Freedom to grow for Minnesota’s brewers and distillers
Minnesota’s craft brewers have been an economic success story over the last decade. Brewer’s Association data shows 35 craft breweries operating statewide in 2011: in 2020, that number was up to 217, an increase of 520%. While the craft beer boom has been a nationwide phenomenon, Minnesota has been something of a market leader: it ranks 13th nationally for breweries per capita.
This success is largely due to free market policies of tax cuts and deregulation which have given these brewers the freedom to innovate and grow. Starting in the 1970s, the federal excise tax has been cut and smaller breweries exempted. Deregulation saw home brewing legalized. Brewpubs—breweries with restaurants or pubs on the premises—were legalized in every state, Minnesota doing so in 1987. In 2011, Minnesota’s production breweries won the right to operate and sell their own beer onsite in a taproom.
Nevertheless, both tax and regulatory barriers to further growth remain. Removing these can help our state’s craft brewers and distillers to continue their success.
As well as federal excise taxes, all 50 states and the District of Columbia also collect their own taxes on fermented malt beverages. In Minnesota, beer retailers are taxed at $0.15 per gallon, and an alcohol-specific sales tax of 9% (instead of the state’s 6.875% general sales tax rate) is then applied at the point of sale, showing up on the customer’s receipt. As a result, according to the Tax Foundation, Minnesota’s excise taxes are the ninth highest in the United States.
In the regulatory sphere, one of the main barriers to the expansion of craft breweries in Minnesota is the ‘Growler Cap.’ This law prevents breweries producing more than 20,000 barrels annually from selling ‘growlers’ (containers that can be used to transport beer). Breweries that reach this level of production face a choice between continued expansion or ending the sale of growlers, which can make up a substantial share of taproom sales.
Minnesota’s distilleries face a similar problem. When a distillery hits production of 40,000 proof gallons annually, they either have to stop expanding or close their cocktail room (and they can no longer sell half-bottles to guests.)
A further regulatory barrier faced by Minnesota’s brewers and distillers are rules governing what sized vessel they can sell from their taprooms. Minnesota law currently limits breweries to selling off-sale beer in vessels under 750ml. Distilleries cannot sell full-sized bottles at all, they are limited to sales of just one 375ml (half-bottle) per customer per day.
Minnesota’s craft breweries and distilleries are American success stories of people following their dreams to make a living doing something they love. Tax and regulatory policy should be geared towards helping them. Minnesota’s policymaker should cut excise taxes, remove limits such as the Growler Cap and those faced by distilleries, and free breweries and distilleries to sell in vessel sizes of their own choosing. These measures would be big steps in the right direction.
This op-ed originally appeared in the Forum on Oct. 6, 2021