Lawmakers to continue discussing bourbon barrel tax in Kentucky

Kentucky is the only State that taxes aging barrels of distilled spirits

FRANKFORT, Ky. (WTVQ) – Bourbon, it’s one of the things Kentucky is known for most.

Kentucky makes 95% of the world’s bourbon, according to the Kentucky Distillers Association.

But, Kentucky is also the only State that taxes aging barrels of distilled spirits

“So, it’s a tax literally on the barrel of bourbon and whiskey as it ages so if you’re lucky enough to buy a bottle of 18 year old Kentucky bourbon, it has been taxed 18 times every year that it sits in a warehouse, aging and ready for sale” said Eric Gregory with the Kentucky Distillers Association.

The bourbon barrel tax is a tax that many counties rely on for revenue, with a majority of the money benefiting local communities.
Gregory says it funds anything from local operations, public health, fire districts to education.
Last year there was about $30 million dollars in barrel taxes paid, with $25 million of that going to education, according to Gregory.

“This is a tax that has been growing every year on the distilleries and so the longer we continue to do this the more dependent the counties are on it and we just think from a public policy standpoint that that’s not good fiscal policy either” added Gregory.

This summer, lawmakers have been looking at ways to eliminate or offset the tax without harming counties, though it could mean a huge loss in revenue for some.

Franklin County could see a loss of about $2.4 million dollars, while Woodford County could lose $1.2 million.

Though, Gregory says SEEK funds would back fill most of the loss. For instance in Woodford County the SEEK formula would back fill about $854,000, leaving $381,000 to replace.

And, in Franklin County, SEEK would back fill $1.6 million in educating funding of that money, leaving a total of about $750,000 to replace.

“It actually leaves only 5 or 6 million dollars state wide in all 120 counties that you have to make up the difference for” said Gregory.

He says it’s a complicated issue, but that the Kentucky Distillers Association is in favor of getting rid of the tax, saying it deters more distillers from coming to the State.

“We rank 12 in the country in actual number of distilleries and we’re sliding down, so if we want to keep Kentucky the one, true, authentic, home for bourbon we need to have more of these distilleries located here than other states and right now that’s not happening” added Gregory.

The Bourbon Barrel Taxation Task Force is expected to meet Friday to hear testimony from local school districts that could be impacted by a change in the tax.

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