Alcohol Taxes on Beer, Wine, & Spirits (Liquor): Federal & State

Governments collect excise taxes on alcohol beverages. That is, on beer, wine, and distilled spirits. (Spirits are vodka, gin, tequila, rum, whiskey, etc.) Both the federal government and state governments impose alcohol taxes. In addition, local governments do so as well.

            Overview

I.   Background

II.  Federal Alcohol Excise              Taxes

III. Additional Taxes by State

IV.  Alcohol Tax Facts

V.   Resources

Alcohol taxes at the federal, state, and local levels adds greatly to the retail price of alcoholic beverages. Especially for distilled spirits.

I. Background: Alcohol Taxes. 

Producers, importers, wholesalers and, sometimes, retailers pay excise alcohol taxes. Of course, they pass these these alcohol taxes on to consumers through higher prices.

An excise tax is generally on a fixed quantity of alcoholic beverage. For example, on a gallon of beer regardless of price.

On the other hand, the sales price of an item determines the sales tax. And the tax usually includes most consumer items.

So the producers or others pay the excise tax. Therefore, it becomes part of the cost. Of course, it increases the price used to calculate sales taxes. That includes both state and local sales taxes. Thus, consumers pay sales taxes on the excise taxes.

II. Federal Excise Alcohol Taxes

The U.S. government collects these alcohol taxes per gallon.

alcohol taxesBeer…….$18.00 

Wine…….$1.07 to $3.40 depending on alcohol content.

Spirits……$13.50

The federal government collects about one billion dollars per month from excise alcohol taxes on spirits, beer, and wine. The taxes on spirits are much higher than those on beer or wine. Therefore, well over half of that tax money comes from spirits consumers.

For both health and safety, it’s important to know an important fact about beer, wine, and spirits. That fact is alcohol equivalence. It means that standard drinks of beer, wine, and spirits contain the same amount of alcohol. That is, six-tenths of one ounce of absolute or “pure” alcohol.

A standard drink is any of the following.

  • A 12-ounce can or bottle of regular beer.
  • A 5-ounce glass of dinner wine.
  • A shot of 80 proof spirits. A shot is one and one-half ounces.

In spite of this, the excise alcohol taxes on standard drinks of beer, wine, and spirits varies greatly. A consumer of a drink of spirits pays over three times the excise tax of a drink of wine. And the spirits drinker pays over two and one-half times the excise tax of the beer drinker.

Standard drinks have alcohol equivalence but certainly not tax equivalence.

III. Additional Alcohol Taxes by State

States and some counties or cities add excise alcohol taxes. They also add sales taxes on their excise taxes. These taxes appear by state.

Alabama

The state of Alabama has a government monopoly over the sale of spirits beverages. Thus government makes all decisions about the stores. This includes the hours of operation, the brands, the prices, and the locations of the stores. Consequently, customers have little choice.

To beer, it adds an excise tax of 53 cents per gallon plus 52 cents state-wide local excise tax. The state adds $1.70 excise tax to wine. However, it’s $9.16 if the wine is over 16.5% alcohol.

Alabama has a state sales tax of 4%. The local sales tax averages 4.45%. Thus, the average sales tax is 8.45%. The state and local sales tax applies to all spirit, beer, and wine purchases.

Alaska

The state of Alaska adds an excise tax of $12.80 per gallon of spirits. Therefore, the total excise tax on spirits is $26.30 per gallon. It also adds an excise tax of $1.07 to beer and $2.50 to wine.

Alaskans are free of sales taxes. However, alcohol excise taxes recently went up about 150%

Arizona

Consumers in Arizona pay an additional excise tax on spirits of $3.00. That’s a total of $16.50 per gallon. On beer, it’s 16 cents and on wine it’s 84 cents.

All alcoholic beverages are subject to sales taxes. The statewide rate is 5.6%. In addition, the county rate may be up to 2.0% and the city rate up to 4.5%. Thus, the sales tax on alcohol can be as high as 12.1%.

Arkansas

The state of Arkanas adds an excise tax of $2.50 per gallon on spirits. The tax on beer is 23 cents and on wine it’s 75 cents.

Arkansas imposes a sales tax of 6.5%. Also, cities can tax 3.5% more. In addition, there’s a 14.0% on-premises tax for spirits drinks. It’s 10.0% for a beer or glass of wine.

Customers don’t know that nearly $4 of a $12 tax-inclusive cocktail in Little Rock is for sales taxes. Of course, that doesn’t incude the hidden excise taxes.

California

Customers in California pay an extra $3.30 a gallon excise tax. But if the spirit is over 50% alcohol, the tax doubles to $6.60. So the combined total is $16.80 or $20.10. For beer and wine the rate is 20 cents per gallon. However, for sparkling wine the rate is 30 cents.

All alcoholic beverages are subject to the general sales tax.  The statewide rate is 7.25%. That includes the local sales tax.

Colorado

The state of Colorado adds an excise tax of $2.28 cents per gallon of spirits. The rate for beer is eight cents and for wine it’s 28 cents.

Colorado collects general sales tax on all alcoholic beverages. The state sales tax rate is 2.9%. However, localities can raise the total to as high as 11.2%

Connecticut

The excise tax that Connecticutt adds to each gallon of spirits is $5.40. This raises the total excise tax to $18.90 in the state. The state adds 24 cents to that of beer and 72 cents to that of wine. However, if the wine is sparkling or over 21% alcohol, the added tax is $1.80 per gallon.

Connecticut adds a sales tax to all alcoholic beverages. The state rate is 6.35%. There are no local sales taxes.

Delaware

The state of Delaware adds an excise tax of $4.50 per gallon of spirits. That brings federal and state excise to $18.00. Delaware adds 26 cents to beer and and $1.63 to wine

The state of Delaware is free of sales taxes.

Florida

Consumers in Florida pay an additional $6.50 per gallon of spirits. If the beverage has over  55.78% alcohol, the added tax  is $9.53. That’s a combined excise tax of $20.00 or $23.03. Florida adds excise taxes of 48 cents to beer and $2.25 to wine.

However, if the wine is over 17.259% alcohol the added tax is $3.00. And if the wine is sparkling, the tax is $3.50.

Purchasers pay sales tax on all alcoholic beverages. The sales tax of Florida is 6.0%. In addition, eligible counties may impose two separate sales taxes on alcohol. First, hotels and motels can charge 2.0% for alcohol. Second, certain establishments can charge 1.0% on alcoholic beverages.

Georgia

The state and counties add an excise tax of $4.62 per gallon of spirits. They add 85 cents to beer and $2.34 to wine. However,  for wine over 14% alcohol, the added tax is $3.57.

Purchasers must pay sales taxe on all alcoholic beverages. Georgia’s state-wide sales tax is 4.0%. Yet local rates go up to 5.0%. So the total rate ranges from 4.0% to 9.0%.

In addition, Atlanta imposes an extra 3% sales tax on all spirits drinks sold in the city.

Hawaii

The state of Hawaii adds an excise tax of $5.98 per gallon of spirits. Thus, the federal and state total is $19.48. It adds 93 cents to beer. But if it’s draft beer, the added tax is 54 cents. To wine it adds a tax of $1.38. If the wine is sparkling, the addition is $2.12. For wine coolers, it’s 85 cents per gallon.

General sales tax applies to all alcoholic beverages. The state rate is 4.0%. County rates are up to 0.5%.

Idaho

Purchasers of spirits in Idaho must buy from government monopoly stores. The government mandates the number of stores and their locations. It determines the hours of operation, the brands sold, and their prices. The number of employees, and every other decision is by government.

The state adds an excise tax of 15 cents per gallon of low-alcohol beer. That is, up to 4% alcohol. For regular beer, the tax is 45 cents. For wine the rate is 45 cents.

In Idaho, all beverage alcohol is subject to sales tax. The state-wide rate is 6.0%. However, local sales taxes can bring the total to 8.5%.

Illinois

The state adds an $8.55 excise tax to to the federal tax. Thus, the combined excise tax is $22..05. Illinois adds 23.1 cents to beer. Chicago adds 29 cents more. And Cook County tacks on additional nine cents.

To wine, the state adds $1.39 per gallon, Chicago adds 36 cents, and Cook County adds 20 cents more. However, if the wine is over 20% alcohol, Illinois jumps its tax to $8.55. Chicago’s tax goes to 89 cents. And Cook County increases its to 45 cents.

All alcoholic beverages are subject to sales taxes. The state sales tax is 6.25%. However, localities can add their own sales taxes to that. And those can be up to 4.75. Thus, the combined rate can be up to 11.0%

Indiana

Purchasers of spirits in Indiana have to pay a state excise tax of $2.68 per gallon. For beer, they pay an extra 11 and one-half cents. And for wine, the pay an extra 47 cents. But if the wine has over 21% alcohol, the extra tax jumps to $2.68.

Beer, wine, and spirits are all subject to sales tax. It’s 7% in Indiana. There are no additional local taxes.

Iowa

Customers in Iowa must buy spirits at government monopoly stores. The government mandates how many stores to have and their locations. It decides which brands to sell and how much to charge. And it decides the level of service to provide.

The state adds an excise tax of 19 cents per gallon of beer and $1.75 per gallon of wine.

All alcoholiv beverages in Iowa are subject to sales tax. The state sales tax rate in Iowa is 6.0%. Local taxes are generally 1.0%. Thus, the typical sales tax is 7.0%.

Kansas

The state adds an excise tax of $2.50 per gallon of spirits. To beer it adds 18 cents and to wine it adds 30 cents. However, if the wine is over 14% alcohol, the tax jumps to 75 cents.

Kansas adds a retail tax of 8% for off-premises consumption of either spirits or beer. It’s 10% for on-premises consumption. For wine, it’s also 8% for off-premises. But it’s 11% for on-premises consumption.

Kentucky

In Kentucky, the state adds a $1.92 excise tax per gallon of spirits. It adds eight cents per gallon of beer and 50 cents per gallon of wine.

Also, there’s an 11% wholesale tax on spirits. The wholesale tax on beer and wine is 10.5%.

In addition, all alcoholic beverages are subject to sales tax. That’s 6% in Kentucky. And the state is free of local sales taxes .

Louisiana

The state of Louisiana adds an excise tax of $3.03 per gallon of spirits. It adds 40 cents to beer and 76 cents to wine. However, if the wine is 14% to 24% alcohol, the added tax jumps to $1.32. And if it’s either above 24% or is sparkling wine, the added tax goes to $2.08 per gallon.

Beer, wine, and spirits are all subject to sales tax. Statewide, that tax is 4.45%. Hower, local sales taxes tend to at least double the total sales tax. In fact, it is as high as 11.45%

Maine

alcohol taxesCustomers in Maine must buy their spirits from a government monopoly store. Also, they must buy any any wine over 15.5% alcohol from the monopoly. The government dictates how many stores to make available. It mandates the brands to offer and the prices. Government decides the level of service it’s willing to provide the public.

On beer, the the state requires vends to add a 35 cent excise tax per gallon. And on wine, they must add a tax of 60 cents. However, if the wine is sparkling, they must add a $1.25 excise tax.

Also, all alcoholic beverages are subject to the general sales tax. In Maine, it’s 5.5%. And there are no local sales taxes. However, there’s a 7% on-premises sales tax for beer and wine.

Maryland

alcohol taxesIn Maryland, the state adds a $1.50 excise tax per gallon of spirits. On every gallon it adds nine cents to beer and 40 cents to wine.

In addition, beer, wine, and spirits are all subject to a 9% sales tax.

Massachusetts

alcohol taxesThe state adds $4.05 to the federal excise tax. That brings the total excise tax to $17.55. It adds 11 cents to beer and 55 cents to wine. However, it adds 70 cents if the wine is sparkling. In every case, private clubs must add 57 cents per gallon to beer, wine, and spirits.

Beer and wine are subject to the state’s 6.25% sales tax.

Michigan

 alcohol taxesCustomers in Michigan must buy spirits from government monopoly stores. Thus, government mandates the number of stores and their locations. It dictates which brands to offer and at what prices. And it decides what level of service it will provide.

The state adds an extra excise tax of 20 cents per gallon of beer. It adds 51 cents on that of wine. However, if the wine is over 16% alcohol, the added tax is 76 cents.

All alcoholic beverages are subject to the state’s 6.875% sales tax. Local sales taxes can can charge up to 1% additional sales tax. Thus, the total can be 7.875%.

Minnesota

alcohol taxesIn Minnesota, the state adds an excise tax of $5.03 to the federal tax of $13.50. Thus, the total excise tax is $18.53. For beer, the addition is 15 cents per gallon. And for wine the added tax is 30 cents. However, for wine 14% to 21% alcohol, the added tax is 95 cents.  Over 21% alcohol to 24%, and for sparkling wine, the rate is $2.08. If the wine is over 24%, the added tax jumps to $3.52.

Beer, wine, and spirits are all taxed at the rate of 9%. Also, there’s a small fee per bottle. (The general sales tax ranges from 6.875% to  8.875%.)

Mississippi

 alcohol taxesPurchasers in Mississippi must buy spirits from government monopoly stores. Therefore, the government decides which brands to sell and at what prices. It determines how many stores to have and where they’re located. And it decides the level of servive that it provides.

The state adds an extra excise tax of 42.68 cents per gallon of beer. And it adds 35 cents to wine. However, if the wine is sparkling, the added tax jumps to $1.00.

All alcoholic beverages are subject to sales tax. The state rate is 7%. Local rates can be up to 1%. Therefore, the total rate is usually 8%.

Missouri

alcohol taxesThe state of Missouri adds an extra $2.00 to the federal excise tax per gallon of spirits. It adds 6 cents to that of beer and 42 cents for that of wine.

Beer, wine, and spirits are subject to Missouri’s 4.225% sales tax. Local sales taxes usually raise that to around 7% to 9%. However, it can be as high as 10.350%.

Montana

 alcohol taxesIn Montana, purchasers must buy spirits at a government monopoly store. They must also buy any wine over 16% alcohol in a monopoly store. So it’s government that dictates the number of stores and their locations. It decides which brands to sell, the prices, and the service.

The state adds an extra 14 cents per gallon of beer. And it adds a extra tax of $1.02 on low-alcohol wine.

Montana is free of sales taxes.

Nebraska

alcohol taxesThe state of Nebraska adds another $3.75 excise tax per gallon of spirits. It adds 31 cents per gallon to beer. And it adds 95 cents to that of wine. However, if the wine has over 14% alcohol, the extra tax is $1.35.

Nebraska is free of sales taxes.

Nevada

alcohol taxesIn Nevada, the state adds an extra $3.60 excise tax to that of the federal government. It adds an extra 16 cents to beer. And to wine, it tacks on an extra 70 cents. But if the wine has alcohol of 14% to 22%, the tax rises to $1.30. And if it’s over 22%, the tax jumps to $3.60.

Beer, wine, and spirits are subject to the state sales tax. That rate is 6.85%. However, local taxes can raise it to 8.265%.

New Hampshire

alcohol taxesCustomers in New Hampshire must buy spirits in a government monopoly store. Therefore, customers have little choice. Government decides how many brands to offer, which brands, and the prices. It determines the number of stores, their locations, and their hours.

The state adds an extra 30 cents excise tax per gallon to beer. And to wine it adds an extra 20 cents.

However, alcoholic beverages are not subject to any sales taxes. That’s because New Hampshire is free of them.

New Jersey

 alcohol taxesThe state adds an extra $5.50 excise tax to spirits. Thus, the total excise tax is $18.50. It adds 12 cents to beer and 87.5 cents to wine.

All beer, wine, and spirits are subject to sales tax. That rate is 6.625%. New Jersey is free of local sales taxes.

New Mexico

alcohol taxesIn New Mexico, the state charges an excise tax of $6.06 to that of the federal tax. This brings the total excise tax to $19.56. The state also adds excise taxes of 41 cents to beer and $1.70 to wine.

All alcoholic beverages are subject to sales taxes. The state tax is 5.125%. However, local sales taxes can increase the total to 9.0625%. In addition, the state imposes a gross receips tax on businesses. Of course, businesses pass that tax on to purchasers.

New York

alcohol taxesThe state of New York adds an extra $6.44 excise tax per gallon of spirits. And to that the city of New York adds another $1.00. So the total excise tax in New York City is $20.94. The state adds 14 cents to that of beer. In addition, the city tacks on 12 cents more. And the state adds 30 cents to that of wine.

All spirits, wine, and beer is subject to sales taxes. The state tax is 4%. However, local taxes can be as high as 4.75%. Thus, the total sales tax can be 8.75%. And it often is.

North Carolina

alcohol taxesCustomers in North Carolina must buy spirits at government monopoly stores. That is, in those areas that are not dry. And government decides how many stores, their locations, and their hours. It decides the brands to sell and their prices. Of course, government also decides the level of service.

To beer, the state adds an extra excise tax of 61.71 cents per gallon. And to wine it adds an extra $1.00. However, if it’s over 17% alcohol, the added tax is $1.11.

Beer and wine are subject to the general sales tax. The state’s rate is 4.75%. Yet local taxes can raise the total to 7.5%. But on average the rate is 6.75% to 7%. The tax for spirits is for on-premises sales.

North Dakota

 alcohol taxesIn North Dakota, the state adds an extra excise tax of $2.50 per gallon of spirits. To beer it adds 16 cents and to wine it adds 50 cents per gallon. If the wine is over 17% alcohol, the  tax is 60 cents.

The state’s sales tax of 5% does not apply to alcohol beverages. Instead, North Dakota imposes a sales tax of 7% on all such beverages.

Ohio

alcohol taxesCustomers in Ohio must buy spirits at government monopoly stores. This means customers have little choice. Government decides if the stores are convenient, what brands to sell, and at what price. If they don’t like the stores, they must travel to a nearby state.

To beer the state adds an extra excise tax of 18 cents per gallon. For wine the added tax is 32 cents. But for wine with alcohol from over 14% to 21% alcohol, the tax jumps to $1.00. For vermouth, it’s $1.10. And for sparkling wine, it’s $1.50.

Wine, spirits, and beer are subject to sales taxes. The state rate is 5.75%. But local rates can be 2.25%. Thus, the tax can beas high as 8%.

Oklahoma

 alcohol taxesThe state adds an extra excise tax of $5.56 per gallon to spirits. That brings the total federal-state excise tax to $19.06. It also adds an extra 40 cents to beer. And to wine it adds 72 cents. But if it is sparkling, the tax jumps to $2.08.

All alcohol beverages are subject to sales tax. The state tax is 4.5%. However, local sales taxes can add up to 5% to that. That is, 9.5%. However, most localities add about 3% to 4%. Also, there is a 13.5% tax for on-premises consumption of any alcoholic beverage.

Oregon

alcohol taxesIn Oregon, customers must buy spirits at a government monopoly store. Government decides how many stores, their locations, and their hours. Also it decides what brands to sell and at what prices. Customers have little choice. If they don’t like selection, prices or service, they must go out of state to buy.

On beer, the state adds another excise tax of 8 cents per gallon. On wine, the increase is 67 cents. But if has over 14% alcohol, the added tax is 77 cents.

Oregon is free of any sales taxes.

Pennsylvania

alcohol taxesBoth beer and spirits customers must buy their beverages from a government monopoly store. The state acknowledges that its stores have lacked variety and good service. In response to threats to privatize them, monopoly stores have improved greatly.

Customers buy beer elsewhere. Pennsylvania adds an extra excise tax of 8 cents per gallon of beer.

All alcohol beverages are subject to sales taxes. The state rate is 6%. Counties may add up to a 1% sales tax. However, Philadelphia has an 8% sales tax. And customers pay sales taxes on all their purchases at monopoly stores.

Rhode Island

alcohol taxesThe state adds an excise tax of $5.40 per gallon of spirits. Thus, the total excise tax is $18.90. It also adds 11 cents to beer plus a small wholesale tax. And it adds $1.40 to wine. If the wine is sparkling, it adds an extra 75 cents.

Alcohol beverages are all subject to the state sales tax of 7%.

South Carolina

alcohol taxesIn South Carolina, the state adds an extra $2.72 excise tax per gallon of spirits. Also, it adds a tax of $$5.36 per case  and a 9% surtax. Of course, vendors pass these on to the customer in higher prices.

The state adds an excise tax of 77 cents per gallon of beer and 90 cents on wine.

Beer, spirits, and wine are all subject to sales/use taxes. The statewide tax is 6%. Counties can add a 1% sales tax. And there can be other taxes. For example, in Charleston, a mixed drink is subject to 16% in taxes. The 6% state tax, a 3% county tax, a 2% hospitality tax, and a 5% state on-premises tax. The on-premises tax does not apply to beer or wine.

South Dakota

 alcohol taxesThe state of South Dakota adds an excise tax of $3.93 to each gallon of spirits. It adds 27 cents to beer and 93 cents to wine. But if the wine is 14% to 20%, the added tax is $1.45. And if it’s either over 21% alcohol or sparkling, it’s $2.07 more.

There’s also a 2% wholesale tax on both spirits and wine. Naturally, these are past on to customers.

All alcoholic beverages are subject to sales taxes. The state rate in South Dakota is 4.5%. Local sales taxes can add another 3% to that, or 7.5%. However, most areas of the state have a rate of 6.5%

Tennessee

alcohol taxesIn Tennessee, the state adds an excise tax of $4.40 to the federal rate on spirits. Thus, the total excise tax is $17.90 per gallon. To beer it adds $1.29. And to wine it adds $1.21.

Spirits, wine, and beer are subject to sales taxes. The state tax is 7%. Because of local taxes, the rate in Tennessee ranges from 8.5% and 9.75%.

Also, the state imposes a 15% on-premises tax for wine and spirits.

Texas

alcohol taxesThe state adds an extra excise tax of $2.40 on each gallon of spirits. It adds 19.4 cents to beer. And it adds 20.4 cents to wine. But if the wine is over 14% alcohol or sparkling, the added excise is 40.8%.

All alcohol beverages are subject to sales taxes. The Texas sales/use tax is 6.25%. But local taxes can add up to 2%, for a total of 8.25.

Texas imposes a 14.95% on-premises tax for all alcohol beverages. Also, a 5 cents per drink tax on airlines.

Utah

 alcohol taxesCustomers wanting alcohol beverages must buy them at government monopoly stores. (Only “near beer” of 3.2% alcohol or lower is available elsewhere.) Obviously, government makes all decisions about its stores. Their number, locations, and hours. Perhaps more important, it decides the brands to sell and their prices.

Beer, spirits, and wine are subject to Utah sales taxes. The state rate is 4.7%. But local taxes can be as high as 4%. This means the total rate can be 8.7%. However, in most areas the rate is 7.1%

Vermont

 alcohol taxesAnyone wanting to buy spirits or wine over 16% alcohol must get it from a government monopoly store. Government dictates which brands to stock and greatly limits the selection. It also decides the number of stores, their locations, and hours.

Vermont adds an extra excise tax of 26.5 cents per gallon of beer. But if it’s over 6% alcohol, the extra tax is 55 cents. On wine 16% or less alcohol, the added tax is 55 cents.

Beer and wine are subject to Vermont sales taxes. The state sales tax is 6%. Local sales taxes can bring the total to 7%.

The tax on any alcohol beverage served on-premises is 10%

Virginia

 alcohol taxesCustomers wanting to buy spirits must do so from a government monopoly store. Therefore, the government makes all decisions about the stores. That includes store locations, hours, and prices. It also limits the brands for sale. As a result, customers have little choice.

Virginia adds an extra excise tax of 25.65 cents per gallon of wine. It adds $1.51 to wine. However, if it contains over 14% alcohol it’s only available from a monopoly store.

Any alcohol beverage bought in Virginia is subject to sales taxes. The state charges 4.3%. But localities can collect up to 2.7%. Thus, the total can be 7%.

Washington

alcohol taxesThe state adds $14.27 to the federal excise tax per gallon. That raises the total excise tax to $27.77. It adds 26 cents to beer and 87 cents to wine. But if the wine has over 14% alcohol, the tax jumps to $1.72 per gallon.

When bought by the bottle, the sales tax on spirits is 20.5%. But when bought by the glass, the tax is 13.7%. Wine and beer are subject to the standard sales taxes in Washington.

The general sales tax in Washington is 6.5%. County rates can be 2.5%. And the citiy rate can be 3.9%. A special rate can be up to 3.8%.

West Virginia

alcohol taxesIn West Virginia, spirits must be bought at government monopoly stores. The temperance orientation of the state influences its government stores. This is obvious in the selection and pricing of alcohol.

West Virginia adds an extra 18 cents excise tax per gallon of beer. And it adds $1.00 per gallon of wine.

All spirits, wine, and beer are subject to sales taxes. The state rate is 6%. Localities can add up to 1% more. Wine also has an added 5% sales tax.

Wisconsin

 alcohol taxesIn Wisconsin, the state adds an excise tax of $3.25 per gallon to that of the federal tax. It adds an extra 6 cents to that of beer. And it adds 25 cents to that of wine. But if the wine is over 14% alcohol, it’s 45 cents.

Alcohol beverages are subject to sales taxes. The state tax is 5%. Local sales taxes can add .6% to that. So the highest rate is 5.6%.

Wyoming

alcohol taxesCustomers in Wyoming must buy all wine and spirits at government monopoly stores. So government dictates the number of stores, their locations, and the brands sold. Also, the prices and level of service offered. Obviously, customers have very little choice.

Wyoming adds a 2 cent excise tax to beer. And all alcohol beverages are subject to sales taxes. The state sales tax is 4%. Localities can add up to 2% to that. Nevertheless, the typical sales tax in Wyoming is 5%.

District of Columbia

 alcohol taxesThe District adds an extra excise tax of $1.50 per gallon to spirits. It adds 9 cents to that of beer. And it adds 30 cents to that of wine. But if the wine over 14% alcohol, the tax is 40 cents. And for sparkling wine it’s 45 cents.

All wine, beer, and spirits are subject to a 10.25% sales tax.

IV. Facts

  • Alcohol taxes are highly regressive. That is, they put a much heavier burden on lower than higher-income people. Most people think this is unfair.
  • In addition, the excise tax increases the mark-up added by the wholesaler. That is, the wholesaler increases profits because of the mark-up on the tax itself. The same thing happens at the retail level. Thus consumers pay the excise tax along with the two mark-ups on the tax itself.alcohol taxes 
  • Over half the cost of spirits is from taxes.
  • Alcoholic beverages are largely inelastic. That is, they don’t respond much to price changes.
  • Alcohol taxes don’t lower consumption or abuse of alcohol. For example, they don’t reduce underage consumption. (Most underage drinkers don’t buy their alcohol.) And they don’t reduce DUI or traffic crashes.
  • Politicians sometimes refer to alcohol taxes as “sin taxes.” However, drinking beer, wine, or spirits in moderation increases health and length of life. On the other hand, abstaining from alcohol is a health risk.
  • About 40% of the cost of a beer is fromalcohol taxes.
  • Differences in alcohol taxes between states or localities often leads consumers to cross state or county lines. This benefits places with lower taxes. Also, people often buy other products. This magnifies the economic benefits to lower tax areas.
  • Congress imposed an excise tax on beer in 1862 to help pay for the Civil War (1861-1865).

V. Resources

“Sin Taxes” on Alcoholic Beverages.

Do Alcohol Excise Taxes Reduce Motor Vehicle Fatalities? Evidence from Two Illinois Tax Increases.

Taxes and Prohibition: Taxes and Repeal (Effects of Tax Revenue & Its Sources on Prohibition & Repeal).  

Burman, L. and Slemrod, J. Taxes in America. What Everyone Needs to Know. Oxford: Oxford U. Press, 2013.

Slemrod, J. and Bakija. Taxing Ourselves. A Citizen’s Guide to the Debate Over Taxes. Cambridge, MA: MIT Press, 2017.