The number of Bourbon barrels in Kentucky reached a record 11.4 million in January.
The industry marked its fourth consecutive year filling more than two million barrels, while paying a record $40 million in barrel taxes. Including other aging spirits, the state’s total inventory is almost 12 million barrels. The tax-assessed value of all barrels also hit an all-time high this year of $5.2 billion.
While barrel records are typically cause for celebration, Eric Gregory, president of the Kentucky Distillers’ Association warned the impact of aging barrel taxes is more a cause for concern. Kentucky remains the only state that taxes aging barrels of spirits.
“We’re thrilled that our homegrown and historic industry continues to flourish, but these numbers could have been much higher if Kentucky didn’t have a major barrier to entry for new distilleries in the form of this barrel tax,” Gregory said.
(Photo from KDA)
Since the beginning of the year, Kentucky has fallen to 12th in the country in the number of distilling operations, according to federal Tax & Trade Bureau (TTB) statistics. There are now more than 2,300 distilleries in all 50 states, while Kentucky has fewer than 100. In the last year, Kentucky ranked 29th in the country in the rate of adding new distilleries.
Kentucky’s share of distilleries nationwide has plummeted from a high of 24% to now just 6%, and Kentucky’s percentage of distilling jobs has dropped from 43% down to only 30%, even though the state crafts 95% of the world’s Bourbon.
In the last five years alone, barrel taxes have more than doubled, increasing 102%. Kentucky distillers are paying nearly $40 million in barrel taxes this year – $7 million more than last year.
“We are only asking to be treated like every other manufacturer in Kentucky – and possibly the world – whose goods are not taxed during the production process,” Gregory said. “Barrel taxes hamper growth, punish success and jeopardize the state’s ability to attract new distillers in the birthplace of Bourbon.”
The new production numbers are based on inventories reported as of Jan. 1, submitted to the Kentucky Department of Revenue for tax purposes and include all distilling companies in Kentucky.
Kentucky Statistics:
• Total barrels of Bourbon: 11,406,135
• Number of Bourbon barrels filled in 2021: 2,619,633
• Total inventory including Bourbon and other spirits: 11,982,965
• Assessed value on all barrels for tax purposes: $5,207,221,744
Kentucky Bourbon has seen tremendous growth since the turn of the century. Production skyrocketed 475% since 1999. The state’s aging Bourbon inventory has more than tripled during that time, while the tax-assessed value of all barrels is now $5.2 billion, a staggering $780 million increase over 2021.
The Bluegrass State continues to benefit with $9 billion each year into the Kentucky economy, with the industry sustaining more than 22,500 jobs with an annual payroll topping $1.2 billion a year, and draws millions of tourists from around the world to the Kentucky Bourbon Trail.
A key export, distilling has the state’s highest job spin-off factor among top manufacturers, buying at least 17 million bushels of corn and other grains every year, mostly from Kentucky farm families. The industry is also investing more than $5.2 billion in new stills, warehouses, bottling lines, tourism experiences and more.
Distilling also is the highest taxed among all large manufacturing industries in the Commonwealth, paying more than $285 million in local and state taxes every year. That’s $180 million more in taxes each and every year now than distillers paid a decade ago.
Kentucky distillers also pay over $1.8 billion in federal alcohol taxes, by far the most among any state.
Of the 11 states ahead of Kentucky in the number of distilleries, all but Washington license state have a significantly lower spirits tax rate than Kentucky, Gregory said. Kentucky’s tax rate is $8.41 per bottle; California, which leads the nation in the number of distilleries, is $3.30.
“We have proven, time and time again, that Bourbon is a great investment for Kentucky,” Gregory said. “But we cannot ignore the fact that more than 2,200 distilleries have made the business decision not to locate here, despite our rich traditions and ready-made infrastructure.”
Gregory said the time is now – when the industry is healthy – to eliminate barriers to growth like the barrel tax and to continue modernizing Kentucky’s alcohol laws.
“It’s critical that distillers, community partners and elected officials work together to attract more distillers and investment to the Commonwealth because there will come a day – hopefully not in our lifetimes – when Bourbon is not as popular as it is right now.
Kentucky Distillers Assoctiation
