Montana Whiskey Maker Seeks Tax Break to Compete With Big Boys

By Beacon Staff

It takes grain, water and patience to make whiskey. Making a profit at it – legally, that is – seems to require a tax break as well.

At least that’s the motive behind legislation this session to boost development of a homegrown Montana distilling industry. So far that industry consists of one licensed distiller looking for help in competing with the biggest names in the business.

With hard liquor ranking among the most heavily taxed products in America, it’s easy to see how a little leeway from the “revenooers” can go a long way.

“For small producers, there are not many ways to level the playing field,” says Brian Schultz, owner of Bozeman’s RoughStock Distillery. Big distilleries have advantages in name recognition, distribution networks, raw ingredients and equipment costs, he adds.

A tax break, Schultz says, would make it possible for him to profitably produce and distribute his whiskey at a reasonable price

Schultz’ champion in the Legislature is Rep. Brady Wiseman, the Bozeman Democrat who sponsored legislation four years ago that allows small distilleries to operate in Montana. This session, Wiseman pushed through legislation to cut state liquor taxes for small distillers from 13.8 percent to 4 or 8 percent, depending on how much they produce.

Wiseman says the barriers for small distillers are immense, while large distillers have experience and sheer size on their side. His House Bill 412 passed the House and Senate by overwhelming margins. All it needs is the governor’s signature.

Wiseman’s bill is one of a handful this session that affects brewers, distillers or their distributors.

Also awaiting the governor’s signature is House bill 400, sponsored by Rep. Deb Kottel, D-Great Falls. The bill, which also passed the Legislature easily, allows stores and restaurants to offer beers up to 14 percent alcohol by volume.

Previously, beer in Montana was defined as having not more than 8.75 percent alcohol by volume. Anything stronger than that was considered liquor and could only be sold in liquor stores. Most mass-produced American beers contain about 5 percent alcohol by volume.

The old law, on the books since the 1950s, was out of step with changes in American brewing over the past 20 years. With the burgeoning craft beer movement, more and more breweries began creating beers with higher alcohol levels.

In fact, the 8.75 percent limit made it so that Montana’s 25 breweries could not brew nearly a fifth of recognized beer styles to specifications, according to Tony Herbert, executive director of the Montana Brewer’s Association.

The law also meant that Montana consumers couldn’t easily purchase a wide variety of stronger beers created elsewhere around the world that are considered by their fans to be among the best and most interesting beers. Montana’s liquor stores are not typically set up to handle these beers, which require precise refrigeration and great care in order to reach the consumer without spoilage.

The bill passed despite protests from members of the Legislature’s Native American Caucus, who worried that it would entice brewers would make cheap high-alcohol beers and malted beverages that would contribute to alcoholism on the reservations.

To allay those concerns, Kottel and Herbert changed the bill to require that higher alcohol beers be brewed using at least 75 percent fermentable ingredients, a process that would make such brews more expensive than typical beers.

According to Herbert, this requirement rules out most of the high-gravity malt liquors and fruit flavored “alco-pops,” which often remove alcohol created by fermentation and replace it with distilled liquor. It would be difficult, time consuming and expensive for these beverages to reach such high alcohol levels without the addition of distilled spirits.

Consumers could begin to see higher gravity beers on the shelves in October if the governor signs the bill, though Montana breweries may take a couple of months to produce their own high-alcohol beers.

The third alcohol-related bill to pass the Legislature this session was Senate Bill 438, sponsored by Sen. Carol Juneau, D-Browning. The bill aims to keep caffeinated alcohol beverages out of the hands of minors. These drinks, such as Sparks and Tilt are often unclearly labeled, inexpensive, and flavored in such a way as to appeal to minors, the bill’s supporters say.

SB 438 would define these caffeinated alcohol beverages as liquor, meaning they could be sold only in liquor stores, which are better equipped to make sure these drinks aren’t falling into the hands of minors, supporters argued.

Christi Blazer, a lobbyist for the Montana Beer and Wine Wholesaler’s Association, predicts the producer of Sparks and Tilt will reformulate their products to retain their classification as beer or wine.

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