Michigan took a giant step this week to kickstart the burgeoning craft distillery industry by passing bipartisan legislation that will make some products easier to sell and lower taxes. Now it should overcome the remaining obstacles preventing the promising new segment from realizing its full potential.
The centerpiece of the four-note package signed by Governor Gretchen Whitmer deals with Canned Cocktails, the hot new segment of the liquor business that packs mixed drinks in an aluminum can.
Michigan distilleries can now increase the alcohol content of ready-to-drink cocktails from 10% in cans less than 24 ounces to 13.5%.
In addition, taxes on liquor were reduced from $ 0.48 per liter to $ 0.30 per liter.
Small distilleries can also distribute up to 3,000 gallons of their product to retailers themselves, bypassing the Michigan Liquor Control Commission’s rigid distribution system. Liquor makers can now ship their bottles through wine wholesalers, a cheaper option that gives them access to more points of sale.
The cost savings and additional revenue that the legislation should generate will be a boon to an industry that has grown from fewer than five to about 40 local distilleries across the country in the past five years, says JP Jerome of Detroit City Distillery and Vice President of the Michigan Association of Craft Burners.
“It’s really important to those who make small-scale liquor in Michigan.” he says. “It should allow more people to get a foot in the door. It will allow local brands to build. “
To really move it forward, the state should take additional steps.
The most important of these is the lowering of the crushing excise tax on distilled spirits. For a bottle of liquor that sells for $ 30, the state charges about $ 10 in taxes. After distribution and other costs, the distiller only has $ 7 left.
This reduces profit margins on a low volume business and makes prices less competitive.
Lowering the tax on small distilleries that use Michigan farm products and employ Michigan workers could even increase the state’s revenue.
Artisanal distillers in Michigan should also be allowed to sell their products online and ship them direct to consumers like wineries do.
The potential for this industry could match that of craft breweries that have sprung up in cities across Michigan, creating jobs and boosting tourism.
“We could have the same presence” says Jerome.
Another push from the state could get them there.
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