Traverse City Record-Eagle

Business

March 19, 2014

Distillers say it’s time to reform taxes

TRAVERSE CITY — Kent Rabish loves making vodka, whiskey and rum in Michigan. He wouldn’t have it any other way.

The Grand Traverse Distillery owner does see room for improvement in the state’s business climate for distilleries, though. Rabish and other distillers said the state’s tax rate on liquor makers is oppressive, and limits new business start-ups and expansions in the fledgling industry.

“If we could have anywhere near the (tax) reductions similar to what beer and wine makers (get), it would make a significant impact,” Rabish said. “It would mean higher profits per bottle, and that money would go back into production for future sales.”

Rabish isn’t alone in that opinion. An executive with the American Distilling Institute in California described Michigan’s tax rate on hard alcohol makers as “archaic.” And Mark Moseler, co-owner of Northern Latitudes Distillery on M-204 in Leelanau County, said the state has done an exceptional job in fine-tuning licensing for small distillers, but the state tax on liquor manufacturers is onerous and is “inhibiting growth.”

“We are the highest tax commodity other than cigarettes,” Moseler said. “If you figured it on micro distilleries (Michigan is) probably number one or number two in the nation.”

Matt Moersch, distiller at the The Round Barn Winery, Distillery, and Brewery in Baroda, said the taxes on hard liquor manufacturers impedes hiring more workers.

“It would give us a chance to be more competitive, and we would be able to make a little more on margins,” Moersch said of a rollback. “For us, it would go right back into production and packaging and hiring more people for growth. At this point, the margin is a lot less, and it limits what we can sell.”

The suggested retail price for a bottle of Grand Traverse Distillery’s True North vodka runs around $30 in local stores. A huge chunk of the price, about $14 -- or 47 percent of it -- goes to the state of Michigan. The federal government collects a sin tax of about $2.14 a bottle.

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