Low Tide Brewing’s Upcoming Food Truck Rodeo

13267791_1729818963962968_4893791740246429437_nIf you haven’t been to Low Tide Brewing on Johns Island, you must go soon!

Join Owner Mike Fielding,  Head Brewer Andy Elliott, and team on Saturday, June 25 for their Food Truck Rodeo from 12 – 4 pm.  There will be 10 different food trucks, live music from Sea Water, and most importantly, great Low Tide beer.  Low Tide currently has 12 unique beers on tap, including their first nitro beer.

Proceeds from the Food Truck Rodeo benefit the Charleston Animal Society.

Check them out on Facebook and follow Low Tide Brewing on Instagram.

Relief from Federal Excise Tax Could Be on the Horizon for South Carolina Brewers

On June 11, 2015, the Craft Beverage Modernization and Tax Reform Act of 2015 was introduced in the U.S. Senate with a companion bill, the Small BREW Act, introduced on July 8 in the House of Representatives.  Many in the brewing and distilling industries are singing the Bills’ praises in hopes it will provide a measure of excise tax parity that will boost investment and create new jobs.

beer_moneyLast week, the Beer Institute and the Brewers Association submitted a joint letter in support of the Craft Beverage Modernization and Tax Reform Act to Members of Congress.  The letter described the legislation as one that “recalibrates and updates the federal excise tax on alcohol and reduces the administrative and regulatory burdens for brewers, importers, and other craft beverage producers.  This common sense, forward-looking approach will help the entire beer industry remain competitive, create good-paying jobs, and benefit American consumers.”

Of particular importance to South Carolina brewers is that the Bill, among other things, proposes to reduce the Federal Excise Tax as follows:

  •  Reduces the Federal Excise Tax from $7.00 per barrel to $3.50 per barrel for the first 60,000 barrels for domestic brewers producing fewer than 2 million barrels annually.
  • Reduce the Federal Excise Tax from $18 per barrel to $16 per barrel on the first 6 million barrels for all other brewers and all beer importers
  • Keeps the Federal Excise Tax at the current $18 per barrel rate for barrelage over 6 million.

While both Bills have garnered a number of co-sponsors, no one from the South Carolina delegation has signed on as of yet.

Waiver of Distance Requirements for On Premises Consumption of Liquor

15KK0131RFEver wonder why bars, restaurants and hotels that serve liquor aren’t located near schools, churches or playgrounds? Historically, state law has prevented the South Carolina Department of Revenue (SCDOR) from granting liquor licenses to applicants located within 300 feet of a school, church or playground within a municipality or located within 500 feet of a school, church or playground outside of a municipality.

In fact, the SCDOR’s hands were tied even if a school, church or playground was willing to permit establishments to serve liquor.

While the distance restrictions still apply to schools, legislation passed in 2014 (61-6-120(C)) now allows the SCDOR to issue liquor licenses to applicants desiring to locate near a church or playground as long as the church or playground administrators do not object. Applicants and churches or playgrounds must sign an affidavit, ABL Form 956, waiving the distance requirements.

Hopefully, the flexibility provided by the new legislation permits all parties concerned to communicate openly from the beginning and foster communal bonds built on cooperation.

Small BREW Act v. BEER Act – Competing Interests of Craft and Macro Brewers on Federal Beer Excise Taxes

379794_9873Craft brewers and macro brewers are making separate pleas to Congress for relief on federal beer excise taxes.  Currently, craft brewers (producers up to 2 million barrels a year) pay $7 of taxes on each on the first 60,000 barrels and $18 of taxes on each subsequent barrel while macro brewers (producers over 2 million barrels a year) pay the full $18 of taxes per barrel on all barrels produced.

The Small BREW Act proposes a $3.50 tax on the first 60,000 barrels, a $16 tax on barrels between 60,001 and 2 million and an $18 tax on each barrel thereafter.  The Small BREW Act would only apply to domestic producers who produce 6,000,000 barrels or less.

A competing proposal, the BEER Act , proposes no tax on the first 7,143 barrels, a $3.50 tax on barrels between 7,144 and 60,000, a $16 tax on barrels between 60,001 and 2 million and an $18 tax on each barrel thereafter.  The BEER Act would apply to all brewers and importers.

While both acts propose to reduce excise taxes, craft brewers generally favor the Small BREW Act because it increases their margins and allows them to invest profits back into their businesses. Craft brewers criticize the BEER Act because it provides tax relief to importers and companies which may not directly invest the savings back into domestic operations and jobs.

Macro brewers generally support the BEER Act because they feel it helps all brewers (no limit on the barrels a brewer can produce to qualify for the tax rates) by not only reducing excise taxes, but eliminating taxes for producers of fewer than 7,143 barrels per year (which includes the majority of beer producers in the United States).

Expect a heated debate on Capitol Hill over the next couple of months to see who wins the day on federal beer excise taxes.

 

 

New law signifies progress for South Carolina beer, but there is work to be done

While the passage of the Stone Law in 2014 was a large step forward for South Carolina, there is still work to be done to be on equal footing with other states.  A number of states have chipped away at traditional three-tier laws.  For example, Arizona currently allows breweries below certain production requirements to self-distribute (within boundaries) and to own and operate as many tasting rooms, restaurants and other retail spots as desired.  This article discusses further changes being considered in Arizona that have the potential to impact craft breweries and distributors.

Link to Phoenix New Times article.

Brewery & Distillery Team Speak at Upstate Seminar

Haynsworth Sinkler Boyd attorneys Bonnie Lynch and Seth Swan presented at the 5th Annual Upstate Corporate Law for Accountants Seminar at the Greenville Hilton.

Their presentation, “Brews, Booze and Clues on How to Navigate the Emerging Brewery/Distillery Industries,” provided insight on the expanding brewery and distillery industry in South Carolina by exploring the background of the three tier system that forms the backbone for the laws South Carolina has pertaining to the production, distribution and sale of beer and liquor today. 

Topics covered included an explanation of the recently enacted Stone Bill and an overview of South Carolina licensing types, qualifications and issues for clients in this industry. 

 

SC Department of Revenue releases summary of Stone Bill

On September 2, 2014, the South Carolina Department of Revenue released an Information Letter (IL #14-12) giving further explanation to the recently enacted “Stone Bill” and in doing so has provided a good synopsis of the rules relating to sales of brewed beer at breweries. In applicable part, the language from Information Letter is copied and annotated below:

“Breweries may sell beer brewed on the premises for on premises consumption without the requirement that consumers take a full tour and without a separate license, if the following requirements are met:

  1. Sales must be made within an area of the licensed premises that has been approved by the rules and regulations of the Department of Health and Environmental Control (DHEC) governing eating and drinking establishments and other food service establishments.
  2. The brewery must comply with all state and local laws concerning hours of operation applicable to eating and drinking establishments and other food service establishments holding permits to sell beer and wine for on-premises consumption.
  3. The brewery must comply with the discount pricing provisions [relating to free offerings, half-price offerings, two or more for the price of one offerings and happy hour pricing], applicable to persons holding permits to sell beer and wine for on-premises consumption.
  4. The price for beer sold by the brewery must approximate retail prices generally charged for identical beverages by on-premises retailers elsewhere in the same county.
  5. Consumers must not be intoxicated or under age 21.
  6. The brewery must remit appropriate excise taxes, as well as appropriate sales and use taxes and local hospitality taxes.
  7. Signage posted at each entrance and exit and other places visible during a tour must inform consumers of: (a) the alcoholic content by weight of beer available in the brewery and (b) the penalties for conviction for driving under the influence, unlawful transport of an alcoholic beverage container and unlawful transfer of alcohol to minors.
  8. The brewery must provide South Carolina Department of Alcohol and Other Drug Abuse Services (DAODAS) approved training for its server staff.
  9. The brewery must maintain liability insurance coverage of at least $1 million for the biennial license period and provide proof of insurance to the State Law Enforcement Division (SLED) and the Department’s Alcoholic Beverage Licensing section within 10 days of receiving its biennial license.
  10. A wholesaler must not provide and a brewery must not accept services, equipment, fixtures, or free beer . . ., except [for certain draft beer equipment replacement parts of nominal value and certain point of sale advertising and product display items].
  11. The brewery must not discriminate in pricing at the producer or wholesaler levels.

Separate Permit to Sell Other Beer and Wine for On-Premises Consumption. A brewery with an area of its licensed premises approved by the rules and regulations of the Department of Health and Environmental Control governing eating and drinking establishments and other food service establishments may apply for a separate permit to sell beer and wine at retail for consumption within the approved area.  The separate permit allows sales of wine and beer produced by another licensed producer and purchased from a wholesaler through the three tier distribution chain . . ..”

 

South Carolina is still a good place to brew

Not that bad.Palmetto Brewery Co.

Much has been written this past week about Stone Brewing Co.’s decision to remove South Carolina from its list of potential East coast expansion plans.  Decisions such as Stone’s are usually based on a multitude of factors, including personal preferences of the owners and operators of the business.  We in South Carolina should not be disheartened by this decision.

South Carolina competes well from an economics and labor perspective bringing with it an extremely business friendly approach.  Yes, our excise tax is a bit high, and we have quirky distribution rules, but a variety of tax incentives and abatements available at the local, state and sometimes federal levels can offset other operational costs and improve bottom lines.

Depending on the situation, any new capital investment (from small to large) or creation of jobs could garner potential operational savings for new or expanding businesses in South Carolina.

Property tax reductions/abatements

One of the most widely used incentives only requires that a business make a capital investment of at least $2.5 million in its project.  Depending on the specifics of the deal, owners can reduce their property tax burden by 10-50%, coupled with a fairly aggressive statutory depreciation rate of 11% for breweries and distilleries, resulting in a net property tax burden that is very reasonable and workable into a profitable business model.

Job creation rebates, credits and grants

In addition, South Carolina may be able to provide wage withholding credits and grants for certain investments that further reduce the overhead and startup costs for a new project or expansion.  The credits and incentives vary by county, but can be up to 5% of a company’s wage withholding taxes, and can be used to offset a wide variety of capital expenditures and even training and relocation costs for employees.  As an added perk, the state also allows by statute for a company to claim income tax credits for every new job created (ranging from $1500 to $8000 depending on where the jobs are created).

Rehabilitation tax credits, rebates, and reductions

Other opportunities, particularly for smaller investments, are available if a business locates in an abandoned building, old textile mill, historic building or deserted retail facility.  Each of these opportunities can generate additional benefits to a project by returning 10-25% of the upfit or rehabilitation costs through the form of tax credits and property tax abatements.  This is in addition to opportunities to freeze property tax assessments at pre-renovated values in certain circumstances.  Some of these credit opportunities are even transferable to third parties who may help bring much needed equity and resources to a new deal.

In short, South Carolina is a great place for a new brewery or distillery to locate or expand as South Carolina has the tools and business friendly environment to help just about any new business succeed.

 

How to Keep Your Recipes and Processes Protected in Your Brewery or Distillery?

As a brewer or distiller, you have probably spent hours perfecting your beer or liquor recipe and processes for making your beers and liquors. As such, you may want to consider steps to protect these recipes and processes.  Generally, there are two avenues for protecting your recipes and processes: (1) trade secret and confidentiality agreements or (2) non-competition agreements.

Trade secret agreements allow a former employee to work for a competitor but the employee cannot disclose the trade secret or confidential information. This could last forever —so long as the information remains a trade secret or otherwise confidential. A trade secret is, generally, considered information that has actual or potential economic value; that is not generally known or not readily ascertainable by other people; and that is the subject of reasonable efforts by its owner to maintain its secrecy. See S.C. Code Ann. § 39-8-20(5) (2014). Information, under South Carolina’s Trade Secret Act includes, but is not limited to, “a formula, pattern, compilation, program, device, method, technique, product, system, or process, design, prototype, procedure, or code[.]” Id. As you can see from the definition above, a brewery or distillery recipe, most likely, can be considered a trade secret. However, brewers and distillers must be cautious and take the appropriate steps to keep these trade secrets protected.

In contrast to trade secret agreements, a non-competition agreement prohibits an employee from working with a competitor for a reasonable period of time after leaving employment. States have different approaches to enforcing non-competition agreements. In South Carolina, generally, to be enforceable a non-compete must be no greater than is reasonable to protect the legitimate interests of the employer. Stringer v. Herron, 309 S.C. 529 (Ct. App. 1992). Further, a non-competition agreement must: be reasonable as to area and length of time; not unduly burden the employee’s ability to earn a livelihood; be supported by valuable consideration; and be reasonable from the standpoint of sound public policy. Id.

With the vast expansion of craft breweries and distilleries, competition is increasing. Brewers and distillers should consider trade secret agreements and/or non-competition agreements with their employees to protect their recipes and processes.

 

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