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Starting a small business is not without its challenges — and that’s especially true when it comes to craft breweries and distillers. From cash flow and inventory management to distribution and tax compliance, you have a lot to keep track of and plan for. That’s why it’s not uncommon for certain tax-saving opportunities to get overlooked — such as the research and development (R&D) tax credit.

As a brewery, if you are investing time, money and resources toward the improvement of your products or processes, an R&D tax credit could be an immediate source of cash for your brewery. Additionally, legislation recently passed enables small businesses to use the R&D credit to offset payroll tax liabilities, resulting in reduced labor costs.

You may be eligible if you have developed new or improved:

  • Bottle, bottle crown or can designs
  • Bottling or canning processes
  • Brewing or bottling equipment
  • Fermentation processes
  • Hop varieties
  • Hopping techniques
  • Ingredient-processing techniques
  • Keg-filling or keg-treatment techniques
  • Preservative chemicals
  • Product formulations
  • Product prototype batches
  • Quality assurance testing processes
  • Water-recycling or waste management processes
  • Yeast strains
  • Filtration methodologies
  • Flavor or aroma profiles
  • Ingredient-mixing methodologies

You may also qualify if you’ve tested new or improved:

  • Product designs to ensure consistency
  • Product designs to ensure shelf life
  • Product ingredient mixtures for desired flavor or aroma profiles

Excise Taxes

It is also imperative to monitor the Fair Brewers Excise and Economic Relief (BEER) Act, which is currently pending in U.S. legislature (HR 767 and S 807). If this bill passes, it will reduce the excise tax from $7 to $3.50 on each barrel of beer up to 60,000 barrels produced each year, and reduce the escalated rate from $18 to $16 for every barrel after 60,000.

Paul Rozek

As a reviewer in the tax department, Paul Rozek is experienced in the preparation and review of all tax returns, including Forms 990 and 990-T. His clients include family offices, private foundations, trade associations, charitable organizations, schools, credit unions and other non-profit entities.