Leveling the playing field for homegrown microdistilleries

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Senator John Proos

Senator John Proos

LANSING, Mich. — Sen. John Proos has introduced legislation to provide a reduced tax rate to microdistillers, similar to the rate applied to microbrewers.

“Small-volume distillers in Michigan must deal with Prohibition-era rules and regulations and a tax system that treats them the same as giant, multinational spirit makers,” said Proos, R-St. Joseph. “This initiative would operate in a similar fashion to the tax credit currently available to eligible brewers and brewpubs. The goal is to help startup spirit producers succeed and encourage entrepreneurship and job creation in Michigan.”

Senate Bill 579 would provide a tax cut for distillers on the first 60,000 gallons of spirits manufactured in a calendar year, with each bottle beyond 60,000 gallons being subject to the current requirements.

“This is about fostering growth and innovation in an up-and-coming industry in Michigan,” Proos said. “We have seen the tremendous success that this policy has had on our local microbrew industry. Applying a similar tax system to the state’s spirits industry could result in millions of economic growth, more jobs and increased tax revenues.”

Michigan operates as a “control” state for the sale of spirits with the Liquor Control Commission as the wholesaler for all spirit products. Current law requires the commission to establish uniform prices for the sale of liquor that return a gross profit to the commission of at least 51 percent and not more than 65 percent.

Journeyman Distillery owner and operator Bill Welter supports Proos’ efforts and testified last year on the issue before the Senate Committee on Regulatory Reform.

“While Michigan had a clear competitive advantage, it has since evaporated as Indiana and other states have updated their craft distilling laws to allow for on-site retail sales while also having much lower taxes,” Welter said.

According to Welter, Michigan taxes Journeyman Distillery $15 per bottle, while the same bottle sold in Indiana is taxed at 53 cents.

“Michigan’s rate is 28 times higher and therefore 28 times less competitive,” Proos said. “We should be competing with other states for these new opportunities and giving these small businesses a chance to thrive, not stifle them with burdensome red tape.”

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Editor’s note: Audio comments by Proos are available at www.SenatorJohnProos.com/Audio.