Excise tax on beer

Prior to the 2017 Tax Cuts and Jobs Act (TCJA), the aggregate (average federal plus median state) nominal tax on beer had remained unchanged at $0.65 per gallon since 1991, while the retail price of beer has steadily risen. In 2014, however, Ohio raised its state excise tax on beer from $0.30 to $0.32 per gallon, which raised the nominal tax rate to $0.66. Nevertheless, due to inflation, the real tax level has steadily declined, becoming a smaller part of the retail price of beer. Prior to the TCJA, which went into effect in 2018, the regular federal rate levied on producers was $18.00 per barrel (31 gallons). The reduced rate mandated $7.00 on the first 60,000 barrels for brewers producing less than 2.0 million barrels and $18.00 per barrel after the first 60,000. As a result, the average nominal tax rate per gallon at the federal level was $0.46 per gallon.

The passage of the TCJA reduced federal excise taxes for brewers and beer importers beginning in 2018. The TCJA reduced the federal excise tax to $3.50 per barrel on the first 60,000 for brewers producing less than 2.0 million barrels. In addition, it reduced the federal excise tax to $16.00 per barrel on the first 6.0 million barrels for all other brewers and beer importers. For brewers producing over 6.0 million barrels annually, the excise tax of $18.00 per barrel was unchanged. As a result of these changes, the average nominal federal excise tax dropped from $0.46 per gallon to $0.43 per gallon. This decline, in combination with inflation, resulted in an overall 6.9% decrease to the aggregate excise tax on beer, in real terms.

In 2021, $0.43 of the $0.63 per gallon tax is levied by the federal government, while the median state tax is $0.20 per gallon. Most states are near the median, but Tennessee levies the highest tax of $1.29 per gallon. In contrast, Wyoming levies the lowest excise tax rate at $0.02 per gallon. In general, states in the Southeast tend to have the highest beer taxes (along with Alaska and Hawaii), while those in the Midwest have the lowest.