Don't Mess With Taxes

UPDATE, July 24, 2024: Yes, this item originally was published on a prior Margarita Day. But since the main potent potable in that adult beverage is tequila, it’s worth topping off today, National Tequila Day, for another toast. So jot down the recipe offered by the always animated (in every sense of the word) Sterling Archer. It will help the associated federal and state alcohol tax info below go down a bit easier. ¡Salud!

FX/FXX TV's spy-turned-private detective Sterling Archer offers his margarita recipe. If, however, you're looking for a drink that's a bit more elaborate that the basic one preferred by the animated (in so, so many ways!) and self-absorbed bon vivant, check out the Cooking Channel's top 28 margarita recipes.

It's National Margarita Day! Each Feb. 22, the focus is on appreciating this popular tequila-based cocktail. Or as we call it here in Texas, every day.

Personally, I prefer beer. But if a margarita is your drink, here's to an enjoyable happy hour with your fellow fans of this azul agave beverage.

Tacking on tequila taxes: Of course, if you do go to your favorite bar or restaurant, you know that your professionally made margarita will cost you more than concocting the drink at home. But I'm with you in paying a bit more to not have to do the work, especially when alcohol is involved. Those second or third drinks might not measure up to the initial one mixed when you were totally sober.

One thing, though, that all mixed drinks share regardless of where they are poured are the taxes levied on the distilled spirits used.

Uncle Sam's distilled spirits' tax cut is shown below in the table from the Alcohol and Tobacco Tax and Trade Bureau, a division of the U.S. Treasury.

As the TTB (yep, that's the acronym the agency uses) table shows, distilled spirits taxes are based on amounts of the potent potables produced:

• A tax rate of $2.70 per proof gallon is levied on the first 100,000 proof gallons in production.
• A tax rate of $13.34 per proof gallon applies to the proof gallons of 100,001 to 22.23 million proof gallons in production.
• Any proof gallons exceeding 22.23 million face an excise tax of $13.50 per proof gallon.

Quick aside, and a TTB data tidbit you can use to impress your pals at happy hour: A proof gallon is one liquid gallon that is 50 percent alcohol. You might want to jot it down in case you don't share your distilling knowledge until after you've had a few.

States excise and more add-ons: Then there are the state (plus the District of Columbia) tax collectors, who also push up tequila's — and all other distilled spirits' — prices thanks to excise taxes.

The table below from the Federation of Tax Administrators (FTA) shows the 2023 state tax rates on distilled spirits.

Click image for a larger PDF view.

n.a. = not applicable. These 5 states do not have a general sales tax.

(1) In 17 states, the government directly controls the sales of distilled spirits. Revenue in these states is generated from various taxes, fees, price mark-ups, and net liquor profits. (For more, see National Alcohol Beverage Control Association)

(2) General sales tax applies to on-premise sales only.

(3) Washington privatized liquor sales effective June 1, 2012.

High, low, and median distilled spirits tax rates:  As the FTA notes, the national median tax on liquor is $3.77 per gallon.

Washington state assessed the largest excise tax on booze, a whopping $14.27 per gallon. Alaska is close on the Evergreen State's heels. The Last Frontier's distilled spirit excise tax is $12.80 per gallon.

The lowest per gallon distilled spirits excise tax is $1.50 in Maryland and neighboring Washington, D.C. Insert your own jokes here about how folks working in the shadow of the federal government deserve a tax break on the hard stuff.

As for Capitol Hill's southern neighbor, Virginia is one of 17 states where the government directly controls the sales of distilled spirits. Revenue in these states is generated from various taxes, fees, price mark-ups and net liquor profits.

Adding up other levies: One of those various taxes is the states' general sales taxes.

The District of Columbia and 45 states collect statewide sales taxes. Local sales taxes are collected in 38 states.

Those taxes generally are applied when you order food or drinks at restaurants, regardless of the alcohol content of the beverages.

You'll escape this levy, though, if you eat out in one of the five jurisdictions without statewide sales taxes on food or anything. They are Alaska, Delaware, Montana, New Hampshire, and Oregon.

If you do plan a margarita or other tequila toast today or any day, I wish you an enjoyable and safe — designate a driver or use a rideshare service — National Tequila Day.

¡Salud!

You also might find these items of interest:

• How beer excise taxes hike your tailgating costs
• Tacos, food taxes and tax breaks on Tuesdays and every day!
• Japanese tax officials holding contest to encourage drinking…and alcohol tax collection

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