Complying With The South Carolina Craft Beer Economic Development Act. Prior to passage of The South Carolina Craft Beer Economic Development Act (Act No. 31 of 2023) state law only allowed for the sale of a maximum of 288 ounces per consumer, per day, to-go for off-premises consumption from a licensed brewery taproom which has been law since 2010. Additionally, licensed breweries in this state did not have an allowance for sale of the bonded transfer of beer between multiple facilities that they own. However it is worth noting Federal law allows this practice in addition to transferring freely to breweries which have collaborated on beers.
SO WHAT DOES ACT 31 DO?
The South Carolina Brewers Guild (SCBG) drafted S. 566 (which was signed into law as Act No. 31 of 2023) to expand current South Carolina law, based on the success of multiple Southeastern states’ legislatures codifying and implementing increased to-go limits and brewery-to-brewery transfer provisions. The Act implements two substantial changes within the South Carolina Code of Laws Title 61, Chapter 4, Article 15 (specifically, Section 61-4-1515):
- Bonded Transfer: Allows licensed South Carolina breweries with 100% identical ownership in locations to transfer their beer between locations without having to buy the beer back from a wholesaler, provided that a 1:1 volume transfer to production ratio exists – meaning a brewery may not transfer more than what the receiving location brews itself.
- Increased To-Go Limits: Allows South Carolina breweries the ability to sell 864 ounces (about 25.55 L) of product to-go from its taproom, superseding the current 288 ounce (about 8.52 L) per person, per day limit.
SO HOW DO I COMPLY:
1. Bonded Transfer
Effective immediately, breweries can now transfer beer to another brewery with 100% identical ownership. Breweries taking part in beer transfers should include the following information on their Beer Wholesalers Monthly Report:
- Breweries should ensure all records of transfer are kept.
- Breweries with outgoing transfers should include the beer that was produced for the receiving brewery on the Purchases received during the month (Breweries: Include transfers and withdrawals for tasting and retail sales) They should then enter the beer that will be transferred on the Transfers – attach L-600-CM (Breweries: attach invoices or bills of lading from items transferred to breweries with identical ownership)line to remove it from their inventory.
- Receiving breweries should include the beer received on the Purchases received during the month (Breweries: Include transfers and withdrawals for tasting and retail sales)
- Breweries with outgoing transfers that already have the beer included in their inventory only need to include the beer on the Transfers – attach L-600-CM (Breweries: attach invoices or bills of lading from items transferred to breweries with identical ownership) The receiving brewery would follow the same steps listed above.
- Cider may not be transferred under the new beer transfer law.
An example of how brewery-to-brewery transfer will work under the new law:
An established brewery in the Lowcountry desires to open a second smaller location in the Midlands. The Midlands facility will house a smaller 10- barrel brewery with a production capacity of 500 barrels/year, that produces one- off beers for sale in the Midlands brewery/taproom. The Lowcountry facility has a production capacity of 5,000 barrels/year and produces all the flagship brands the brewery is well known for. Given each brewery is 100% owned by the same company, bonded transfer will allow the company to transfer finished beer for sale between breweries without using a distributor if the amount of beer transferred in for sale to an individual brewery does not exceed the amount produced at each facility.
For example, given the Midlands facility can produce 500 barrels/year, the Lowcountry facility can only transfer a maximum of 500 barrels into the Midlands facility if the Midlands facility produced its maximum of 500 barrels that year. The Midlands facility, on the other hand, can transfer as much beer as it can produce to the Lowcountry facility because the Lowcountry facility produces 5,000 barrels/year.
2. Increased To-Go Limits
Effective immediately, breweries can now sell a maximum of 864 ounces per consumer, per day (3 x 12 oz. can cases OR 2 x 16 oz. can cases OR 1 661 oz. sixtel keg PLUS 17 12 oz. cans) for off-premises consumption. Sales may include cans, bottles, growlers, and crowlers.
- Breweries may now sell up to 864 fluid ounces of beer per day to customers for off-premises consumption. The sales must be in conjunction with a tour of the brewery. If selling the beer in kegs (not required by law) up to 6.75 gallons (864 ounces), you must follow all keg tag requirements, including completing the ABL-907and ABL-908.
- Breweries are encouraged to pay specific attention to each of the form fields required to be completed on both of the above referenced forms.
- ABL-908 is used to request Keg Tags from the S.C. Department of Revenue at one of its Taxpayer Service Centers.
- Retail tax and excise must be remitted to the S.C. Department of Revenue on these sales.
- Beer must be sold at prices approximate to retail prices.
- It remains permissible only for brewery permittees to sell up to a maximum of 864 ounces per person, per day (only of their own product) to consumers. Therefore, permit holders cannot sell product directly to licensed retail locations.
3. Miscellaneous Beer Wholesaler Excise Tax Provisions
The Beer Wholesaler Excise Tax is imposed on any person who makes the first sale within South Carolina or who sells or distributes any quantity of beer to any other person for resale. Every person subject to the tax is required to file and pay the Beer Wholesalers Monthly Report electronically on MyDORWAY. A letter is sent when a new account is opened.
Sales to retail customers: Breweries with the required ABL permits may make sales for on- or off-premises consumption to retail customers. Breweries must pay Beer Excise Tax on all beer that is brewed on-premises and sold to individual customers for on- or off-premises consumption. These Beer Excise Taxes must be reported on the brewery’s Beer Wholesalers Monthly Report.
Sales to wholesalers and distributors: Breweries should not include beer that is sold to a licensed wholesaler or distributor on their Beer Wholesalers Monthly Report. Wholesalers and distributors are responsible for paying Beer Excise Tax on beer purchased from breweries. Breweries should keep records to differentiate beer sold to retail customers and beer sold to wholesalers and distributors.
Tastings: Breweries with the required ABL permits may offer customers tastings in conjunction with a tour of their licensed premises. They must pay Beer Excise Tax on the beer used for tastings. (See Revenue Ruling #19-2 for more information.) Breweries must indicate the total number of people touring each month on their Beer Wholesalers Monthly Report.
QUESTIONS?
Until the South Carolina Department of Revenue updates and adopts further rules specific to the 2023 law, the above guidance will pertain directly to licensed manufactures in the state of South Carolina. To learn more about how this newly proposed law may affect your current brewery or your desire to open a new brewery in the state, please reach out to our alcohol licensure practice group.
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