Liquor Tax Laws: Beer's Exemption In Tennessee

Tennessee imposes a liquor-by-the-drink tax on the sale of alcoholic beverages, wine, and high-alcohol-content beer (more than 8% alcohol by weight) for on-premise consumption. This tax is levied on the gross sales of these beverages and is typically collected from the consumer, with a rate of 15%. However, it is unclear if this tax applies to regular beer, as the definition of high-alcohol-content beer is not explicitly defined. To clarify whether regular beer falls under the liquor-by-the-drink tax in Tennessee, further investigation into the specific definitions and tax regulations is required.

Does TN Liquor-by-Drink Tax apply to regular beer?

Beer barrelage tax

Tennessee imposes a beer barrelage tax on the privilege of storing, selling, distributing, or manufacturing beer. If beer is distributed through a Tennessee wholesaler, the wholesaler is responsible for paying the barrelage tax. However, a beer manufacturer is responsible for the barrelage tax when it operates as a retailer and sells its beer to other retailers within the same county, or when it operates as a retailer or holds a license as a restaurant, limited-service restaurant, or hotel.

The beer barrelage tax rate in Tennessee is $1.29 per gallon, the second-highest in the United States. The beer barrelage tax is one of two separate taxes imposed on beer with an alcohol content of 8% or less by weight in Tennessee. The other tax is a wholesale tax on each case of beer sold at wholesale in the state, which is generally paid by wholesalers.

House Bill 852 reallocates 3% of revenue derived from the beer barrelage tax that goes to the general fund to the Department of Agriculture to support the growth of the Tennessee brewing industry and the use of Tennessee agricultural products in brewing.

In addition to the beer barrelage tax, Tennessee also imposes a liquor-by-the-drink tax of 15% on the gross sales of alcoholic beverages, wine, and high-alcohol-content beer (more than 8% by weight) for consumption on the premises.

Beer with >8% alcohol content

Beer with an alcohol content of more than 8% by weight is considered a high alcohol content beer in Tennessee. This is important because the state imposes three distinct taxes on alcoholic beverages manufactured or distributed within the state, and high alcohol content beer is one of the beverages subject to these taxes. The other beverages are distilled spirits and wine.

The three taxes are the brand registration and renewal tax, the gallonage tax, and the wholesale tax. Every brand of alcoholic beverage distributed in Tennessee must be registered with the Department, and manufacturers or importers must pay a brand registration tax and renew it annually. The gallonage tax is levied on every gallon of alcoholic beverage sold or distributed in the state, and it's usually paid by wholesaler distributors. Finally, the wholesale tax is imposed on each case of alcoholic beverages sold at wholesale in the state, and it's the responsibility of wholesalers to pay this tax.

In addition to these taxes, Tennessee also has a Liquor-by-the-Drink Tax, which is charged on the gross sales of alcoholic beverages, wine, and high alcohol content beer sold for consumption on the premises. The tax rate is 15%, and it should be collected from the consumer of the beverage.

It's worth noting that the majority of beers worldwide have alcohol contents ranging from 4 to 6%, with many beers containing up to 7 or 8%. However, some beers can have even higher alcohol levels, equivalent to quality wines, which typically have about 12 to 14% alcohol content.

When it comes to listing alcohol content, the more common method is by actual percentage of volume, which is the law in the United Kingdom and Europe. In the United States, however, it had been customary for big brewers to note alcohol by weight. Today, most brewers list alcohol contents by volume, as it is easier to understand since beer is purchased by volume.

Retail sales

In Tennessee, alcoholic beverages are subject to excise taxes, which are applied on a per-unit basis, generally per gallon for liquids. These taxes are collected from the merchant, who typically passes them on to the consumer in the form of raised alcohol prices.

Tennessee has some of the highest state taxes on alcohol in the United States. The state imposes three distinct taxes on alcoholic beverages manufactured or distributed within the state: brand registration and renewal, gallonage tax, and wholesale tax. These taxes apply to distilled spirits, wine, and high alcohol content beer (i.e., beer with an alcohol content of more than 8% by weight).

For retail sales, the Liquor-by-the-Drink Tax applies to alcoholic beverages, wine, and high alcohol content beer sold for consumption on the premises. The tax rate is 15% and should be collected from the consumer.

Additionally, Tennessee's general sales tax of 7% applies to the purchase of wine, beer, and liquor. Wine, beer, and liquor vendors are responsible for paying this tax, plus Federal excise taxes, for their respective alcoholic beverages sold.

The state excise tax rates for wine, beer, and liquor in Tennessee are as follows:

• Wine: $1.21 per gallon
• Beer: $1.29 per gallon
• Liquor: $4.40 per gallon

Consumption on the premises

Tennessee has a three-tier system for distributing alcoholic beverages. Generally, licensed retailers can only purchase from licensed wholesalers, who can only purchase from licensed manufacturers/importers. Neither licensed manufacturers/importers nor licensed wholesalers may sell alcoholic beverages directly to consumers. However, there are limited exceptions.

If you sell at retail alcoholic beverages, wine, and high-alcohol-content beer for consumption on the premises, you must pay the Liquor-by-the-Drink Tax on the gross sales of those beverages. The tax should be collected from the consumer of the beverage, and the rate is 15%. This applies to all alcoholic beverages with an alcohol content of more than 5% by weight.

There are two related taxes to consider. Firstly, an annual fixed amount based on the type and size of the business. Secondly, a percentage levy of 15% based on the sales price of alcoholic beverages sold for consumption on the premises.

Businesses in Shelby County, outside of any municipality, that sell and dispense alcoholic beverages for on-premise consumption are required to register with the Shelby County Clerk. The amount of Liquor-by-the-Drink Tax due is based on the type of business and/or number of seats available in the establishment.

Tax distribution

Tennessee imposes a liquor-by-the-drink tax on the gross sales of alcoholic beverages sold at retail for consumption on the premises. The tax rate is 15% and should be collected from the consumer of the beverage. This includes alcoholic beverages with a high alcohol content, such as wine and beer. Beer with an alcohol content of over 8% by weight is subject to this tax.

The distribution of the liquor-by-the-drink tax in Tennessee is as follows:

• The fixed annual tax: This is paid to the state general fund for state purposes.
• The gross receipts tax:

• 50% goes to the state general fund, earmarked for educational purposes.
• 50% is distributed to local political subdivisions, with half of this amount designated for education and the other half divided between unincorporated areas and municipalities.

Additionally, Tennessee imposes a beer barrelage tax on the storage, sale, distribution, or manufacturing of beer with an alcohol content of 8% or less by weight. If a Tennessee wholesaler is involved in the distribution, they are responsible for paying the barrelage tax. However, a beer manufacturer assumes this responsibility when selling to other retailers within the same county or when operating as a licensed restaurant or hotel.

The beer barrelage tax is distributed as follows:

• Any county where a distillery is located receives four cents per liter of the tax imposed on the sale of distilled spirits.
• 82.5% of the proceeds go to the state general fund.
• 17.5% of the proceeds are distributed to counties, with 75% apportioned based on county population and 25% based on county area.
• 30% of the amount distributed to counties with a population over 250,000 is allocated to cities within the county with a population of more than 150,000.

Frequently asked questions