American Beer Distribution - More Relevant Today Than Ever
The Three-Tier System

Video Topics - Click to View
Introduction
Pre-prohibition Era
Prohibition: The Failed Experiment
A New System of Regulation
The Three-tier Distribution System
Today's Distribution
Community Responsibility
Conclusion
Our family businesses deliver more than just beer. Beer wholesalers give back to our local communities in jobs provided, taxes paid and charities supported.
The Three-Tier System In Iowa
Beer wholesalers operate in a unique regulatory environment that was established by the 21st Amendment to the Constitution and state and federal governments in the wake of the repeal of Prohibition. Since the end of Prohibition over 60 years ago, malt beverages, wine and spirits in the United States have been distributed according to a three-tier system composed of licensed suppliers (brewers, vintners, and distillers), wholesalers and retailers. Beer wholesalers occupy the middle tier of the three-tier system for the distribution and sale of beer that was established to insulate retailers from control by suppliers; to encourage moderation in consumption; to guarantee full collection of state and federal taxes; and to permit states to superimpose their own rules and regulations over licensed beverages that reflect their states practices and beliefs.
Is It Effective?
The three-tier system has far exceeded its framers' expectations. It has produced a beer market that is efficient, highly competitive, extremely responsive to local concerns and control and is unencumbered by pre-prohibition abusive marketing practices. Because of the three-tier system, beer is among the best “deals” in the marketplace today. It is clear that the three-tier system is more necessary than ever to protect consumers and government revenue, as well as to provide for efficient distribution of licensed beverages.


Click below to see how Iowa’s excise tax compares with seven contiguous states.
State Excise Tax on Malt Beverages 2004

The Tax Burden on the Brewing Industry
Tax burdens include:
  • taxes paid at all stages of production, distribution, and sales;
  • taxes related to sales, income, profits, and payroll;
  • taxes paid to federal, state, or local governments;
A standard procedure was adopted to obtain reliable, consistent results for these three industries: malt beverages, baked goods, and boats valued over $100,000.
  • The data sources for the calculations are public, published information primarily from the Department of Commerce and the Internal Revenue Service, allowing confirmation of the conclusions by any interested parties.
  • Economic value-added components and taxes are presented in both absolute magnitudes (billions of U.S. dollars) and proportions (shares of value added and effective average tax rates.)
  • 1997 was the most recent year for which all necessary data was available, thus this is the reference year for all computations.
The tax burden borne by beer consumers is far higher than average for the U.S. economy.
  • Taxes represent 44% of the retail price of beer. In comparison, total federal, state, and local taxes equal 31.7% of final sales of all products (GNP) in the U.S., approximately 20% at the federal level and 12% at the state-local level depending on the year.
  • In the reference year (1997), taxes on beer raised just under $25 billion. The income generated by beer industry manufacturers and related sales and distribution partners added $10.7 billion in federal personal income, profit, and payroll revenues and $3.6 billion in similar state-local revenue. Sales and excise taxes on the beer value-added chain added a further $10.7 billion to government coffers.
  • In contrast, bakery products are found to be a typical good in terms of U.S. tax burden, with a 33% effective rate. Boats are more highly taxed, with a 36% burden. On the other hand, services and capital goods face lower tax burdens because they tend not to be subject to sales or excise taxes of any type.

Prepared by Standard & Poor’s DRI – January 17,2001

Click on the appropriate link below to learn more about the Economic Impact the beer industry has on the state of Iowa and the United States.

Economic Impact of the Beer Industry 2001 Data for United States
Economic Impact of the Beer Industry 2001 Data for Iowa
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