps breweries of all sizes craft customized strategies to protect profits, minimize business risks, and ensure compliance.