Shelton Brothers issue statement regarding New York's repeal of beer tax and fee exemptions

It was still unfair before. Their motives for challenging it may be less sympathetic for you, but who cares? The law was found unconstitutional. And, to be fair, they want the fees to be removed for everyone, they just find the griping about the result to be ridiculous.

You should read up on the Supremacy Clause (Article VI) and pre-emption to have a better understanding of the matter.

"This Constitution, and the Laws of the United States . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the Constitution or Laws of any State to the Contrary notwithstanding."

This stuff is complicated, thats why even the allegedly greatest legal minds in the world routinely split 5-4 votes on what the Constitution actually says. . .

But I do genuinely like your critical thinking skills, too few people dare ask questions about the actual text in the Constitution.

The response started out nice, but turned to poo. Whoever wrote it started to whine him/herself, and tried to shift the blame and attention to Brooklyn and New York State. The Beer Taxes part was a reversal of an explanation, and more of a spotlight onto the reactions of NY brewers. What other reactions were there? What are some other possibilities? I guess they don't care, or know.

They make up 0% of the market share in NY: why are they in there? Especially if they're paying $20k. But that also means the possibility of local (NY) brewers make up more % of the market. As someone stated earlier, this law effectively protected small, local businesses for external giants (even though ShBrs may not represent one, but collectively essentially they are). It opens the door wider to InBev/AB, Coors, Heineken, etc.

"....really tiny (importers) like us..." You aren't that small.

And they doubt New Yorkers will see the raise in price? Ha! Yes they will. The most common complaint I get in CO about local/CO beer prices is that they aren't cheaper than out of state (some are, some aren't. But the consumer WILL notice). Even at the same price the consumer will ask, "it's made just down the street, why is it so expensive?" And they'll go for an out-of-state beer b/c of the novelty and out of spite.

Really, it's clear?? Certain?

Bottom line, they should rethink their responses

A sudden imposition of a new tax on brewers is going to trickle down to the consumer or have an impact on the bottom line of the brewer, one or the other. Not sure what's so speculative about that, the money's coming out of someone's pockets. Perhaps you'd have some issue if similar happened to your local breweries.

Such a welcoming board. Feel free to continue berating me, I'll take a hint.

To be clear, here's my original post:

They're motives might matter to me, but only in an emotional/moral sense.

I never said the original law was fair. I simply said it undermines the emotional appeal of their position somewhat to say that the law was really hard on them. These are some of their quotes from the article: "That’s why we pushed to have the brand registration system, with its onerous fees, eliminated outright . . . Basically, it’s a hideously regressive tax . . . There are plenty of ways to help in-state small brewers that don't involve totally screwing out-of-state small brewers."

But later, they say: "The . . . brewers . . . just have to factor this new cost into their pricing – as the rest of us have had to do all along . . . In reality, the state tax will add less than two cents to the cost of a pint of beer (the NYC tax that only applies to sales in that municipality is even less), and those costs will be passed along with scarcely any notice by the consumer . . . Clearly, the New York brewers' world is not going to fall apart if they are made to pay taxes like the rest of us."

Taken together, these statements seem to lack something in the even-handedness department.

I'm not really clear what you're getting at. You almost seem to be conflating something being "constitutional" and it being "[morally] right"; but, it's reasonable to understand the former while denying the latter.

Berating you? Bro, this is friendly for me!

My local breweries? I'm also notorious for not supporting them too! Read my reviews of Nevada breweries why don't you . . . I support CA, OR, WI, MI . . . well, there's about 90% of my consumption.

Now on to your theory:
I agree, it will have an impact like you said, just like calls to "tax the rich" in this election cycle. But I doubt everyone who supports local beers in NY is also against raising taxes on the rich a la the Buffett rule on the same basis that you laid out?

But ultimately, there is a difference between "impact" (now) and "damage" (previous post).

This new tax, applied without geographical nepotism, is pretty close to negligible in my opinion, so I don't believe there will be "damage" from it. Impact yes, a neglible impact. Damage, doubtful. Why would one brewery fail in NY, while another succeeds, if they're both paying the same tax at issue here? Because of other factors not attributable to this tax I would guess.

I don't understand how that's having it both ways. They say that the fees are high, I believe they're the highest in the country so that's true, and that they impact their business in an especially large way. That's why they went after it legally to try to get the same exemption in-state businesses got. After it turned out that NY would rather have the revenue from in-state breweries than exempt everyone, they told the in-state breweries who whined about it that they're now in the same competitive environment as everyone else and to deal with it. They additionally said that the in-state breweries have the option of attempting to get the law changed.

I completely fail to see how that contradicts. I also completely fail to see where the moral issue is here. Are you saying Shelton did something immoral?

^^^
People want directed outcomes, not fair process or equal treatment more and more these days.

I find it funny that Shelton is complaining about having to pay 20K in registration fees because SB is "ridiculously small", but the fee is $150/label so the 20K meant they were registering over 130 labels in NY.

I'd be interested in hearing the rational basis for charging $150 per label. . .(as opposed to by volume).

One distributor/brewery sells 10,000 bbls of said beer= $150
One distributor/brewery sells 1 bottle of said beer = $150

NY progressives and fans of progressive tax structure should be outraged, no? Especially considering the "diversity" of options this constrains?

Another reason I can see why Shelton is affected by something like this more than other breweries...look at a NY brewery like Southern Tier. Say that on the high side, they produce 20 different beers in a year. Shelton probably imports that many IPAs from Mikkeller, just one of the many breweries they import and distribute. There is a sheer quantity of labels that they have to pay for in comparison to other breweries, which absolutely destroys them in comparison to others.

I'm just guessing but, there's probably other taxes that apply to sales by volume (sales tax at least, and maybe more I don't know about). This is just a fee that each product has to pay. Here in WA each beer has to be registered with the state before you can sell the beer, IDK if there's a fee involved in the registration process. I don't have a problem with the state giving the small, local producers a break, that's what a local government is supposed to do, look out for the locals.

I don't know if it's still true, but when I lived in NYS, there was legislation that allowed NY produced wines to be sold in grocery stores, while all other wines could be only sold in liquor stores. It may have been a limited time, or temporary thing, I've been gone from NY for 12 years now, so IDK if that is still true or not.

If I remember correctly didn't ny give label approval for those xmas beers before the lawsuit came about? Thus making his lawsuit unecessary and just about sour grapes and media attention for his brands while selfishly trying to lower his owm costs. Now that his actions bring about more taxes for others, I find the hand washing here an insult to ny brewers. Imo, he should take responsibility for his actions - even if the consequences were unintended.

Why don't you support treating people equally?

Furthermore, I don't think the product has to pay anything, I believe the people who distribute the product do. Since 12 years ago, that practice (discrimination in-state/out of) has been held to be unconstitutional with some exceptions (baitfish!). . . which actually, now that I think about it, the unique natural resource exemption, could be argued to apply here, I don't buy it, but that's not the point, its a legitimate position to take is what I'm saying. . . hmmm.

I guess I ponder the overall impact in NYS given the explosion of craft beer. We have many of these high taxes and label fees in Pennsylvania and Philadelphia is the Mecca of beer as far as selection. I think we have covered the Constitution and interstate commerce in depth as well as how the Sheltons never intended for this to happen. Here's a point to consider: with a budget hole as big as they see in Albany, this was bound to happen. (Igrew up in Binghamton btw)

I do support treating people equally. Companies are not people. I don't think it's wrong to keep an eye on your neighbors welfare. The government is comprised of, and (theoretically at least) represents us. There's nothing wrong with giving your neighbor a little edge over out-of-state competitors. If Mr. Shelton wants to bring 500 different brands into the state, why should he not have to pay for each one? He's making his off of each one. I could see perhaps changing to a per-brewery fee, instead of a per beer fee, that might be a bit more fair. And yes, it's whoever brings the beer into the state that has to pay the registration fee. If a brewery self-distributes they pay it, if a distributor brings it in, they pay it.

Entirely correct. Screw the "consitutionally and legally correct" arguments. As is often the case, it was a dickish and childish thing for the Shelton Brothers to do. Over some useless gimmick beers.

Yup. That too.

Screw the sheltons and their overpriced ticker-bait beers.

not sure it took me 8 minutes, principals are one thing, but great beer cannot be replaced. I actually had a Miller Lite today on the golf course because my playing partner bought too many, I'd rather pay the taxes myself than drink that again!

The intriguing thing I find about this system is it treats imports from an out of state distributor to be in the same category as a beer brewed in a state. I understand that States can't levy tariffs against other states. But why not distinguish between products manufactured in the US versus imports? Levelling the playing field means a flood of cheap imports can get an unfair advantage against homegrown products? Our beer distrubution system is ridiculous. I support our locals. I love the products the Sheltons bring in. But I mostly buy American and local craft brews (most of my consumption I brew myself). I think I see the light now. The Sheltons should have stuck to the First Amendment issue with the labels.

I think there are two points Mr. G.O. is talking about

1. the personal 'attack' on him by Shelton and the exposure of a private message. Kind of a cheesy move on Shelton's part. No need for it to make his point; but needed to spotlight G.O.
2. Sure, it effects the bottom line, but the 'treating everyone equally' is not entirely accurate, as when you mix/exchange % for $ especially when the actors are not exactly equal

I hate to agree with a Yankee fan.

OK, lemme find a disagreement point. Other than Cantillion... I don't love the products the Sheltons import. Let's keep in mind here- the "beers" that prompted this LAWSUIT pursued by the Sheltons are a bunch of asinine gimmick beers that have no value whatsoever other than childish amusement. What, was it "Santa's Butt" that really prompted a lawsuit? "Pickled Santa"? Maybe it was "Reindeer Droppings"?

The people defending the Sheltons... THOSE are the beers you are going to bat for.

Reindeer Droppings.

So does this effect High and Mighty or just the beer that Shelton distributes?

I view the Sheltons actions with skepticism, as they are known d-bags.

Lawsuit was self -serving as they knew they had legal grounds to force the state of NY 's hands. They deserve all the hate directed towards them.

Its really a non -issue for me to boycott Shelton...I was done ticking their beers in 2004 )

Concerned you can't get Beer of the Gods @ DE or LH any time soon? ) Recommend an avoidance of this crappy brand too.

Not directly. If Shelton won based on their first goal (get rid of all fees), then yes, this point would be totally true. But as it is, everyone will be charged the "same" fee, even the cheap imports. The field wasn't lowered, it was raised to be level.
Indirectly, however, the locals will raise their prices. My magic 8-ball sees cheap imports as no big deal more so than they are now. But the pricier imports will be closer in price to the locals.

I've never said that it contradicts. I've never said they are "having it both ways." And I've never said they are doing anything "immoral." You're arguing against something I never said.

I do not think they did anything immoral. When I say "moral" or "emotional," I'm just referring to the non-legal side of things. If what I'm referring to isn't clear, I'm just not sure what else can be said/how else I can say it.

And I'm not saying that it is explicitly contradictory in a factual, objective sense.

Instead, I think that their statement loses "emotional" appeal when it calls the fees "onerous," yet says the newly-exposed brewers are overreacting and the fees are no big deal. If those comments are referencing the application to them, then it makes sense, i.e. it's not contradictory. But I take 2 issues even with that: 1) I don't think they made it clear enough in the statement; and 2) It's the nature of their business that causes them to have more brands. Even with everyone paying the fee, they still have to pay more fees overall and more as a % of their sales.

Basically, I think it makes them look worse than it could if the statement were better-written. That doesn't detract from the dry fact that they were absolutely correct about the law being unconstitutional, and it doesn't detract that their legal argument also appealed to fairness [at least in some ways]. But to me, the above-referenced parts of their statement make them, say, a less lovable hero.

Incidentally, I'm not really arguing against you, I just don't think you're being coherent.

I wrote out a lot of stuff but then realized that I've said it all before and if you don't agree with me then whatever. I think Shelton did nothing wrong and don't really care if other people think they did.

I did say they can't have it both ways; my bad. And "moral" was admittedly a bad word choice, you are right; I was just trying to further explicate my use of the word "emotional," since it wasn't being understood as I intended.

Again, I don't think they did anything wrong; I just don't find them entirely sympathetic, nor do I find them as sympathetic as they could be because of how they wrote the statement, as I [at least attempt to] express above.

Let's just hope that the NY legislature figures out the math and reinstates the tax breaks so that 1) they bring in the same revenue as before and 2) they apply equally to ALL small brewers and labels. If before they didn't tax the first 200K bbls for in-state breweries, perhaps in the future they can refrain from taxing the first 50K bbls for anyone. That would only hurt the bigger craft breweries in NY, and would be a major help to an exponentially greater number of genuine micros.

Not that long ago this same forum was praising Jester King Brewery out of Texas for going up against the state of Texas and winning. This is exactly the same situation with different results. Shelton's intent was to remove or at least level the playing field when it came to "brand registration "fees. The state of New York took it upon themselves to remove the small brewer exemption, not Shelton Brothers.

Heh, and then Shelton Bros sues because they import 20,30,whatever breweries?

In terms of sheer numbers, Brooklyn has quoted that this will cost them over $500k a year in additional expenses, and Captain Lawrence has said it's anticipating over $100k. Luckily, those guys have the financial security to overcome and high enough demand that a small price bump to consumers won't hurt them.

The real tragedy of this is with small nanobreweries in NY. Barrier Brewing in Oceanside brews single-batch beers 31 gallons at a time. The diversity and uniqueness of their product line is the entire purpose of their company. Last year, they brewed over 40 different types of beer, which in 2012 will cost them $6,000+ just for application fees, not to mention the extra $4-8 bucks per barrel. That's a huge financial setback for a small, two-man business with barely any fat to trim. They'll have to rethink their entire business strategy and undermine their own mission statement to overcome this.

And their beers don't cross state lines, so this application fee becomes mandatory for the PRODUCTION of beer, whereas with Shelton Brothers, it's only being taxed on beers that they decide to DISTRIBUTE in NY. If they don't project enough profit to make it worthwhile, they have the option of pulling their distribution and going elsewhere. I think that's the unfair level of this that people seem to be missing. Out of state breweries DECIDE to pay the fees. NY breweries are FORCED to pay it.

I think the fee is unfair for everyone and should be reconsidered, but it's far more imposing for local brewers, in my opinion.

The extra cost to Barrier, inclusive of taxes and registration fees, is about $20 per barrel ($6000 in fees and ~$5/bbl in tax over their ~400bbl annual production). On a per-growler basis, the additional taxes/fees are only $0.30. On a per pint basis, it's $0.08. Barrier can easily pass their costs on to their customers. Are Barrier's beer so cheap that their customers will even notice this price increase?

If Barrier and other brewing companies can't absorb this tiny cost increase, they should have started rethinking their business strategies long ago.

I say extend the tax exemption to all. Win / Win.

We pay 17$ per barrel (.55$) to the state of Vermont in excise taxes any beer over 6% abv sold out of our retail shop or via our distribution company. We pay .265$ per gallon on any beer under 6% abv sold out of our retail shop or via our distribution company.
The fact that New Yorkers didn't have to pay this tax beforehand was a very unique privilege. And, in fact, it is still less than we pay in Vermont.
A tax rate of 14 cents per gallon on all beer sold or used in New York State, and an additional tax of 12 cents on any beer sold in New York City... well... once again, it's still less than the tax rate in Vermont. Just trying to put things into perspective...
It isn't necessarily costing the breweries "money." They just need to raise the price of their beer by 26 cents a gallon... or 4$ per half barrel keg. That's 3 cents per 14oz glass of beer.

That's tacked onto the cost of production, and not taking into consideration the double taxation for anything they sell in NYC (which, for most NY breweries, is at least half their production). Maintaining steady markups from the brewery, to the distributor, to the retailer, things grow quickly. You're probably talking closer to $0.25 per pint to the end user when you factor in percentage-based margins each step of the way. It isn't an exorbitant increase, but considering the fragmented nature of the market and the nature of the industry, a $0.25 per pint increase could make a noticeable different for a small-batch brewery.

Really? A quarter in the on-premises price of a pint is probably smaller than the bar-to-bar variation in price in NYC. It sure as hell isn't going to necessitate a reevaluation of a business plan!

Btw, I just did a quick search on Google Scholar to see what the price/tax coefficient is for beer. It looks like it's probably somewhere in the neighborhood of 1.5-2, which means an excise tax increase of $0.08/pint would result in a retail price increase of $0.12-$0.16/pint.

I don't think it'll effect the quantity of people physically coming to the brewery, but that isn't where a place like Barrier makes money. Their brewery is smaller than the living room of my Queens apartment and they're only open for growler fills twice a week because of the time and effort they need to put into production. And I don't think the $0.25 price hike will change peoples perception of the brewery.

However, I think a $0.25 price hike ONLY to NY breweries will close the price gap between their products and others on tap at the bar and make it more likely for people to choose alternative products.

Take Southampton Abbot 12, for example. Fantastic Belgian Quad, comparable in quality to any Belgian, that in NY you could find for $11.99/bottle, far cheaper than actual Belgian ones. Close the price gap, though, and consumers may be much more likely to go for the imports.

I mean, I obviously hope I'm wrong, but I think small price fluctuations affect local brands more than they do big established breweries with higher inelastic demand.

Thats exactly why its unconstitutional. The Founding Fathers didnt want states setting up tariffs against each other, it would tear the country apart.

Yeah. It seems like the general consensus here is that New York State handled this as poorly as they handle everything else. The original exemptions did, undeniably favor local business which, under constitutional law, isn't cool. But the new plan is far more imposing on local businesses than it is on out of state breweries, which doesn't seem to make sense either.