If you run a small business, you know taxes are complex. You may have to keep track of and pay income tax, both for yourself and your business, payroll taxes for your employees, property tax on your buildings, other state and local taxes and excise tax on some special items. You also need to separate your ordinary expenses from capital expenses and take advantage of the correct depreciation tables for your capital expenses. And deal with any tax audits that occur.
If you are just starting a new business, managing all of that and the operational demands of your business can be daunting. If you are making one of those specific products, such as distilled liquor, that is subject to an excise tax, that can be one more hurdle between you and your businesses success.
Michigan has become the capital of microbrewers in the U.S., and is third when it comes to micro distilleries. New legislation introduced in the U.S. Senate could help it become number one in that category too.
Currently, the federal excise tax on distilled spirits is $13.50 per proof gallon for the first 100,000 gallons. The proposed legislation would lower that to $2.70, if passed into law, and that could help many starting distilleries survive their start-up phase.
Imagine if you wanted to open a restaurant, and after hiring staff, buying or leasing a building and buying supplies, you had to wait three years before you could sell a meal to your first customer. A new distillery faces that situation, as the spirits must age in barrels for years before it can be sold.
The lower tax rate on the beginning years of production could make the difference during those lean times.
Source: Mlive.com, "Proposed tax cut for small distilleries could help Michigan's spirit business grow," Kyle Feldscher, May 28, 2015