February 20, 2017

A Spirited Voyage: How to Avoid the Excise Tax by Exporting

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As most distillers know well, Uncle Sam makes a pretty penny on each bottle of alcohol manufactured in the United States. Federal excise taxes, on distilled spirits in particular, are higher than those imposed on almost any other consumer good. When you add in state and local excise and sales taxes, domestic taxes can account for as much as one-half of a bottle’s sales price. And since these taxes are passed on to the consumer in the form of higher prices, it’s no wonder distillers are looking to foreign markets for their products. This is because the federal excise tax is waived when alcohol is exported.

While distillers can catch a break by shipping their products abroad, they should be sure to investigate whether the receiving countries impose importation or other taxes. Indeed, deciding whether to export American-made spirits can be a balancing act. Shipping costs and taxes in other countries may offset the tax-savings realized by exporting. Nevertheless, as domestic taxes continue to remain high, it is certainly worthwhile for distillers to explore exportation as a path to financial savings.Washington, Oregon, Virginia, Alabama and Alaska. Wyoming and New Hampshire have some of the lowest excise taxes on liquor, followed by West Virginia, Missouri, Colorado and Texas.

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