Georgia’s growing craft beer industry is foaming mad at new Department of Revenue guidelines limiting their ability to charge for tours based on the price of different beers.
Legislation adopted this year gave craft brewers the ability to sell facility tours and give away their product — a kind of backdoor way to actually sell their beer directly to customers, something those brewers have long sought. After Gov. Nathan Deal signed the bill into the law, the state Revenue Department enacted rules governing the tours. Those regulations allowed brewers to create different tour packages at different price levels.
And brewers did exactly that.
But last week the department issued a “bulletin” saying while brewers can offer different levels of tours, the price differences cannot be based on the value of the beer. Industry leaders say that’s as stinky as a skunked brew.
“Throughout this process, from the bill’s introduction in January to its enactment in July, a brewer’s right to charge variable prices for brewery tours by whatever basis they saw fit was clear and unambiguous,” said Nancy Palmer, the executive director of the Georgia Craft Brewers Guild. “It is egregious that the Department of Revenue has waited until now — after the conclusion of months of debate on this law — to quietly, and without open comment, issue a bulletin that flies in the face of the consensus understanding of the law and the known legislative intent.”
Palmer said brewers have invested hundreds of thousands of dollars to build new tasting rooms, hire employees and market their new tours.
Many breweries were already doing exactly what the state now says is illegal — and some, including Wild Heaven Craft Beers, say they were given written approval by the department to do so. Wild Heaven has been offering tour packages that ranged from $10 to $30, with different beers available with each.
“I shared our new tour plan based on (Senate Bill) 63 with the Department of Revenue and received written confirmation stating: ‘This is perfectly fine. Looks great,’ ” said Nick Purdy, the president of Decatur-based Wild Heaven. “Based on this email, our company spent over $17,000 on new equipment and improving our tasting room experience. We would not have done this if the recent bulletin had been in effect.”
State Rep. Brett Harrell, R-Snellville, wrote to the Department of Revenue in June, before the first set of regulations were finalized, according to a copy of the letter obtained by The Atlanta Journal-Constitution. Harrell asked the department to consider a wide range of hypothetical tour scenarios involving multiple prices and a large beer selection. Harrell specifically asked Revenue officials to tell him whether his scenario would be allowed under the law.
Harrell told the AJC that a Revenue employee told him that “‘based on our review, none of your suggested events exceed the allowed amount limits.’ They didn’t see there was any issue with the fictious tour sale.”
Economic impact lags behind in state
Craft beer brewing is a booming part of the U.S. alcohol industry and had a $55.7 billion impact on the national economy in 2014, according to the Brewers Association, a national trade group. Georgia has 40 craft breweries, ranking 24th in the nation. But, thanks to laws that make it illegal for breweries to sell directly to consumers, Georgia ranks 41st nationally in economic impact per capita.
Georgia is one of the few states in the nation where it is still illegal for drinkers to buy beer at the brewery, either for on-site consumption or to take home. Every state bordering Georgia allows both.
Those prohibitions here are protected by the state’s three-tier system of alcohol sales. Manufacturers can only sell to wholesalers or distributors, and they in turn can only sell to retailers. When SB 63 was first introduced this past legislative session, it would have ended the prohibition on direct sales to consumers, but the powerful wholesaler lobby successfully shot that down.
Beer and liquor wholesalers have a close relationship with lawmakers. The wine and liquor lobby spent $5,500 in June hosting lawmakers at its annual convention on St. Simons Island. Wholesalers have contributed at least $587,000 to state campaigns in the past five years, and individual distributors have given hundreds of thousands of dollars more.
State Sen. Rick Jeffares, the chairman of the Senate Regulated Industries and Utilities Committee, crafted the compromise that allowed breweries to sell tours and give consumers their product as souvenirs. Efforts to reach the Republican from McDonough on Wednesday were unsuccessful.
The brewers believe that during the legislative process it was clear that the intent of the bill was to allow for variable tour pricing. In fact, they say, it was specifically discussed and that everyone — brewers, lawmakers, wholesalers and Revenue officials — agreed.
As an example, brewers wanted to be allowed to sell a tour featuring Beer A for $10 but another tour featuring more expensive Beer B for $20. Instead, the Revenue Department now says tours can have different prices but must be based on something other than the market value of the beer offered. For example, if a brewery hires a live band to play after the tour, it can charge more for that package.
‘Too toxic and unpredictable’ regulatory environment
The brewers believe the powerful hand of the beer wholesalers pressured the department to hamstring them just as they were getting started. A spokesman for the Georgia Beer Wholesalers Association declined to comment.
William Gaston, a spokesman for the Department of Revenue, said: “Everything in (the bulletin) was derived either from SB 63 or previously existed in Georgia’s sales tax code. A tour permit is required by code and was added by SB 63.”
Gaston declined to answer further questions.
Brewers in Georgia say the new department guidelines will put a stopper in the growth of the industry here. John Pinkerton, the owner of Moon River Brewing Co. in Savannah, said Georgia’s regulatory environment for beer “is just too toxic and unpredictable for Moon River to even consider expanding our manufacturing operation here.”
Instead, the company is building a new brewery across the river in South Carolina, where lawmakers have recently made it legal for breweries to sell to consumers.
Palmer, the Brewers Guild’s executive director, said the whole situation makes craft brewers more convinced than ever that more changes are needed to state law.
“This situation clearly evidences that the system under which breweries operate is broken,” Palmer said. “Georgia’s small breweries need unfettered direct sales to the public, and Georgia’s political leadership will certainly be hearing that message loud and clear.”
Support real journalism. Support local journalism. Subscribe to The Atlanta Journal-Constitution today. See offers.
Your subscription to the Atlanta Journal-Constitution funds in-depth reporting and investigations that keep you informed. Thank you for supporting real journalism.