Governor Wolf signed House Bill 262 (HB 262) on June 28, 2019, marking a victory for the Pennsylvania craft beer industry. In July 2018, the PA Department of Revenue (DOR) issued a tax bulletin that required PA breweries to collect the 6% state sales tax on beer sold direct to customers in their taprooms. The tax bulletin had an effective date of July 1, 2019.
Under this previous tax bulletin, the sales tax was going to be assessed based upon the retail price charged to the consumer. That assessment would have resulted in craft brewers paying sales tax that was four to five times greater than the same beer sold in restaurants and grocery stores.
Since the release of the July 2018 PA DOR tax bulletin, the Brewers of Pennsylvania, the state’s official brewers guild, worked alongside state legislators to fight for the PA craft beer industry and amend the tax code to make it a level playing field. As a result of HB 262, breweries will pay the 6% state sales tax on 25% of the retail sale to the customer, which is more in line with the sales tax paid by restaurants, grocery stores and other establishments that sell beer to consumers.
What is the Impact of PA House Bill 262 for Taprooms?
To illustrate the impact of this change, if BSSF had a brewery, the BSSF Brewery would sell a pint of craft beer for $6. Under the original July 2018 DOR tax bulletin, the sales tax would have been $0.36 for that pint of beer. With the changes made by HB 262, the sales tax would be $0.09 (25% of retail = $1.50 x 6% sales tax).
HB 262 also pushed the effective date of collection from July 1, 2019 to October 1, 2019 in order to provide additional guidance and clarification. Breweries that are selling beer directly to consumers in their taprooms will need to update their point of sale systems in order to reflect this change in the sale and collections process.
If you have any questions regarding the state sales tax update, contact the BSSF Craft Beverage Group today!
About The Author
Matthew S. Fox, CPA is a Principal with Brown Schultz Sheridan & Fritz (BSSF) and a key member of the Firm’s Tax Department. He received his Bachelor of Science degree in Accounting from Pennsylvania State University. Matt has over 15 years of public accounting experience. He leads the Craft Beverage Group at BSSF, specializes in Research & Development (R&D) Tax Credit consulting and serves a variety of industries including craft beverage, insurance, construction, real estate, manufacturing and financial services.