The N.C. Wholesalers Association Says Barrel Cap Bill Won't Help Breweries, Attacks Them Anyway | News
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Monday, April 10, 2017

The N.C. Wholesalers Association Says Barrel Cap Bill Won't Help Breweries, Attacks Them Anyway

Posted by on Mon, Apr 10, 2017 at 7:18 PM

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The N.C. Beer & Wine Wholesalers Association threw some serious shade at North Carolina’s craft breweries today.

The groups are at odds over House Bill 500, a piece of legislation filed last month that, among other things, raises the limit on how many barrels of beer a brewery can self-distribute before it must go through a wholesaler to sell its beer.

The wholesalers association sent out a memo today saying that, according to the Department of Revenue, 23 percent of the state’s craft breweries are not in total tax compliance. This means that 38 of 164 North Carolina breweries aren’t filing and paying taxes as required. Which breweries are compliant came up during talks in the House Finance Committee last week about a different bill, House Bill 480, which would require an annual review to ensure breweries and distilleries are paying taxes.

The Wholesalers Association used the information as ammo in its efforts to shoot down HB 500, basically saying brewers are incapable of paying or unwilling to pay their taxes. That’s a strange move, given that the association says it's against HB 500 because it would hurt breweries.

“It makes no sense to expand self-distribution when nearly one-fourth of all brewers are out of compliance with their tax payments and reporting,” said Tim Kent, executive director of the Wholesalers Association. “State excise tax revenues have been basically flat for the last six years. The growth rate has been less than one percent a year since 2011. Now we know why.”

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Currently, North Carolina breweries that sell fewer than twenty-five thousand barrels of beer per year can get their own wholesaler permit and distribute their own beer. Beyond that “barrel cap,” breweries must go through an independent distributor, even if they want to sell their brews to a restaurant next door or already have all the infrastructure in place to get beer to retailers themselves. HB 500 seeks to raise the annual cap to two hundred thousand barrels, or roughly 49.6 million pints, meaning that much fewer breweries would need to go through a distributor. (For perspective, in 2014, all of North Carolina’s craft breweries produced 372,473 barrels of beer).

Critics of the current cap say it deters breweries from growing, cuts into their revenues, and traps them in exclusive distribution contracts that are near-impossible to break. (HB 500 would also allow small breweries to break these agreements). The N.C. Craft Brewers Guild has said that HB 500 would bring North Carolina’s laws up to speed with its booming craft beer industry.

“These common-sense reforms will put our independent craft brewers on an even footing with international corporate beer, and give them a real shot at success,” Margo Metzger, executive director of the brewers guild, said when the bill was filed.

The Wholesalers Association, however, says the current system ensures safe distribution of fresh beer and “a competitive system that encourages and provides consumers with more choices."

"House Bill 500 is a direct attack on our successful N.C. beer laws. It places North Carolina distribution jobs at financial risk, and it’s designed to give just three breweries a special privilege in a highly competitive marketplace. HB 500 seeks to dismantle a proven system that provides great consumer choice and variety.”

HB 500 supporters have a tough opponent in the Wholesalers Association. The group gave $231,662 in political contributions to North Carolina candidates during the 2016 election cycle, according to the North Carolina Free Enterprise Foundation. In the 2014 cycle, it gave $262,000.

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