Last updated on February 7th, 2024
A tax credit reduces the amount of taxes you owe, dollar for dollar. Tax credits are available at the federal and state levels. Here are some highlights about of two tax credits every brewer/distiller/distributor business should explore.
New York’s Alcoholic Beverage Production Credit
Starting tax years beginning on or after January 1, 2023, distributors may be eligible for a higher Alcoholic Beverage Production Credit than what was available in the past. Registered distributors who produced beer, cider, wine, or liquor in New York are eligible if during the tax year 60 million or fewer gallons of beer; 60 million or fewer gallons of cider; 20 million or fewer gallons of wine; and 800,000 or fewer gallons of liquor were produced.
For the first 500,000 gallons produced in the state, the tax credit equals:
- $.14/gallon of beer or cider
- $.30/gallon of wine
- $2.54/gallon of liquor with alcohol by volume (ABV) not less than 2% and not more than 24%
- $6.44/gallon of liquor with an ABV above 24%
For amounts in excess of 500,000 gallons, the credit equals $.045/gallon up to 15 million additional gallons of beer, cider or wine and up to 300,000 additional gallons of liquor. During an audit you may be required to prove entitlement to the tax credit by providing copies of various forms (click here for a list.) For more information about the credit, click here.
Federal R&D Tax Credit
The Federal R&D tax credit reduces federal tax liability dollar for dollar; unused amounts can be carried forward for 20 years. It can apply to a range of qualifying research activities (QRAs) in all size businesses and across numerous industries. Qualified small businesses can use the R&D credit to offset quarterly payroll taxes up to $500,000.
When it comes to breweries and distilleries, they may be eligible for R&D tax credits for activities relating to brewing and distillation processes that result in product changes; updating fermentation processes or changing ingredients to develop new flavors; streamlining processes for product improvements, waste reduction and efficiencies; new sustainable and eco-friendly practices; and more. Credits are based on money spent on employees’ time; contractor expenses; related supplies and equipment; and more.
For more information from the U.S. Chamber of Commerce, click here. (Kubiak, Lauren. “How to Qualify for and Claim the R&D Tax Credit.” November 13, 2023. www.uschamber.com.)
Please note: the preceding information provides highlights related to tax credits; there’s a lot more involved impacting eligibility, documentation, and such. RBT CPAs accounting, audit, tax, and business advisory professionals can help you make the most of the tax credits available to your business. To learn more, give us a call.
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