Natalie Mihalek at hearing

Harry Funk/The Almanac

State Rep. Natalie Mihalek, R-Upper St. Clair, represents part of Bethel Park, where the committee hearing was held.

A so-called “taproom tax” scheduled to take effect July 1 could have a significant impact on Pennsylvania’s small, independent beer breweries.

For example, Brian Eaton estimates an additional tax of $80,000 to $100,000 per year that Grist House Craft Brewery, the Millvale business he co-owns, would have to pay on beer sold for consumption on the premises or to go.

“This is a burden that I would either have to pass along to my customers, which will certainly mean a reduction in sales, or eat the cost of the tax, which means less money to invest in my growing business,” he said.

Brewers

Harry Funk/The Almanac

Matt Katase, left, and Brian Eaton speak at a legislative hearing on the “taproom tax.”

Eaton was among those who provided testimony during a House of Representatives Liquor Control Committee public hearing held April 23 at Spoonwood Brewing Co. in Bethel Park. The hearing delved into the coming application of the tax, with representatives of various interests explaining reasons for opposing or supporting it.

“We felt it was necessary to bring together industrywide stakeholders so that we can have all the relevant information at hand,” state Rep. Natalie Mihalek, R-Upper St. Clair, said to open the hearing.

Last July, the state Department of Revenue issued a bulletin entitled “Taxation of the Sale of Malt or Brewed Beverages in Pennsylvania,” essentially stating manufacturers of beer have been required to collect state tax on all sales for decades.

“The language written in 1959, verbatim, word for word, is what’s in the tax law today,” Andrew Moser, the department’s director of legislative affairs, told committee members. “Nothing’s changed.”

In 2015, though, the department sent a letter to the Brewers of Pennsylvania trade association that includes the assertion:

“Pennsylvania’s Tax Reform Code’s definition of a taxable sale at retail does not include the sale of malt or brewed beverages, wine or liquor by a retail dispenser. Therefore, a brewery pub would not collect sales tax on its sale of malt beverages to its customers who buy beverages for consumption on the premises, or on six packs, cases, etc. purchased ‘to go.’”

Many breweries subsequently took the letter into consideration when building their businesses, according to Adam Harris, Brewers of Pennsylvania deputy director. Among them is Brew Gentlemen, located in Braddock and co-owned by Matt Katase, which recently announced an expansion with an investment of $1 million.

“If the tax on beer sold by breweries goes into effect, my small business will see an additional tax burden equal to three full-time jobs we planned on hiring for, and that’s just in year one,” Katase said during the hearing.

Legislators also heard testimony from members of trade associations that favor the “taproom tax” as an equitable measure, including a Bucks County restaurateur who said his business has been hurt by recent changes to the state liquor code.

Tom Tyler, who owns McStew’s Irish Pub in Levittown, cited the 2016 legislation that allows a variety of retailers to sell beer and wine to go, an ability that previously was exclusive to holders of an “R” (restaurant) liquor license.

“I made an investment into a specific license many years ago because that license came with certain exclusive rights and ownership, for me to be able to sell and operate in a specific environment,” he said. “I entered the business believing I would have a valuable asset, but now, frankly, I am hanging on for dear life.”

Tyler asserted he is a firm believer in competition.

“But legislatively created competition that gives to some and not to all, in my opinion, creates unbalanced competition,” he said.

Melissa Bova, vice president of governmental affairs for the Pennsylvania Restaurant and Lodging Association, spoke about Liquor Code changes in the context of giving breweries a greater variety of opportunities.

“We believe that they are very clearly now in the realm of the restaurant business,” she said. “They are operating like restaurants. They are providing on-premises consumption. And we do believe that they should be collecting and remitting tax at a wholesale cost.”

Multimedia Reporter

Staff writer Harry Funk, a professional journalist for three-plus decades, has been on the staff of The Almanac since 2015. He has a bachelor’s degree in journalism and master of business administration, both from Indiana University of Pennsylvania.

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