automated excise tax
Five questions regarding excise tax automation with Kevin Rasmussen, co-founder of EthoTech.
Q. For beginners, how does excise tax differs from sales tax?
A. Excise tax differs from sales tax in two main areas: Sales tax appears on the invoice and is paid by the customer. Excise tax does not appear on the invoice, as it is paid by the brewery or distributor.
Sales tax is calculated as a percentage of the invoice sale amount. Excise tax, in the craft brew industry, is calculated as a dollar amount times the quantity sold. This is further complicated because the taxing unit of measure may differ from the selling unit of measure. For example, you may sell in cases but be taxed in gallons. Both the tax rate and taxing unit of measure are set by each tax authority.
Q. If a brewery has an excise tax problem in their accounting system, how would VicinityBrew solve that issue?
A. Our VicinityBrew module allows you to create federal, state, county, and municipality tax authorities, along with the tax periods and rates for each tax authority. When a sales document is created, the excise tax owed to each tax authority is automatically calculated, based on the customer address and line items that appear on the document. Our product reminds you when it’s time to pay tax to a particular tax authority and even creates a payables transaction if you desire.
To sell bottled beer within the jurisdiction of a particular tax authority, a brewer must obtains a Certificate of Label for each beer that will be sold. Each Certificate of Label must be renewed each year; otherwise, the brewer is prohibited from selling that beer until they re-certify. These renewals are not excise tax, but since they are paid to tax authorities, our product includes reminders for paying label renewals and can also create a VicinityBrew payables transaction for the renewal.
Q. How long would it take for that company to implement your excise tax module?
A. The time to implement can be as little as a couple of hours or as long as a few days and is dependent on several factors, including:
The number of tax authorities to which a craft brewer is subject. The tax rate complexity for those tax authorities. The number of customer addresses to which they sell. The complexity of their unit of measure schedule setups.
Q. Which states have the highest excise tax rates?
A. Tennessee, Alabama, Georgia, Alaska, and Hawaii have the highest rates in the United States. Tennessee is the highest at $1.17 per gallon. So, it really makes for an uneven playing field for craft brewers. For example, the state of Wyoming is only $0.02 per gallon.
Q. Has the unprecedented growth of the craft beer market in the last three years effected the demand for automated excise tax?
A. Absolutely! For craft brewers, excise tax becomes an issue when they begin selling into multiple states, as the complexity increases given the varying rates, tax periods, and rules governing tax within different states. Additionally, timely payment of label renewals becomes an issue when multiple tax authorities are involved.
Kevin Rasmussen drives the product development, customer support and information technology side of EthoTech. Graduating from Illinois State University in Normal, Illinois, he earned a Bachelor of Science degree in mathematics focusing on theoretical and applied mechanics. Along with his degree, Kevin holds key industry certifications including: Microsoft Certified Systems Engineer [MCSE], Database Administrator [MCDBA], Integration Developer for Great Plains Edition [CID] and Installation Specialist for Great Plains Edition [CIS]. Prior to EthoTech, Kevin contributed to executive leadership teams for two Microsoft ISV Partners and was responsible for the development of a large vertical application franchise management solution.