Jack Daniel’s, the largest maker of whiskey in Tennessee, is attempting to stop an alleged property tax on whiskey barrels, the New York Post reports. The company argues that the barrels are not equipment, but are in fact part of the product. The barrels had been withheld from property tax considerations. Resale of the barrels has become a profitable sub-industry, and the new “tax” threatens to cripple it, opponents of the measure say. Spokesmen for the company also point out that the new tax is industry-wide. Even if Jack Daniel’s can pay the tax with little trouble, smaller distilleries would be adversely affected. This state level dispute is in contrast to a federal law cutting the excise tax for makers of spirits. That law also gave tax relief to breweries, especially smaller ones. Jack Daniel’s hailed the deep cut in the excise tax as good for the industry as a whole. The legal resolution will probably turn on the question of whether the barrel is equipment, or a separate product altogether.
Advocates for the beverage producers say that about 60 percent of the retail price consumers pay is taxes. This new assessment would cost Jack Daniel’s an estimated 2.8 million dollars this year, based on anticipated production of about 2 million barrels.
A section of the state constitution prohibits any such taxes, except inspection fees. It is apparent that from the whiskey giant’s perspective, an effective property tax would be contrary to the state constitution. The state claims instead that it is not a new tax, but an audit of Jack Daniel’s in particular. Much of what is assessed is self-reported, and an audit indicates the belief that a major error has taken place. The state constitution does permit audits at any time, especially in regard to major firms. It will be an intriguing case to watch.