(Period Covered: 1/1/2003 through 1/1/2007)

NOTICE:  Data for this policy topic have not been updated beyond 1/1/2007.  Current data on State-level alcohol beverage taxes are available from the Federation of Tax Administrators (FTA) at http://www.taxadmin.org/fta/rate/tax_stru.html .  FTA data from prior years are available from the Tax Policy Center at http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=349 .  Historical data on Federal-level alcohol beverage taxes, dating from 1862 for beer and spirits and 1916 for wine, are available from the Alcohol and Tobacco Tax and Trade Bureau at http://www.ttb.gov/tobacco/94a01_4.shtml .   Note:  Clicking the above links will take you to web sites that are not part of the Alcohol Policy Information System.  APIS is not responsible for the accuracy, currency, or completeness of information contained on any third-party site, and is not liable for damages of any kind arising from accessing, using, or inability to access or use any third-party site.

Policy Description

Note: The secondary literature and the laws and regulations related to this policy topic use a variety of terms that are sometimes used in different ways by different jurisdictions.  To see definitions for these terms as they are used in APIS, choose the link to Definitions on the right side of this page.

General Information

States levy two major types of taxes on the sale of alcoholic beverages: 

• Ad valorem taxes are value-based taxes usually levied as a percentage of the product's retail sales price (which may also be referred to as gross receipts, gross proceeds, retail receipts, or retail proceeds).  In a limited number of jurisdictions, the tax is based on the wholesaler's price to retailers or the producer's price to wholesalers.  APIS uses the term ad valorem to refer to percentage taxes imposed specifically on alcoholic beverages, as distinct from general sales taxes.
• Volume taxes, also called per unit taxes, are levied as a dollar amount on a specified volume (in liquid measure—e.g., gallons, ounces, or liters) of alcoholic beverage. 

Alcohol beverages taxes are not always labeled as such.  For example some States call volume taxes "fees" or "levies."  For License States, APIS treats as taxes anything that meets these definitions (but see below for exceptions applicable to Control States).  Fees that are not based on sales or volume of beverage sold are not included in this analysis.  For example, license fees are imposed on licensees as a cost of obtaining a license and are, therefore, not included. 

Alcoholic beverages may be taxed in their capacity as a special commodity or as part of a larger category of tax.  Some ad valorem taxes, for example, may be applied to food and beverages generally.  Similarly, other taxes such as meal taxes or room service taxes may also include alcoholic beverages.  Alcoholic beverages may also be subject to general sales taxes.  Such taxes are not addressed in this analysis, which documents only taxes that apply specifically to alcoholic beverages. 

Taxes may vary within a given jurisdiction by beverage category (Distilled Spirits, Wine, Sparkling Wine, Beer, and Flavored Alcoholic Beverages).  In addition, alcohol beverage tax rates are typically based on the level of alcohol content, with higher-alcohol-content beverages generally taxed at higher rates.  Accordingly, jurisdictions make taxation distinctions among beverages with varying alcohol content, usually expressed as a range (e.g., <5 percent Alcohol by Volume).  As noted in the Definitions for Alcohol Beverages Taxes, these categories of beverages defined by alcohol-content ranges are referred to as "beverage subtypes."  Statutes and regulations may specify different ad valorem and volume taxes for different beverage subtypes. 

An additional distinction involves whether the alcohol content range is expressed as Alcohol by Volume (ABV) or Alcohol by Weight (ABW).  ABV is more common, but many jurisdictions use the ABW measure.  In some cases, State statutes do not specify the measure used, and in others a range may be described with both (e.g., 5 percent ABV-10 percent ABW).  The APIS tax data specify whether the tax is based on ABV, ABW, or unspecified, and do not attempt to convert to a common measure. 

Alcohol beverages taxes within a given State may be quite complex.  A single State may impose several separate taxes, including both ad valorem and volume taxes, on a given beverage type or subtype, making it difficult to combine them into a single tax rate.  Further, some taxes may apply to only certain alcohol beverage sales within a State (e.g., sales made through certain kinds of licensed outlets) among other variations described below.  APIS comparison tables provide a detailed descriptions of the various tax rates applied in a given State.

Special Considerations for Analyzing Alcohol Beverages Taxes in Control States (States with State-Run Retail and/or Wholesale Systems)

In Control States, where the State owns and operates retail and/or wholesale outlets, taxes are in addition to any markups in price that occur within the State stores (see Definitions for Alcohol Beverages Taxes).  These markups, which are functionally similar to taxes, may be controlled by statutes, regulations, and/or internal administrative decisions (only statutes and regulations are included in APIS).  State stores are authorized to sell only certain alcohol products; the exact product mix varies by State (see the Alcohol Control System policies for analyses of Control State distribution networks).  Similarly, the price charged by State-operated wholesalers will include a State-controlled markup when selling to private retail licensees that may be separate from any additional tax levies.  States also vary in terms of the extent to which competition is allowed between State stores and private vendors.  In License States, by contrast, markups are controlled by private licensees at both the retail and wholesale level. 

The APIS analysis of Alcohol Beverages Taxes addresses statutory and regulatory provisions identified as taxes, but omits provisions relating to markups.  This limits the ability of users to compare tax rates across States.  For example, a Control State's decision to increase the markup of a given alcohol product may be the functional equivalent of a tax increase.  Users are encouraged to use caution when examining tax rates in Control States and when comparing these rates across jurisdictions.

Special Considerations for Beer Taxes

States use a variety of terms and definitions for beer and other fermented malt beverages which are not consistent across jurisdictions.  For simplicity, APIS uses the term "beer" to refer to all fermented malt beverages, including light beer, near beer, malt liquor, and stout.  Regardless of the terms used, States typically base tax rates on the beer's alcohol content, providing alcohol content ranges for which a specific tax applies.  APIS therefore uses the "Beverage Subtype" variable to differentiate beer taxes based on the alcohol content range to which the taxes apply.   Beers that have higher alcohol content may contain distilled spirits and, therefore, may be subject instead to distilled spirits taxes.  Note that flavored alcoholic beverages (FABs) with a malt alcohol base are taxed as beer unless a specific FAB tax applies (see Alcohol Beverages Taxes: Flavored Alcoholic Beverages).

To view the comparison tables and additional
information about this policy topic, click
on the links on the right side of this page.

Email a link to this page: http://alcoholpolicy.niaaa.nih.gov/Tax-Beer