View Full Version : Beam makes a run for the end zone
This is something to watch:
Beam appeals tax assessment (http://www.kystandard.com/articles/2004/06/07/news/news02.txt)
It's an interesting argument. One counterargument might be that nothing has changed, so how is it that a tax which was fair yesterday is suddenly unfair today?
Good point, Chuck. They should ask for the ruling to apply retroactively. (Then too, if one believes in a so-called "living, breathing" U.S. Constitution, why not a living, breathing tax code? http://www.straightbourbon.com/forums/images/graemlins/wink.gif )
This discussion reminds me that while I was on loan to the Tax Department at Hughes, I suggested that the cost of launching a satellite should be treated as a delivery cost, because the customer did not take ownership until the bird was in orbit and operational. Coming from a mere engineer and occasional accounting systems analyst, my suggestion was rejected with ridicule -- until it was adopted. (The Kerry-esque turn of phrase there was unintentional. http://www.straightbourbon.com/forums/images/graemlins/grin.gif)
The impact on Company profit of the remainder of my 25+ year career at Hughes pales in comparison to that one, otherwise inconsequential, off-the-cuff idea.
A tangent, related to another thread discussing Kentucky Bourbon Distillers: I note the newspaper lists it as a company which 'stores' aging bourbon in the county. Elsewhere, I believe we'd just about concluded that they don't.
Good call. The article doesn't indicate how much KBD has in storage, but the tax list is a reliable indicator. If it says somebody has whiskey in storage, they do. The last time I saw the list, which was a few years ago, KBD was not on it.
One counterargument might be that nothing has changed, so how is it that a tax which was fair yesterday is suddenly unfair today?
Ya know, that very thought crossed my mind as I was posting that link.
I'd be interested to know if they're responding to a new assessment, or just tired of paying $101 million... http://www.straightbourbon.com/forums/images/graemlins/skep.gif
Consultants all over the U.S.A. hold themselves out as experts in reviewing property and other assessed taxes. They get their fees as a percentage of the tax savings generated. You can be sure Beam has hired one of these groups.
Since the tax is on the finished product ( aging bourbon ), the consultants most likely advised Beam that whiskey younger than two years isn't legally allowed to be called bourbon. Thus there is no finished product to be taxed.
This most likely will not be allowed but careful examination of Kentucky's assessment laws must be made.
If Beam wins then other distilleries will certainly follow suit. Other tax bases will go up until the state raises the tax on under two year old whiskey.
It could be a lot of things, for example, leverage to stop a proposed rate hike that might be in the wings, or some benefit they're seeking from the county government. The article is pretty clear that the coincidence of whiskey being stored in Nelson County provides a nice subsidy for property owners in the county and maybe the distillers want a little more for their money. Beam is just the stalking horse. If they have any success, you know the others will follow suit.
I don't know about other places, but challenging valuation increases for real property is routine here in Chicago. A new valuation comes out, you hire one of the "right" law firms, and your increase goes down.
It's also possible that having the distilleries pay a significant tax on their aging whiskey, with proceeds to be used there in the county (i.e., not going into the state general fund) made sense when a higher percentage of county residents were employed at the distilleries. Now I'm sure that percentage is pretty small, so maybe the distilleries are asking why they should be subsidizing so much of the county revenue need.
I know Louisville, back before the city and county merged, and maybe still, levied its own additional property tax on whiskey aging within the city limits. As a result, many of the local distilleries built barrelhouses right across the river in Indiana, and moved their whiskey there on its second birthday (i.e., once it was legally entitled to be called "Kentucky Straight Bourbon Whiskey").
Even earlier than that, the Louisville suburb of Shively was incorporated by distillers who wanted to create a haven from Louisville's taxes and other laws. It also became a haven for brothels and strip clubs, but that's another story.
By the way, the article is wrong about one thing. The word that comes into play only after two years in wood isn't "bourbon," it's "straight."
If Beam could lower their taxes, they could lower their prices (and still make margins). As the first to do so, they would have a market advantage. How many more Beam products would you buy at a lower price point?
Beam Black at $8.00 a bottle, I'm in.
They may be storing some whiskey there--the fact that they are on the tax list is a good indication that they are--but that does not mean they produced it. It's still whiskey they bought from an actual producer but are aging on their premises.
Somehow, I don't think any tax savings will go toward the bottle price. Pretty to think so, though.
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