On August 6, 2012, The Brewer’s Association reported that there are now more breweries in the United States than any time since 1887, and that 97% of those breweries are classified as small “craft brewers.” Clearly, craft brewing is becoming one of those hot “emerging businesses” that state legislatures everywhere try to attract for their job and tax growth potential. In this regard, New York’s law makers are clearly out-hustling their Massachusetts’ brethren.
In July 2012, Governor Cuomo of New York signed into law legislation that exempted small breweries from paying an annual brand label fee; that provided in-state small brewers a 14 cent per gallon tax credit against their income tax; and that created a new “farm brewery” license that allows small breweries to, among other things, ship their product directly to retailers on a showing that only 20% of the brewery’s ingredients are produced in New York. The purpose of the legislation was to “strengthen and expand New York’s local craft brewery business,” which includes approximately 90 operating breweries.
Further, this past week, Governor Cuomo signed a law that exempts small and mid-sized breweries from the State’s franchise law which prohibits manufacturers of alcoholic beverages from terminating their wholesaler once that wholesaler has distributed a particular brand. As with many “franchise states,” including Massachusetts, a winery, distillery or brewery that distributed a brand through a New York wholesaler could not terminate that relationship unless certain exigent conditions existed. Under the new legislation in New York, a small brewery is now allowed to terminate a wholesaler for any reason provided that the wholesaler is paid “market value” for the loss of its former brand(s).
In Massachusetts, however, the recent Legislative Session has ended without any significant tax incentives being extended or tailored to the local craft brewing business industry. Moreover, a House Bill that would have amended the current Massachusetts General Law, Chapter 138, Section 25E, the law prohibiting a manufacturer’s termination of a wholesaler, died “on the vine” when it was sent back for further “study.” The proposed bill (H. Bill 1897) entitled “An Act Relative to Small Breweries” would have specifically exempted the “small brewer relationship” from Section 25E’s prohibition against terminating a wholesaler, and would have allowed small breweries to buy their way out of troublesome wholesaler relationships. It was essentially the same change in the law passed in New York and a change in the law endorsed by the Rob Martin, President of the Massachusetts Brewers Guild. The idea, however, presumably requires further “study.”
“Wait till next year,” a once common phrase that is becoming common again when it comes to watching New Yorkers out-hustle the locals, seems to aptly characterize the Massachusetts Legislature when the 55 or so local breweries look for a little help in growing a good thing. The Legislature formally reconvenes in January, 2013.
For the firm’s article on terminating a wholesaler pursuant to G.L. c. 138, sec. 25E, please click the following link: