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The F.X. Matt Brewery in Utica. Photo: Saranac.com
The F.X. Matt Brewery in Utica. Photo: Saranac.com

New York State beer brewers fend off excise tax

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Hot weather calls for cold beer, and that means good business for New York's microbreweries. But as the Innovation Trail's Ryan Delaney reports, a lawsuit earlier this year almost caused New York's beer-makers' fizz to go flat.

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Reported by

Ryan Delaney
Reporter, The Innovation Trail

Nick Matt knows the F.X. Matt brewery in Utica like a second home. His grandfather started the brewery 124 years ago, and Matt was practically raised here. From an old catwalk, he looked down at its two massive copper kettles and said, “This was all done after World War II. These brew kettles are that old.”

While you may not know the name F.X. Matt, if you're a beer drinker, you've probably heard of the popular Saranac beers it makes. “Saranac Adirondack Lager is a much more dry-tasting product, Saranac Pale Ale has got more of a fruity taste to it,” said Matt. When he first started making Saranac in the 90's, there were only 24 microbreweries in the entire state. Today the state liquor board recognizes 124 breweries, which is about half the number of wineries dotting the Finger Lakes. New York-made beer taps about $200 million in revenue each year, according to the New York Brewers Association. Growth was helped in part by a gift of sorts given by New York in 1991: breweries got a waiver from having to pay excise tax and label fees.

However, Matt says that growth almost came to a halt this year. After a lawsuit by a Massachusetts brewery, a court deemed the waivers illegal. “On March 30th they told us about this and they said 'start paying the excise tax effect March 28th' and everybody's like 'you mean next year?' 'No, two days ago.' It was kind of a shock,” said Matt. The excise tax would require breweries to pay 14 cents on every gallon they brew, and it takes more than 15 gallons to fill a keg. In addition, each brewery would have to pay $150 for each label, or style of beer, it makes every year.

Matt says that would add up to $350,000 a year on his bottom line. For Rochester’s Genesee Brewery, It would add up to $900,000. The excise tax will have more even damaging effects on smaller breweries and brew pubs in the state, according to president of the New York Brewers Association David Katleski.

“The margins are so slim in this industry, especially when you’re dealing with raw materials that fluctuate based on how nice Mother Nature is to you,” said Katleski. He makes 70 different kinds of beer at his Empire Brew Pub in Syracuse. Between the label fees and excise tax, he says it will mean having one less employee.

He just purchased 22 acres in nearby Cazenovia with plans to open a brew house and farm. However, when he heard about the tax, he almost scrapped the plans and was contacting real estate brokers in Pennsylvania and New Jersey. But before deciding to move, he made some calls to New York politicians. “I think the legislators and the lawmakers in Albany recognized that not only are we considering doing that, but other companies would be considering doing that as well and they didn't want that to happen,” said Katleski.

It seems lawmakers heard the call. In the waning days of the legislative session, they passed a tax credit that will reimburse brewers for most of the excise tax and label fees they now have to pay. Katleski says Albany realized it shouldn't cut off on an industry that employs 3,500 people and is growing quickly.

According to Matt, the jobs and revenue his brewery generates are important for a town that's struggled the past few decades. “We're somewhat symbolic of this area,” he said. “I think we're looked at as one of the kind of key things that this area is proud of. I think people when they go places and they see Saranac, they're really pleased that that comes from their hometown.”

The neighborhood surrounding the Matt Brewery is dotted with empty warehouses and vacant buildings. However, several bars and another brew pub also now line a neighboring block. F.X. Matt is in expansion mode, too. The brewery is installing a massive green energy project that will generate 40% of its electricity, which shows that the brewery doesn’t plan on slowing down anytime soon.

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