Wineries, Bars Get Reprieve from Civil War Tax

Wineries, bars and other businesses that sell alcoholic beverages will benefit from a tax break that temporarily eliminates a federal tariff originally designed to fund the Civil War.

The American Jobs Creation Act suspends for three years a special tax on businesses that make, distribute, sell or deliver alcoholic products. The tax break, which goes into effect July 1, 2005, will end the $1,000 tax for wineries with more than $500,000 in gross receipts, the Napa Valley Register reported recently. Retailers that sell less than that pay $500 per location and an additional $250 for secondary retail outlets.

The Wine Institute, which represents hundreds of California wineries, led the lobbying effort to do away with the tax, but retailers around the country wanted it to end.

Steve Riedl, executive director of the Illinois Licensed Beverage Association, told the Belleville (Ill.) News-Democrat that the government refused to repeal the tax until now, even though the original purpose of the tax ended more than a century ago.

"As anyone can tell you, that war is long over," Riedl said. "Government has a very strong reluctance to repeal any tax."

He said the alcoholic beverage industry is “extremely overtaxed.” He added, "Anytime we can push for the repeal of any tax whose purpose is not longer served, we feel it is the right thing to do."

Marlene Stephenson, bar manager at Cleo's in Edwardsville, Ill., said the business must pay doubled state taxes and higher city fees along with the federal tax.

"The small business people can't afford to serve drinks at the bar anymore," Stephenson said, noting that grocery stores and drug stores can offer lower prices. "They can sell beer cheaper than what I have to pay for it."

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