The Cost Of Bourbon

[Guest **DONOTDELETE**]

How much does it cost a distillery to produce a bottle of bourbon? Take plain old Jim Beam white label for example. What does the bourbon in that bottle actually cost the distiller to produce? Fifty cents? A dollar?

How much does the bottle; cap, & labels cost? A buck? A buck-fifty?

At the Bourbon Heritage Panel at last years Bourbon Festival Jim Beam's newest Master Distiller, Jerry Dalton, commented that the Federal Excise Tax was (hr thought, but wasn't sure) ten dollars and fifty cents a "proof gallon". A "proof gallon" is a gallon of 100 proof whiskey. That comes out to $2.10 a bottle for the "old standard" one fifth of a gallon bottles.

Your state is likely to have it's own excise tax on liquor. Mine sure does. And then for the final slap in the face they charge you sales tax when you buy it. Triple taxation! Oh! I almost forgot that you had to earn that money in some way yourself and of course had to pay income tax. Make that quadruple taxation! It's no small wonder that they no longer send the tax man around as the nation would suffer an acute tar & feathers shortage!

So what does it cost to "make" a bottle of bourbon ready to market? And while we're at it how much profit does the distillery make?

Linn Spencer

Have Shotglass. Will Travel.

[boone]

As you know I run the booth (at the Bourbon Festival) for Heaven Hill. Every year I write a list with the common questions asked at the festival. One of the top 10 questions was how much federal tax do you pay on all the whiskey? The answer, 2.5 to 3 million dollars a week!!! I took the list back to Mike because I thought it was a mistake. He said it was right. I couldn't believe it. I will not answer a question if I do not know the answer. I always have a back up around. Max, Parker, Craig, David, Steve, Millard, Mike, Phyllis, Bill, Gary and many others drop by to answer (or shall I say I lasso them to answer the questions). I always ask Parker and Craig to come to the booth right after the barrel rolling contest. They both come and it is usually a picture taking opportunity for the people who know who they are. I plan to do the same this year.---------My booth came in second place last year---------. Wild Turkey came in first place. It was awsome. They built a actual saloon!!!!! Swinging doors, bar with bar stools, walls with windows, checker board outside, just about everything that you would fin in a old time saloon.

boone

[Ken Weber]

The current Federal Excise Tax (FET) is $13.50/proof gallon. A proof gallon is one gallon of spirits at 100 proof. In the state of Kentucky, the distributor pays the state sales tax before the consumer buys the product. The state rewards the distributor by allowing them to hold on to some of the tax money, in return for the payment up front. You also have various city and county taxes. At one time, the state government (of KY) was entirely funded by the tax gathered from the production of beverage alcohol.

In addition, since we use the three tier system (distiller, distributor,retailer) each one takes a percentage. If taxes were eliminated and distillers could sell direct to consumers (like some vineyards), everyone would have Blanton's as their regular pour.

Speaking of Blanton's, the package is relatively expensive. The octagonal bottle, cork finish, horse stopper, wax, hand applied labels, bag, and decorative box do add considerably to our cost. However, they are small relative to the taxes placed upon them.

Ken

[Guest **DONOTDELETE**]

$13.50 a proof gallon is just outrageous! A tax rebellion is certainly in order sir.

So Ken how much does it cost to make a bottle of bourbon?

Linn Spencer

Have Shotglass. Will Travel.

[cowdery]

After the American Civil War, new railroads carried bourbon west to the new frontier and the era of large, commercial distilleries began. This period also brought with it a large, permanent federal excise tax, the original one having been repealed during the Jefferson administration. Passed in 1862 to pay for the Civil War, the excise tax on liquor produced a quarter of the government's total revenue. With subsequent increases fueled by rising temperance sentiments, it rose so high that by 1876, liquor taxes generated fully one-half of the federal government's income. This continued until the eve of Prohibition, more than 30 years later.

--Chuck Cowdery

[Ken Weber]

Linn,

Just watch how this marketer dances around this question. My wife is a dentist. She charges about $200 for one of those teeth whitening (sp?) systems. I asked her how much it actually costs her in time and materials. Suffice it to say that her profit is about $160. When asked how she can rip people off, her standard reply is, "Do it yourself". "I don't know how to" is my usual retort. "Then pay me $200 and I will do it for you".

How much does a bottle of bourbon cost to produce, well you have to build a distillery, aging warehouses, bottling lines, hire employees, pay SS taxes, etc. Once you have all of these things lined up, the cost is a few bucks per liter.

Our Sazerac Rye is 18 years old. The retail price is around $40/.750. Another rye producer charges nearly $100 for small batch 2 year old rye. Why the price difference? Perhaps the cost of doing business out west is more than it is in Kentucky. Or, perhaps different companies operate on different margins.

Truly, you are paying for quality, or uniqueness. The market determines the price. Some people decide their teeth look just fine, while others are a bit more vain.

Ken

[Guest **DONOTDELETE**]

Chuck,

You are actually mistaken about linking Temperance with the tax on liquor. Actually the Temperance movement was against a tax on liquor because they realized that if the government was making money off of liquor, they were not likely to prohibit its sale and lose the revenue.

Mike Veach

[Guest **DONOTDELETE**]

"...the cost is a few bucks per liter." Thanks Ken.

Linn Spencer

Have Shotglass. Will Travel.

[cowdery]

That was one point of view, but there were also those who believed (just as they do with alcohol and cigarettes today) that the higher prices caused by higher taxes would discourage consumption, especially among the poor and young.

--Chuck Cowdery

[Guest **DONOTDELETE**]

I think Chuck's point carries a bit more credibility in this case. "The Temperance Movement" wasn't a single entity but a label describing several independent (and sometimes conflicting) organizations and trends. The Women's Christian Temperance Union, who may well have campaigned against a liquor tax, was only one well-known group out of many. They may also have been more politically astute than some of the more knee-jerk prohibitionists, but that doesn't negate the attitude that Chuck compares (quite rightly) with some groups operating today.

=John=

http://w3.one.net/~jeffelle/whiskey

[cowdery]

Government is always looking for something new to tax and there is nothing easier to tax than sin. To the extent that alcohol was being increasingly demonized after the Civil War, that sentiment gave cover to Congress when it wanted to increase tax revenues. Then as now, some politicians argued that disincentives like higher prices would help reduce overconsumption without resorting to an outright ban. For three decades, the money collected from federal excise taxes on liquor was half of the federal budget. Liquor was the money pot. As wrongheaded as prohibition was, the decision to impose it looks remarkably couragous. Politicians seldom act against their own self-interest yet this would seem to be an example of such a decision.

--Chuck Cowdery