Is Crowdfunding for You?

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By Julie O’Neill
Starting a new brewery takes money. Is crowdfunding the way to raise the funds you need?

Crowdfunding allows a company to raise money online without registration under securities laws. There are other exemptions from registration, the most popular being the safe harbor of Regulation D (“Reg D”) for private placements.

To use the Reg D safe harbor exemption, the company seeking investment is supposed to have a “preexisting relationship” with the investors it targets, and there are limits on the number of “unaccredited” investors to whom  the company can sell stock or other equity securities. If you do sell securities to unaccredited investors under Reg D, you need to comply with detailed disclosure requirements, and provide that disclosure to all your potential investors, whether accredited or unaccredited. For individuals, one is “accredited” if he or she has a net worth of at least $1 million, or an annual income of at least $200,000, or $300,000 with one’s spouse.

The new crowdfunding rules allow a company to bypass the preexisting relationship and accredited investor limitations, but there are issues with crowdfunding that should make you think twice before going that route for your brewery’s financing:

  • You will have to file disclosure documents with the Securities and Exchange Commission (“SEC”) at least 21 days prior to the initial closing. If there are subsequent material changes, you will need to file an amendment. You will also have to file regular progress updates and annual reports with the SEC. (Reg D does not require the filing of disclosure documents with the SEC.)
  • Crowdfunding offerings can only be done online through a registered broker-dealer or funding portal, both of which charge fees for their services – usually 3% to 10% of the offering amount. (Reg D does not require the use of a broker-dealer or funding portal.)
  • The crowdfunding rules limit you to a maximum raise of $1 million in any 12 month period. (Rule 506 of Reg D has no dollar limitation.)

The crowdfunding rules limit how much each investor can invest (Reg D does not). Because of these limits, your company could end up with tens or hundreds of equity holders who have each invested a very small amount. This can make getting equity holder consents and filing your tax returns a huge burden; it can also cause problems with later financings and exit transactions.

Even more to celebrate this Labor Day Weekend at Naukabout Brewery & Taproom

After Only Five Months The Cape’s Newest Brewery (Naukabout Brewery & Taproom) Expands. Tripling The Outdoor Beer Garden Space Just In Time For Labor Day’s NauktoberFest Celebration With The Wahlburgers Food Truck.

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The Naukabout Brewery & Taproom opened to the public on March 29th, 2018 in Mashpee, MA on Cape Cod. After just five months in operation, Naukabout is expanding their lakeside beer garden space. Adding over 4,000 new square feet of patio they have more than tripled their outdoor space. Nestled alongside Lake Mashpee and the Mashpee River the new patio offers beer lovers a unique location to try one of the small-batch, hop-forward beers brewed right there in Mashpee. To celebrate the opening of the new beer garden Naukabout is hosting NauktoberFest this Labor Day weekend on Saturday 9/1 & Sunday 9/2 (11am-10pm). 

While Oktoberfest traditionally starts in late September, Nauktoberfest allows visitors and locals to partake in both the Summer and Harvest Season of Cape Cod. Joining the fun on Saturday is local favorite the Wahlburgers food truck; who will be serving up their classic burgers. On Sunday, celebrity Chef Jay Powell will be serving up some traditional Oktoberfest foods, kettle corn, and cotton candy. Naukabout will be releasing three brand new beers (Fest, Pumpkin and a new New England IPA). Games, activities and contests are lined up throughout the weekend: stein hoisting, grain sack toss, face painting, barrel rolling, stein hoisting, sausage toss and a costume/crazy hair contests (sign-ups on naukabout.com or at the taproom). 

With four separate terraced patio areas, visitors get the chance to experience the historic property from a variety of viewpoints. 

“We always wanted to expand our beer garden and we’re excited to be able to have it open for Labor Day. We built a brewery in a Cape Cod style house that's tucked away in the woods, perched up on a hill, between two bodies of freshwater. It makes for a unique Cape backdrop to enjoy a beer while playing games, watching the game or hanging with family and friends. Nauktoberfest is the perfect way to celebrate the grand opening of our expanded beer garden.”   - Peter Murner, Owner/GM

The Nauktoberfest event not only celebrates the completion of the beer garden expansion, but it kicks off a new phase for the Naukabout Brewery & Taproom. From football and baseball viewing parties to private events, concerts, fundraisers and other gatherings…Naukabout is excited to share their new space with the local community and to work with beer lovers who are looking for a place to host or attend a unique craft beer-focused event.

METROWEST CHAMBER OF COMMERCE TO PRESENT LOOKOUT FARM HARVEST FEST SEPTEMBER 9TH IN NATICK, MA

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Natick, MA - August 21, 2018 -Autumn in New England just got better! The MetroWest Chamber of Commerce announced that they will present the first ever Lookout Farm Harvest Fest September 9th from 12 NOON to 6:00PM in Natick, MA, to support programs and scholarships offered by the Chamber and its MetroWest Chamber Educational Foundation. The afternoon will be filled with live music, food, local vendors and exhibitors, craft brewers who incorporate locally sourced ingredients, and a variety of family-friendly events. Tickets are available now at www.lookoutfarm.com and www.metrowest.org.

Established in 1651, Lookout Farm is one of the oldest continuously working farms in the United States. on 180 exquisite acres with over 60,000 fruit trees. The farm is owned by local residents Joan and Steve Belkin who embrace a philosophy of healthy nutrition and respect for the environment.

The MetroWest Chamber welcomed the opportunity to partner with Lookout Farm to promote and celebrate how innovative businesses can continuously reinvent themselves and grow, while at the same time contribute to the quality of life enjoyed by so many MetroWest community members.

“What the Belkins have accomplished here is an extraordinary example of how farming in 21st Century suburban Boston can not only ‘survive,’ but significantly contribute to the local community and economy,” said Paul Joseph, President and CEO of the MetroWest Chamber of Commerce and its Educational Foundation. “Diversifying beyond its traditional farming and ‘U-Pick’ operations, Lookout Farm now brews craft beer and hard ciders and hosts a variety of community and commercial events, often in partnership with local businesses and non-profit organizations like ours.

“We also wanted to celebrate innovative business models that have a positive impact on our quality of life in MetroWest. Modern agribusiness is a great example that touches everyone - on the dinner table, in our healthcare, via clean energy initiatives, or at a local pub. Local businesses not only contribute by creating jobs and tax revenue to our communities, but also by partnering to preserve open space and support cultural, educational, environmental, and social programs.”

Families can enjoy Lookout Farm’s signature activities that include such fun as train rides, oversized lawn games, a chill zone, farm-themed play area, children’s caterpillar ride, farm maze, hay pyramid, imagination playground blocks, moon bounces and children’s face painting. Local vendors and exhibitors will also be on site for a day of fall activities.

In addition to the food offerings from Lookout Farm,Firefly’s BBQ will serve their award winning bbq dishes. Music lovers can enjoy a full afternoon of live bands including two sets of country rock with Dalton and the Sheriffs, and performances featuring the tribal folk thump of Planet Nowhere and Portland, ME-based acoustic duo, Eastern Screech.

For craft beer enthusiasts there will be no shortage of selections at the Harvest Fest Craft Beer Pavilion. This ‘festival within the festival’ will present offerings from Bad Martha Brewing Company, Cambridge Brewing Company, Cape Ann Brewing Company, Castle Island Brewing Company, Exhibit A Brewing Company, Flying Ales Brewing, Ipswich Ale Brewery, Jack’s Abby Craft Lagers, John Harvard’s Brewery & Ale House, River Styx Brewing, Turtle Swamp Brewing, Wormtown Brewery as well as Lookout Farm Hard Cider and Lookout Farm Brewing Company,

“Harvest Fest is a great opportunity for us to showcase Lookout Farm, local agriculture and the businesses that support farming and the environment,” said Jay Mofenson of Lookout Farm. “Participating brewers are encouraged to source and incorporate local ingredients into their products and Harvest Fest gives us the opportunity to continue the conversation about the importance of local businesses, farming and sustainability.”

For tickets and additional information, including sponsorship and exhibitor/vendor booth opportunities, visit www.lookoutfarm.com and www.metrowest.org.

2019 Elections: Call for MBG Board Member Candidates

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Members of the Mass Brewers Guild (MBG) board of directors are volunteers that serve to further the work of the association and its mission -- to protect and promote the interests of Massachusetts craft brewers. 

Unlike many nonprofit boards that serve to advise the organization’s staff, MBG board members also have to serve as staff, and work on behalf of the organization to deliver the created objectives and goals. With the support of only one full-time staff member, board members spend an average of 10 to 25 hours a month working on the MBG’s initiatives -- depending on the project or work cycle.

The guild board of directors currently holds nine seats, four of which are up for election in January 2019.

After serving as veteran board members since the MBG’s inception, both Drew Brosseau from Mayflower Brewing Co., and Michelle Sullivan from Boston Beer Co., have reached their term limits and therefore cannot re-run this year. They will remain supportive and passionate guides to the board of directors when called upon for advice and are welcome to re-run in 2020. Rob Burns, current MBG President and co-founder of Night Shift, and Ryan Daigle, from Gardner Ale House / Moon Hill Brewing Co., will rerun for a two-year term (the 2019 to 2021 calendar year.) 

The MBG’s board is seeking brewers, and brewery staff to consider joining the nonprofit’s leadership team to help further its work by donating their time, expertise and passion for the industry. 

The board’s nominating committee, which consists of Sam Hendler from Jack’s Abby Brewing Co. and Keith Sullivan from Medusa Brewing Co., are now accepting resumes with a letter of intent detailing the goals and or changes that the candidates would like to help implement within the organization. The deadline for submission is Oct. 5 and all candidates will be expected to speak before membership at the fall member meetup on Oct. 30 at Wachusett Brewing Co. 

Those submitting their resume should plan to get involved with the organization prior to the start of the year by joining a working committee. It will be important for the nominating committee to see a strong commitment from individuals wishing to have a seat on the board. 

The board seeks to diversify its members and strengthen its geographical representation. They are looking for all areas of expertise -- from law to marketing, to fundraising, event planning and general leadership. The nominating committee will put forth candidates that demonstrate a willingness to work together on issues and help serve the craft beer community. 

In December 2018, paid brewery members will have the opportunity to cast their vote to fill all four seats. If you are unsure of your membership standing with the MBG please reach out to the MBG’s executive director. 

A committed and passionate board is essential to accomplishing the work of the Mass Brewers Guild. Now more than ever, it’s vital for a strong board and leadership team to help guide the Massachusetts craft beer community forward and serve as a unified voice when confronting all issues that impact the industry. 

Those interested in joining the board can send their resume and cover letter to the MBG’s executive director, Katie Stinchon at Katie@massbrewersguild.org for review. In your cover letter please answer the following questions: 

·       Why do you want to join the MBG’s board of directors? 

·       Realistically, how much time you can dedicate to the organization a month?

·       Which committee you would like to donate your time to?

·       What major issues would you like to be involved in and how would you change them? 

What’s expected of MBG Board Members? MBG Board Members Will: 

·      Interpret the organization's work and values to the community, represent the organization, and act as a spokesperson

·      Listen carefully to board colleagues and members of the craft beer community 

·      Respect the opinion of fellow board members

·      Respect and support majority decisions of the board

·      Recognize that all authority is vested in the full board only when it meets in legal sessions

·      Keep well-informed about developments relevant to issues that may come before the board

·      Attend bi-monthly board meetings (six a year – 1.5 hours long) and understand that they may be relieved of board duties if they miss more than two meetings 

·      Actively participate in board meetings and actions

·      Become actively involved in at least one committee – driving goals and accomplishing tasks – (Marketing, Events, Government Affairs, and Membership) 

·      Support MBG events and initiatives through participation

·      Bring to the attention of the board any issues that will have an adverse effect on the organization or those we serve

·      Refer complaints to the proper level on the chain of command

·      Recognize that the job of a board member is to ensure that the organization is well-managed, not to manage the nonprofit

·      Represent all of those whom this nonprofit serves, not just a particular geographic area or interest group

·      Consider yourself a “trustee” of the nonprofit and do your best to ensure that it is well-maintained, financially secure, growing and always operating in the best interests of those we serve

·      Declare conflicts of interest between your personal life and position on the board, and abstain from voting or discussion when appropriate

MBG Board Members Will Not:

·      Criticize fellow board members or their opinions, in or out of the board room

·      Use the nonprofit organization for your personal advantage or that of your friends or relatives

·      Discuss the confidential proceedings of the board outside the board room

·      Interfere with the duties of the administrator or undermine the administrator’s authority with staff 

As a board member, the organization is responsible to you in the following ways: 

·      To keep its board members regularly updated on the organizational activities, programs, policies, goals and objectives as appropriate

·      It is expected that board members and the Executive Director will respond in a straightforward fashion to questions that are necessary to carry out fiscal, legal and moral responsibilities to the organization

·      If the organization does not fulfill its commitments, board members may call upon the Board President and E.D. to discuss the organization’s responsibilities

·      The organization will carry directors and officers’ liability insurance

The Mass Brewers Guild Mobile App Turns One Year Old

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Dear Craft Beer Fans: 

Can you believe it’s been a year already?! 

Our mobile application, “Mass Craft Beer,” turns one this September, and we could not be happier with the amount of participation and feedback that we’ve had with the program so far. 

To date, there are more than 8k craft beer lovers who use our passport program, and are actively visiting breweries in Massachusetts. By visiting your neighborhood breweries, you are supporting small business owners who employ locals, drive travel and tourism to the state, and help to revitalize downtown communities. 

We hope you are drinking in all that the Massachusetts craft beer scene has to offer and are enjoying the adventure as you travel to different nooks and crannies of the state. 

If you’ve had the program on your phone since its inception you may be receiving a notice that your stamps are going to expire. 

What does that mean? 
Craft beer fans have exactly one year to visit 100 breweries and become “Beer Trail Conquerors” – 365 days after the date of your first brewery stamp, the slate wipes clean and points and badges start from zero. 

Why do we do this? 
To keep the passport program competitive, every year the MBG will create a big prize for Beer Trail Conquerors to climb to. This year it’s the opportunity to win a craft beer dinner with Jim Koch, from Boston Beer Co., Dan Kenary from Harpoon Brewing Co., and MBG president Rob Burns from Night Shift Brewing Co. 

Will users lose their stamps, check-ins or favorites lists?  
Stamps will remain in the user’s profile so they can keep a list of bragging rights of where they’ve been. However, they will appear in the expired tab under “My Stamps.” This is so that when you re-visit a brewery you can re-collect the stamp, earn points for it, and re-climb the leaderboard.

Your check-ins, reviews, and favorites list will remain in-tact. Your bio and photo will also remain on the MBG website if you’ve achieved Beer Trail Commander status. 

The goal of the MBG passport program is to encourage patrons to continue to visit breweries year after year and see what new offerings are available in their tap rooms. As new breweries continue to open their doors there will be plenty of tap rooms to explore and craft beer to enjoy. 

We will continue to add new badges and prizes to the program in the coming months to keep the excitement going for veteran users. 

Cheers, 
Katie Stinchon
MBG Executive Director 

City of Presidents American Pale Ale available exclusively at Quincy Center bars, restaurants

A complex, easy-drinking all-American craft beer
from Widowmaker Brewing

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City of Presidents American Pale Ale is scheduled to arrive at Quincy Center bars and restaurants on Friday, August 17, the first and only craft beer brewed exclusively for distribution in Historic Quincy. 

             The deliciously flavorful, complex but easy-drinking pale ale was crafted by Widowmaker Brewingof Wood Road in Braintree, steps from the Quincy line. 

            “This beer celebrates the history of a great American city and pays homage to downtown Quincy’s rapid rise as one of the region’s most dynamic new dining destinations,” said head brewer Ryan Lavery of Widowmaker Brewing, a former longtime Quincy resident. “Quincy businesses and residents have supported our brand in great numbers and we’re excited to provide this exclusive offering.” 

            The beer is being released at a time when Quincy Center is enjoying a construction boom and is about to welcome a second wave of new eateries on the heels of last year’s arrival of 10 new dining destinations.  

Pending newcomers include Idle Hour, a cocktail-centric neighborhood bar featuring dishes from celebrated former Drink chef de cuisine Ashley Gaboriault; Rewild Plant Food + Drink, touted as America’s first plant-based beer hall and café; and Belfry, a new urban beer hall from the team behind critically acclaimed Quincy Center cocktail boite The Townshend. 

            The City of Quincy is also about to celebrate the opening of its world-class new downtown green space, the Hancock-Adams Common, in a Sept. 8 ceremony featuring local dignitaries, Mayor Tom Koch, Governor Charlie Baker and Pulitzer Prize-winning historian and John Adams biographer David McCullough. This public park, boasting green space, fountains and monumental statuary of Quincy natives and Founding Fathers John Hancock and John Adams, promises to be the centerpiece of the new and improved Quincy Center. 

            In the spirit of Quincy’s historic past and bright future, City of Presidents American Pale Ale is a brewed with 100 percent all-American ingredients, including domestic malts and a blend of classic and nouveau American hops: Amarillo, Cascade and Citra. 

            It’s a cloudy hop-forward pale ale in the popular “New England style” of craft beer, but one that features a brilliant lemonade-yellow hue from the use of lightly toasted American malts. The sunny color symbolizes the dawn of a new day for Quincy Center. The beer’s soft texture and mouthfeel come from its use of American flaked oats. 

            City of Presidents American Pale Ale tastes great on its own or paired with favorite summertime dishes. 

The beer is available in 16-ounce cans with a label that features the facade of Quincy landmark Church of the Presidents, plus modernized images of Quincy’s favorite sons chilling out with sunglasses drinking this cool new brew: President John Adams, President John Quincy Adams and President of the Second Continental Congress John Hancock. 

The label was designed by Quincy artist Jacob Callaway of Verified Beer Traders. 

The first run of City of Presidents American Pale Ale will be available exclusively at Quincy Center bars and restaurants, including 16C, Alba, Angelo’s Coal Fired Pizza, Cagney’s, Fat Cat, The Fours, Fowler House, Fuji at WOC, Idle Hour, Malachy’s, Paddy Barry’s, The Pour Yard, Rozafa, S6, Shaking Crab, The Townshend and Zef Cicchetti & Raw Bar.  

Sap on Tap: Father and Son Duo Use Black Birch Sap As Key Ingredient in Noble Birch Beer

Offered at Rapscallion Brewery and
Restaurants Table & Tap and Kitchen & Bar

 Randy Noble taps a black birch tree.

Randy Noble taps a black birch tree.

Sturbridge, Mass. | Just as the maple syrup season comes to a close in early April, another underutilized and often overlooked tree begins its tapping season, the black birch tree. 

The black birch does not stand out in the woods like its more well-known sister, the white birch, but upon close examination of the bark one would easily recognize the same notches and tick marks ingrained on the tree. Need another telltale sign? Snap off a twig, bring it to your nose and breathe in its wintergreen aroma. 

It’s this subtly-sweet extract from the tree that makes the “Noble Birch” beer, now available on tap at Rapscallion brewery and its restaurants, so unique. 

This labor of love is a collaboration brewed by father and son duo, Randy and Jonas Noble. 

 Black birch twigs used for steeping. 

Black birch twigs used for steeping. 

Randy, 63, an avid outdoorsman, hunter and longtime home-cidermaker, stumbled upon the recipe for a beer made out of black birch sap in an outdoor adventure guide. His son, Jonas, 35, the head brewer at Rapscallion Brewery, toyed with the recipe to make it more pliable for commercial brewing. 

No water is used in the production of this beer. Instead,  approximately 150 gallons of black birch sap is tapped and extracted from the trees on the brewery property by Randy, and chilled in large steel gallon drums. It takes about a week to collect this amount. The black birch sap flows quickly from the tree and is more fluid compared to maple sap.

Then, Jonas has a short amount of time to start the brewing process before the sap begins to perish and turn bitter. The liquid is infused with local honey and malt, and steeped with twigs from the same tree during the boiling process to increase its wintergreen nose and aroma. The beer pours clear and is completely hop free. 

“Noble Birch has a distinct quality to it -- I really kick up the carbonation so it drinks more like a refreshing soda,” says Jonas.

The beer is meant to be sipped due to its high alcohol content ranging from 9 to 12% ABV. The 2018 batch comes in around 10.5% and is served in a small goblet to keep consumers on their feet. 

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This is the fifth year that Noble Birch has been brewed at Rapscallion Brewery and it has quite a following among its longtime customer base. The beer, which is served only on tap, typically sells out quickly due to the small quantity that the brewery can produce.  

“It’s not a beer that you’ll soon forget,” says Jonas. “Many like it as an aperitif or digestif, and we plan to work with our chef to experiment pairing it with some of our new desserts or even making some beer cocktails with it. It’s unlike any seasonal beer you’ll try.” 

Rapscallion plans to hold two releases of the Noble Birch, this summer and again in the winter of 2019. For more information, visit drinkrapscallion.com  

Want to try it? Get out there: 

Brewery & Tap Room
195 Arnold Road, Sturbridge, MA

Table & Tap
5 Strawberry Hill Road, Acton, MA

Kitchen & Bar
208 Fitchburg Turnpike, Concord, MA

 

Beer Excise, Sales, and Meals Tax 101

An overview of beer excise, sales, and meals tax in the state of MA for brewers and their breweries. 

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For anyone who has tried to wrap their heads around the taxation of beer in MA, it can be a challenge. A Google search will bring you to various blogs that contradict each other, state websites that are difficult or impossible to navigate, and tax forms that are vague and make no sense. After helping a few of you navigate the nuances of tax compliance on beer, I would like to share with the MA Brewers Guild and you, some of the basics when it comes to beer excise, sales, and meals taxes. 

While each of these topics are worthy of their own blog post, this summary should provide enough guidance to help you get up and running and stay compliant on some of the most fundamental transactions that breweries encounter. For more complex matters, don’t hesitate to contact me. With that said, let’s start mashingout these nuances into something clear to understand!  

Part 1: Beer Excise Tax
First, we are going to start with beer excise tax and the required MA Form AB-1. Every brewery, wholesaler, and importer of beer in MA is liable for and to pay, an excise tax for the privilege of manufacturing or importing beer into the state for sale. With that said, when you manufacture your beer or import your beer (as a wholesaler), that beer becomes subject to the excise tax of $3.30 per BBL (31 gallons) in MA. MA excise tax is reported to the state on Form AB-1 which is due on or before the 20thday of the month following the month of production. Simple right? But when is my beer considered taxable beer and does it follow TTB requirements? What if I use a contract brewery? What about beer shipped out of state? Here are some compliance tips when it comes to beer excise tax and filing form AB-1:

When is my beer taxable in MA? Can I follow the TTB? 
Unofficially, sure, you can follow TTB rules to determine when your beer becomes taxable in MA as for most, the conversion cycle between production and sale is pretty quick. Officially, unlike the TTB with a designated tax-free zone, when your beer is packaged (bottled, canned, kegged, etc.) it becomes taxable in MA. Notice I said “packaged” and not pushed into a bright tank. Usually we recommend brewers take the position that beer manufacturing is complete when packaged.  This is because when you go from a bright tank to packaging you can have some loss in total BBLs or bad packaging runs that make beer unsellable and therefore non-taxable. If you are going from the tank to tap, make sure you have a clearly marked tax determined tank and log the beer added as that becomes your taxable beer. 

To report tax determined beer, your will utilize Schedule A: Malt Beverages Imported, Purchased or Otherwise Acquired- Form AB-1. But wait, why use this form if it doesn’t say “Manufactured”? That is because the government is behind and has not updated the form! So, what do you do? Here are some best practices, for manufacturers of beer (breweries):

  • Date Received should be the date packaged;
  • invoice number can be an internal batch number or production run number; 
  • from whom imported or otherwise acquired can be either “manufactured internally” or the name of the beer packaged; 
  • number of barrels or cases is total barrels produced;
  • and fill in Box A under no tax paid the total gallons of beer produced. This amount will then be reported on page 1, line 1 Malt Beverages. 

The total gallons is then multiplied by $3.30 to determine your excise tax liability. 

What if I contract the production of my beer to another brewery?
When another brewery manufactures your beer and you purchase that beer from them for resale, you are a wholesaler. As mentioned above, MA requires wholesalers to file Form AB-1. You will still utilize Schedule A, however; you now have an actual invoice number, date received, and name of who produced the beer to fill in. But, the biggest difference is, when reporting gallons upon which tax was paid. 

When you acquire the beer from a manufacturer who is physically located in MA, the manufacturer is responsible for reporting and paying the excise tax beer. Therefore, the total gallons you acquired gets listed under box B of schedule A, Gallons upon which Mass. Tax paid. Here you are simply reporting to the state beer acquired and will have no excise tax liability. If you have made the mistake of paying the excise tax, not a problem. You can simply amend your Form AB-1’s to recover the tax. 

If you are utilizing out of state breweries and then shipping the beer into MA, you as the wholesaler, will be responsible for the payment of excise tax on beer brought into the state. In addition, you will also need to fill out and file Form AB-10, Report of Alcoholic Beverages Shipped into Massachusetts.

Lastly, the above discusses the rules when you are “Contract Brewing”. This is a relationship in which you pay a brewer, the “contract brewer”, to produce your beer. There is another relationship, though used infrequently, called Alternating Proprietorships. Under this arrangement, you and another brewer may take turns in using the physical premise of a licensed brewery, the host brewer, to brew your beer. In this type of relationship, the host brewer is not responsible for paying the excise tax and you will need to file your own form AB-1 and pay the required tax. 

Is beer shipped out of state subject to MA excise taxes? 
No. Beer shipped out of state is exempt from MA excise tax. You report sales out of state on Schedule F, Deductions. Also reported on Schedule F is beer disposed of at the brewery or loss on inventory due to breakage. 

Is beer sold for onsite consumption exempt from MA excise taxes?
Sales of beer for onsite consumption is considered a “meal” and as therefore separately taxed. You are responsible for paying the excise tax on beer produced and for collecting and remitting to the state sales tax on beer sold in your tap room. Still don’t believe me, check out MA DOR Letter Ruling 96-2: Sales of Malt Beverages by Restaurant Brewery (don’t let the word restaurant fool you as it applies to taverns, bars, and taprooms). Here is the link to the letter ruling:

http://archives.lib.state.ma.us/bitstream/handle/2452/54090/ocm09310387-1996-2.pdf?sequence=1  

Part 2: Sales and Meals Tax
Next, we will chat about sales and meals tax. Breweries report sales tax on Form ST-9 and meals tax on Form ST-MAB-4 (note meals, as stated earlier, includes sale of alcoholic beverages).  These forms are both due monthly, on or before the 20thday following the month you are reporting for.  Some common questions we see are as follows:

 

What are the tax rates for sales and meals tax? 
In MA, transactions subject to sales tax are assessed at a rate of 6.25%. Meals are also assessed at 6.25% but watch out! Some jurisdictions in MA elected to assess a local tax on meals of .75% bringing the meals tax rate to 7%. Be sure to check if your location is subject to the local tax. 

What transactions are subject to sales tax?
Let’s look at this transaction from two points of views. 

The first point of view is that of the consumer who purchases swag from your brewery. Generally articles of clothing are exempt from sales tax. Glassware and other swag items like stickers or bottle openers are subject to sales tax. Also, sales of prepackaged beer for offsite consumption are exempt. For transactions that are subject to sales tax, the brewery is to collect from the buyer the 6.25% on the sales price of items subject to sales tax and remit that money to the MA DOR. 

Growlers are tricky. Prefilled growlers that are already sealed, and in a cooler that a consumer can take from are exempt. When a consumer comes in with an empty growler and you fill it, that transaction is subject to sales tax. 

From the point of view of the brewery, items purchased for resale are exempt from sales tax because you are buying them as a reseller. But be careful, if you take stickers or glassware for example, to give away at an event, you are subject to self-charging yourself sales tax. The biggest thing I want to draw attention to for the brewery is this; purchase of equipment, materials, or supplies used to manufacture your beer or directly used in the conversion process to convert raw materials into a finished sellable product are exempt from sales tax. Most vendors a brewery deals with are pretty good about exempting certain items purchased, but some smaller vendors may not and you specifically need to ask for the exemption or provide them with a completed form ST-12, Exempt Use Certificate. This means you are certifying to the vendor that the purchase is exempt from sales tax. 

Just recently, the U.S. Supreme Court decided on the Wayfair Online Sales Tax Case. This can create a requirement to collect sales tax on sales of swag from your website shipped out of state. To see if this will impact you and your online sales, reach out to your tax advisor. 

What transactions are subject to meals tax?
Sale of beer, food, and snacks for onsite consumption are subject to meals tax. Now one thing I notice is a lot of breweries that sell beer in their taproom include sales tax in the price of the beer. Meaning they do not show the tax as a separate line item on your receipt. That is perfectly fine but keep in mind these two things: first, this is only allowed if the sole transaction on the receipt is sale of beer. If the receipt includes sale of beer, merchandise, or snacks, sales tax needs to be separately shown. Second, make sure you assess your selling price to determine if it is including or not including taxes. For example, if you sell a beer for $9 and assuming a 6.25% tax rate, are you just using $9 and therefore your revenue per sale is actually $8.44 or does the $9 not include sales tax so the end sale to the consumer is $9.56 and your revenue per sale is $9. I know this seems silly but if not accounted for correctly you could be leaving money on the table as you are supposed to be collecting from the consumer and remitting back to the state. Further from an analysis stand point, you can be overstating revenues. While the push back is there is an offsetting expense so my bottom line is not impacted, in the beer world it’s all about revenue per BBL or case equivalent and the tax included in revenue is not your revenue, it is the state’s revenue. For some with high tap room volume, this can be a material number.

Part 3: Bottle Deposits
Now the last item to talk about are bottle deposits. This is the most annoying thing out there for a nickel, but it is for a good cause, I guess….While this may not be a large number for most, it is still required in MA and you need to be compliant on all fronts to be in good standing with the state. 

When it comes to bottle deposits here is what you need to know. First, bottles and cans sold to a wholesaler do not need to be assessed for bottle deposits. Cans transferred from the brewery to the taproom or retail area for offsite consumption are assessed a nickel. Second, to report the receipt of deposits or refunds of deposits, you use MA Form AD-1,Abandoned Deposit Amounts Return. This form is due no later than ten days after the last day of each month. Third and last, do you need a separate bank account for this? Yes and I know it’s a pain…MA requires every bottler and distributor to establish and maintain a bank account known as a Deposit Transaction Fund and form AD-1 is your reconciliation of that account which is provided to the state. 

Wrap-up         
I hope you have found this post helpful and insightful as to what type of common transactions in the brewery will subject you to sales, meals, and beer excise tax. I encourage you all to take a moment and review internally your PoS systems and form AB-1s and reach out to your advisor if you think something feels or does not look right. 

If you want to chat through anything or discuss any of the items above in more details please don’t hesitate to reach out! 

Cheers,
Bob Babine
Edelstein & Company
Rbabine@edelsteincpa.com