Don't Mess With Taxes

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 Food Network's myriad margarita recipes.

Happy Cinco de Mayo! Or as we here in Texas know it, an official reason to enjoy a margarita, the state's unofficial mixed drink.

No, today is not Mexican Independence Day. That's Sept. 16, a national holiday in Mexico celebrating the country’s independence from Spain. So mark your calendar for another special celebración in a few months.

May 5, on the other hand, commemorates the Mexican Republic's victory in 1862 over French forces at the Battle of Puebla. While it also is a national holiday in Mexico, festivities in that country are mostly located in and around the Puebla region.

Since we Americans welcome any chance to party, Cinco de Mayo festivities have spread across the United States. That's especially true in locations with strong historic connections to Mexico, like here in my native Texas, which once was part of our neighbor to the south.

So, if you're celebrating Cinco de Mayo today, and a margarita is your choice for a toast or two, enjoy. Your state's tax department appreciates it, too.

Tacking on tequila taxes: When you 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.

The federal government collects approximately $1 billion per month from excise alcohol taxes on spirits, beer, and wine. Taxes on spirits are significantly higher than beer and wine because spirits have higher alcohol content than the other categories.

The maximum distilled spirits federal excise tax is $13.50 per gallon. Beer is taxed at $18 per barrel. Wine is taxed at the federal level at $1.07 to $3.40 per gallon. 

While the $13.50 per gallon rate is the top, there actually are three federal excise tax tiers for distilled spirits, shown in the Alcohol and Tobacco Tax and Trade Bureau (a division of the U.S. Treasury) table below.

As Uncle Sam's alcohol excise tax 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 distilled spirits tax 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 additions: 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 their own alcohol excise taxes.

The Federation of Tax Administrators (FTA) listing of state excise tax rates in 2025 on distilled spirits shows 33 states that collect these levies.

The lowest levies are $1.50 per gallon 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.

Then there's the whopping $14.29 per gallon in Washington state. Alaska is close on The Evergreen State's heels, with a $12.80 per gallon distilled spirit excise tax in The Last Frontier.

And what about the states that don't collect distilled spirits excise tax? In these so-called control states, the governments directly control the sales of distilled spirits (and occasionally wine), allowing the government to leverage its market power to artificially inflate prices in lieu of levying a formal tax.

Adding up other levies: Then there are 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.

So, as noted, state tax officials also have their own reasons to toast today's Cinco celebrations.

Cinco de Mayo's tax origin: As I mentioned at the top of this post, the Lone Star State's origins and the role of Mexican nationals and other Texians in helping establish Texas' independence in 1836 is another reason we Texans celebrate Cinco. 

And as with another famous international conflict, what was seen as an unfair tax was the spark for the Puebla victory celebrated today.

Back in 1862, as the United States was in the midst of our Civil War, the leaders of Mexico passed a series of laws that, among other things, let the government tax the dominant Catholic church. Conservatives in the country objected, with the dispute ultimately leading to war.

Mexico's pro-tax faction ultimately prevailed, but incoming president Benito Juarez, who was facing an empty treasury, issued a decree suspending foreign debt repayment for two years.

Across the Atlantic, French Emperor Napoleon III decided he wasn't going to just write off the loss of Mexico's money. Plus, he saw what he thought was a chance to take advantage of U.S. Civil War turmoil to reestablish French influence in the western hemisphere.

Napoleon sent the French army to Veracruz to collect what Mexico owed. Unfortunately for those troops, the road they took to Mexico City went through the town of Puebla de Los Angeles.

The rest, as the saying goes, is history.

So, if you do raise a margarita or beverage to Cinco de Mayo today, remember that current and past taxes are an inextricable part of the partying. ¡Salud!

You also might find these items of interest:

• How beer excise taxes hike your tailgating costs
• Alcohol taxes would fund $10 million Ohio music incubator
• Japanese tax officials holding contest to encourage drinking…and alcohol tax collection

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