The Massachusetts Distillers Association (MDA) is asking the state’s top politicians to enact legislation that would help mitigate the negative economic impacts many distillers are experiencing due to the COVID-19 pandemic. The group of distillers recently sent a letter to several of the state’s top lawmakers, including Gov. Charlie Baker and Lieutenant Gov. Karyn Polito, detailing a series of measures the legislature could act on.
Gov. Baker signed a bill on April 3 allowing bars and restaurants to sell beer and wine — but not liquor or cocktails — with takeout and delivery orders during the ongoing shutdown of dine-in service caused by COVID-19. The bill provided a lifeline to the restaurant industry and the beer and wine industries, but it did nothing to help Massachusetts distillers. (It’s worth noting that some states, including California and New York, have allowed bars and restaurants to sell cocktails and liquor with takeout and delivery orders.)
The MDA — which is made up of independent distillery owners and operators across the state — says distillers have lost as much as 75 percent of revenues, and is asking for three things, specifically. From the letter:
- Massachusetts excise tax relief for alcohol used in the formulation of hand sanitizer, which we can report through the existing AB-1 form, so that our Federal and Massachusetts reports remain consistent. Otherwise, our state and federal reporting will not agree, putting us at risk of a federal tax audit for trying to help our communities.
- Direct to consumer in-state shipping of Massachusetts-distilled spirits to Massachusetts addresses via third party carriers, which can be implemented safely and securely through existing infrastructure at UPS, including mandatory ID checks at drop-off. Obviously direct to consumer delivery is more consistent with State guidance related to distancing and quarantine.
- An expansion of last week’s bill (authorizing on-premises licensees to sell malt beverages and wine for off-premises consumption) to include cocktails to be sold in secure vessels, and sealed in clear plastic bags similar to those used for partially consumed wine bottles. This measure would have the added benefit of securing employment for many bartenders who are currently unable to ply their trade.
When it became apparent that hand sanitizer was in short supply, a number of Massachusetts distillers began producing and distributing high-proof ethanol hand sanitizer. (Other distillers across many other states did the same.) Some sold it directly to consumers, while others distributed it to pharmacies and hospitals. Ordinarily, distillers would have to pay excise taxes on any ethanol produced and distributed, but because it was not produced or distributed for consumption, the MDA is hoping the state will waive those excise taxes.
“The Alcohol and Tobacco Tax and Trade Bureau has ruled that all hand sanitizer must be denatured, which means made undrinkable,” said Zachary Robinson, the co-founder of Short Path Distillery in Everett and a signer of the MDA letter. “They have explicitly said that if the alcohol is denatured, we do not have to pay federal excise tax. Massachusetts has not communicated either way on the tax issue. Since sanitizer is denatured we should not have to pay state excise tax either — excise tax is only on beverage alcohol.”
Andrew Cabot, who owns the Privateer Rum distillery in Ipswich and is also a signer of the MDA letter, told Eater that producing and distributing ethanol for hand sanitizer has helped in the short term, but that doing so only acts as a revenue stream for as long as there is a shortfall in the hand sanitizer market.
“And it’s definitely not going to make up for the total revenues of a spirits company,” he said. “We had 70 percent of our revenues turned off over night.” Cabot also doesn’t think distillers should have to pay excise taxes on alcohol that wasn’t consumed.
Cabot also told Eater that having the ability to ship directly to consumers through a third party like UPS would be a shot in the arm for distillers that are struggling at the moment. Direct-to-consumer alcohol sales are tricky because it’s more difficult to verify a buyer’s age, and it’s more difficult for the state to collect excise taxes. However, Massachusetts allows breweries to do so (with the correct permit), and distillers are feeling like they drew the short stick.
“The state wants to ensure safe sales and delivery, and to collect excise taxes — we respect that,” said Cabot. “We have so much respect for what the state is doing. It’s so complicated what they’re navigating.” Respect notwithstanding, Cabot said that “craft spirits always seems to get left behind.”
Like Cabot, Robinson is hoping that the state will start treating distillers like it treats producers and distributors of other alcohol, especially when it comes to delivery.
“We would like distilled spirits to be treated just like all other alcoholic beverages,” said Robinson. “We pay higher taxes, we are banned from serving with special one-day licenses, we are not allowed to sell at farmer’s markets. The list goes on and on. We like to be on the same footing as beer and wine manufacturers. At the moment they are allowed to sell through on-premise accounts for off-premise consumption while distilleries are not. That means we have lost half of our accounts while beer and wine have not.”
As of publishing, the state hasn’t acted on the letter.
• COVID-19 Coverage on Eater [EBOS]
• Massachusetts Restaurants Will Remain Closed Through May 4, Except for Takeout and Delivery [EBOS]
• Massachusetts Bars and Restaurants Can Now Sell Beer and Wine With Takeout and Delivery Orders [EBOS]
• With Sanitizing-Solution Shortage, Liquor Distilleries Are Stepping Up and Making Their Own [E]
• Coronavirus Shutdown Forces MA Breweries To Get Creative [PM]