My New York City brewery sells most of its beer to wholesalers but also sells beer by the glass and growler in our public tasting room. Do we owe the state Alcoholic Beverage Tax on both the wholesale sales and the tasting-room sales?

Plain-English summary

A New York City brewery asked the Department two questions: does it owe the state Alcoholic Beverage Tax (ABT) on the beer it sells to wholesalers and distributors, and does it also owe ABT on the beer it pours by the glass or growler in its own public tasting room?

The brewery manufactures beer in New York City (and subcontracts some production to other facilities in and out of state). Almost all of its product goes to wholesalers, with the rest sold directly to the public in its tasting room.

The Department held that because the brewery manufactures beer, it qualifies as a "distributor" under Tax Law § 420(4)(a) and generally owes ABT (and the parallel NYC excise tax) on its sales and uses of beer in the state. But there's a carve-out: sales between two registered distributors are exempt from ABT, so the brewery's sales to other distributors are tax-free as long as both the brewery and the buying distributor are registered with the Department under Tax Law § 421 -- tax then shifts downstream and is collected from the purchasing distributor instead.

Tasting-room sales are a different story. Beer sold by the glass or growler in the brewery's tasting room is subject to ABT, because that's a taxable sale/use of beer in the state. The one exception: free samples poured at a tasting that complies with the Alcoholic Beverage Control Law are exempt under Tax Law § 424(6), since nothing is being sold.

What this means for you

Brewery and distillery owners with a tasting room or taproom

If you manufacture beer (or other alcoholic beverages) in New York, you're a "distributor" and owe ABT on what you sell -- including what you pour and charge for in your own tasting room. Selling to another registered distributor is tax-free on your end, but make sure both sides are actually registered under § 421, or the exemption doesn't apply. Free ABC Law-compliant samples stay untaxed.

Accountants and tax professionals

The key mechanical point is that ABT liability shifts along the distribution chain only between registered distributors (§ 424(1)(g)) -- an unregistered buyer doesn't get the exemption, and the tax then attaches to the manufacturer's sale instead. Track registration status on both sides of any distributor-to-distributor sale.

Common questions

Q: Does my brewery owe New York Alcoholic Beverage Tax on beer sold to a wholesaler?
A: Not if both you and the wholesaler/distributor are registered with the Department under Tax Law § 421 -- that sale is exempt, and the tax then attaches to the buyer's own future sale or use of the beer.

Q: Do I owe tax on beer I sell in my own tasting room?
A: Yes. Beer sold by the glass or growler in a tasting room is a taxable sale/use of beer and is subject to ABT.

Q: What about free samples at a tasting?
A: Alcoholic beverages a licensed producer furnishes at no charge for consumption at a tasting held in compliance with the Alcoholic Beverage Control Law are not subject to ABT.

Q: Can I rely on this ruling for my own brewery?
A: No. This advisory opinion binds the Department only as to the petitioner and the specific facts described. Every brewery's registration status and sales channels need their own analysis.

Citations and references

Statutes:

• Tax Law § 420(4)(a) (definition of "distributor")
• Tax Law § 421 (distributor registration requirement)
• Tax Law § 424 (imposition of the Alcoholic Beverage Tax)
• Tax Law § 424(1)(g) (exemption for sales between registered distributors)
• Tax Law § 424(6) (exemption for free ABC Law-compliant tastings)
• Tax Law § 445; NYC Admin. Code § 11-2056 (NYC excise tax on beer and liquor)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/alcoholic_beverage_ao.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/alcoholic_beverage/a20-2m.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(2)M
Alcoholic Beverage Tax
June 9, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

The Department of Taxation and Finance received a Petition for an Advisory Opinion
from [ REDACTED ] (“Petitioner”). Petitioner operates a brewery and asks whether it is
responsible for the New York State excise tax on alcoholic beverages (“ABT”) for beer sold to a
wholesaler or distributor. It also asks whether the beer it serves in its public tasting room is
subject to ABT. We conclude that the ABT generally applies to Petitioner’s sales and uses of
beer in the State because it qualifies as a distributor, but that Petitioner’s sales of beer to other
distributors of beer will be exempt, provided that Petitioner and the purchasing distributors are
registered for ABT purposes. We further conclude that Petitioner must pay ABT on its sales of
beer in its tasting room.
Facts
Petitioner is a New York State manufacturer of beer with a manufacturing facility in New
York City. Petitioner also subcontracts some of its manufacturing to facilities both in and out of
New York State. Petitioner’s entire product is sold to wholesalers, except for quantities that
Petitioner sells in its tasting room. Beer is sold by the glass or by the growler in the tasting
room.
Analysis
Tax Law § 424 imposes the ABT on alcoholic beverages, including beer, for sale or use
within the State, unless otherwise exempt. New York City also imposes an excise tax on beer
and liquor pursuant to the authority of Tax Law § 445 that is administered and collected by the
Department in like manner as the ABT. See NYC Admin. Code § 11-2056. The ABT and NYC
excise tax are imposed on distributors and non-commercial importers. For purposes of these
taxes, “distributor” includes “any such person who produces, distills, manufactures, brews,
compounds, mixes or ferments any such alcoholic beverages within this state for sale.” See Tax
Law § 420(4)(a). Petitioner, as a manufacturer of beer, qualifies as a distributor for purposes of
the ABT and NYC local tax and must pay tax on sales or uses of beer in the State and NYC, as
applicable, unless an exemption applies.
Sales of alcoholic beverages between registered distributors are exempt from the ABT
provided those distributors are registered with the Department pursuant to Tax Law § 421. See
Tax Law § 424(1)(g); TB-AB-245; Form MT-50-I. Accordingly, Petitioner may sell beer

-2-

TSB-A-20(2)M
Alcoholic Beverage Tax
June 9, 2020

exempt from the ABT and NYC local tax to another distributor within the State or NYC, as
applicable, provided that both Petitioner and the purchasing distributor are registered pursuant to
Tax Law § 421. The beer so sold will be subject to tax in the hands of the purchaser in the same
manner as if the purchaser sold or produced the alcoholic beverage. See Tax Law § 424(1)(g).
Petitioner must pay the ABT tax on beer that is sold by the glass or growler in the tasting
room. See Tax Law § 424. However, alcoholic beverages furnished by a licensed producer at no
charge to a customer or prospective customer at a tasting held in accordance with Alcoholic
Beverage Control (ABC) Law for consumption at such tasting are not subject to the ABT. If
Petitioner offers tastings that comply with the ABC Law, and the samples are provided free of
charge for consumption at the tasting, the beer provided at those tastings is not subject to the
ABT. See Tax Law § 424(6).
DATED: June 9, 2020
/S/
DEBORAH R. LIEBMAN
Deputy Counsel

Note:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set
forth therein and is binding on the Department only with respect to the person or entity to
whom it is issued and only if the person or entity fully and accurately describes all relevant
facts. An Advisory Opinion is based on the law, regulations, and Department policies in
effect as of the date the Opinion is issued or for the specific time period at issue in the
Opinion. The information provided in this document does not cover every situation and is
not intended to replace the law or change its meaning.