Are beer sales in California subject to sales tax?

Most beer sales between licensed manufacturers and distributors are non-taxable wholesale transactions when the buyer is authorized to resell the beer. However, when beer is sold directly to consumers, manufacturers and distributors are generally required to collect and remit sales tax.

When must beer manufacturers and distributors collect sales tax?

Sales tax must be collected when beer is sold directly to consumers. It also applies to sales of items such as equipment, gift items, glassware, accessories, and food sold for on-premises consumption.

What is the Alcoholic Beverage Tax on beer in California?

The Alcoholic Beverage Tax is a USD 0.20 per-gallon excise tax imposed on the sale, distribution, or importation of beer within California. This tax replaces all county, municipal, and district taxes on beer sales. If the manufacturer or importer does not pay it, the responsibility shifts to the beer seller.

Are there sales and use tax exemptions for farms growing hops or barley?

Yes, certain exemptions apply to farms that grow hops or barley or process hops and malt. Qualifying farm equipment and machinery used directly in agricultural production may be exempt, as well as diesel fuel used in farming or food processing, seeds, fertilizer, soil amendments, pesticides, insecticides, and certain manufacturing equipment.

Can beer manufacturers qualify for a partial sales tax exemption on equipment?

Manufacturers and certain research and development businesses may qualify for a partial exemption when purchasing or leasing specific machinery and equipment. To qualify, they must engage in eligible manufacturing, research, development, or power-related activities and purchase qualified tangible personal property such as brewing equipment, fermentation tanks, bottling equipment, or heating systems.

California Beer Sales & Use Tax Guide

Q: Does the CDTFA tax guide address issues beyond basic beer sales?

Yes, the guide also explains the tax treatment of beer labels, packaging, shipping, beer tastings and self-consumption, transfers of beer samples and donations, and facility fees charged for events held at a brewery.

The California Department of Tax and Fee Administration (CDTFA) published a tax guide for beer brewers and distributors that provides valuable insights into the application of sales and use tax. Additionally, the tax guide addresses the application of the Alcoholic Beverage Tax and explains which transactions are exempt from sales and use tax.

Main Sales and Use Tax Rules for the Beer Industry

The CDTFA noted that most beer sales in California, whether by manufacturers or distributors, are non-taxable wholesale transactions to other licensed sellers authorized to resell beer. However, when these sales are made directly to consumers, the beer manufacturers and distributors are typically responsible for collecting and remitting sales tax.

The same applies to any other sales of items such as new or used equipment, gift items, glassware, accessories, and similar merchandise. When beer manufacturers and distributors sell food for on-premises consumption, they must also charge, collect, and remit sales tax.

In addition to clarifying when businesses may owe use tax, the CDTFA explained that a USD 0.20 Alcoholic Beverage Tax, a per-gallon excise tax imposed on the sale, distribution, or importation of alcoholic beverages within the state, applies to beer. Moreover, this tax replaces all county, municipal, and district taxes on beer sales. When the manufacturer or importer does not pay the tax, the responsibility shifts to the beer seller.

The CDTFAs tax guide further elaborates on sales and use tax exemptions for farms that grow hops or barley, or process hops and malt. More specifically, the exemptions apply to qualifying farm equipment and machinery used directly in agricultural production, as well as to diesel fuel used in farming or food processing, seeds and plants, fertilizer, soil amendments, pesticides, insecticides, and manufacturing equipment.

Furthemore, manufacturers and certain research and development businesses that meet several requirements may qualify for a partial exemption from sales and use tax when purchasing or leasing specific types of machinery and equipment. To qualify for the exemption, taxable persons must engage in specific manufacturing, research, development, or power-related activities and purchase or lease qualified tangible personal property, such as brewing equipment, heating systems, bottling equipment, and fermentation tanks.

Conclusion

In addition to these key sales and use tax rules, beer brewers and distributors may also find valuable information on the taxability of beer labels, packaging, shipping, beer tastings and self-consumption, transfers of beer samples and donations, as well as facility fees for events at a brewery. Overall, the CDTFA provided a comprehensive tax guide that covers the most important sales and use tax topics, together with useful examples.

Source: California Department of Tax and Fee Administration