Theo Nash
Alcoholic beverages are taxed differently across the United States, with distilled spirits facing the stiffest tax rates of all alcoholic beverages. In North Carolina, the sales tax on alcohol is 4.75% for liquor, while beer and wine are taxed at lower rates. Excise taxes are also levied on distilled spirits in North Carolina, which can result in a final price that is more than double the original. These excise taxes are often passed on to the consumer, leading to higher prices for alcoholic beverages in the state.
| Characteristics | Values |
|---|---|
| North Carolina's general sales tax on liquor | 4.75% |
| Type of state | Alcoholic beverage control state |
| Availability of liquor | Only in state alcohol stores or "ABC Stores" |
| Excise tax on distilled spirits | Fifth-highest in the country |
| Excise tax on wine | $1 per gallon |
| Excise tax on beer | 62 cents per gallon |
| Federal tax on liquor | $13.50 per gallon |
| State excise tax | 30% |
| Additional taxes | County or municipal ABC board taxes, state distribution taxes, mixed beverage tax |
| Final price | Includes a 7% state sales tax |
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What You'll Learn
North Carolina's general sales tax on alcohol
Distilled spirits, such as liquor, face the highest tax rates among alcoholic beverages due to their higher alcohol content. In North Carolina, distilled spirits are subject to a state excise tax of 30%, as well as various smaller state distribution taxes and county or municipal ABC board taxes. These taxes are built into the price of the liquor, and a 7% state sales tax is added, resulting in a significant final price for consumers.
Beer and wine taxes in North Carolina are generally lower than those for spirits. According to a 2017 study, the state's wine tax was $1 per gallon, impacting 750-milliliter bottles with an 11% alcohol volume. Meanwhile, the beer tax in North Carolina was listed as the eighth-highest in 2016, at 62 cents per gallon for 12-ounce containers with a 4.75% alcohol volume.
It's important to note that North Carolina is an "Alcoholic Beverage Control state," which means the sale of liquor and spirits is state-controlled. Liquor sales are restricted to state alcohol stores, and these stores set prices to generate revenue, sometimes inflating them instead of imposing formal taxes. Direct-to-consumer (DTC) shipments of alcohol are subject to sales tax requirements and "markup" taxes, where the retail value is multiplied by a percentage rate.
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Excise tax on spirits
North Carolina levies a high excise tax on spirits, which has been described as the fifth-highest in the country. The state earns revenue by selling alcoholic beverages through state-run Alcohol Beverage Control (ABC) stores, and hence, an additional excise tax is not required on liquor. However, the price of alcohol sold in North Carolina includes federal alcohol excise taxes, which are generally passed on to the consumer in the beverage's price.
The federal excise tax on distilled spirits is typically based on the alcohol content, place of production, or place of purchase. Spirits are subject to higher tax rates per alcohol content due to their greater alcohol percentage compared to wine or beer. A one-ounce shot of 40% alcohol-content spirit carries a higher tax than a 12-ounce beer with a 4.8% alcohol content with the same amount of alcohol.
In North Carolina, distilled spirits are taxed at multiple stages, including federal excise taxes, state excise taxes, county or municipal ABC board taxes, and state distribution taxes. The federal tax on liquor is approximately $13.50 per gallon, while the state excise tax is set at 30%. Additionally, a 7% state sales tax and a mixed beverage tax for establishments serving mixed drinks contribute to the final price consumers pay.
The high excise taxes on spirits in North Carolina have been a cause for concern for the craft distilling industry. Industry experts argue that high excise taxes hurt competitiveness and force small craft distillers to increase their prices. There have been calls for reforming tax policies and reducing excise taxes to support the growth of the craft distilling industry and promote tourism and agriculture.
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Alcohol taxes on DTC shipments
North Carolina's general sales tax of 4.75% applies to the purchase of liquor. The state is an "Alcoholic beverage control state", where the sale of liquor and spirits is state-controlled. Liquor sales are restricted to state alcohol or "ABC" stores. The state generates revenue from the sale of alcoholic beverages, so no additional excise tax is levied on liquor. However, the price of alcohol in North Carolina includes federal alcohol excise taxes, which are typically passed on to the consumer.
When it comes to direct-to-consumer (DTC) shipments of alcohol, the tax rules can get complicated. Licensed alcohol shippers are generally required to register for sales tax in most states, and North Carolina is no exception. The state has specific compliance rules for businesses shipping wine directly to consumers (DTC) within the state. Direct shippers must notify their North Carolina wholesaler of their intent to ship any brand labels already in distribution. Additionally, wine shippers are required to affix a conspicuous notice to each package stating, "Contains alcohol: Signature of a person 21 years of age or older is required for delivery."
Several states, including North Carolina, have "markup" taxes, where the retail value of the alcohol is multiplied by a percentage rate. These markup taxes are often passed on to the consumer. Traditional "gallonage"-based excise taxes are also typically due on DTC shipments and may or may not be passed on to the consumer. Wineries with permits to sell both wholesale and direct-to-consumer in North Carolina must file monthly non-resident wine vendor reports and an annual wine shipper excise tax return.
The North Carolina Department of Revenue (NCDOR) has made changes to alcoholic beverage tax forms to ensure consistency in reporting and paying alcohol taxes. Wineries holding a Nonresident Wine Vendor Permit must report shipments to NC-licensed wholesalers monthly using a specific form. These changes aim to streamline the reporting process and ensure compliance with tax requirements for DTC shipments of alcohol in North Carolina.
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Wine and beer taxes
North Carolina collects special excise taxes on the sale of all types of alcohol, including wine, beer, and liquor. Alcohol taxes are sometimes referred to as "sin taxes", which also cover cigarettes, gambling, and drugs. The IRS collects a federal excise tax on alcoholic beverages, which is included separately from North Carolina's alcohol taxes in the final purchase price.
The North Carolina excise tax on wine is $1.00 per gallon, higher than 58% of the other 50 states, and already included in the purchase price. The state's excise tax on beer is $0.62 per gallon, one of the highest beer taxes in the country, and also included in the purchase price of all beer bought in the state.
Federal excise tax rates on wine and beer are adjusted depending on the percentage of alcohol in the beverage. A proof gallon is a gallon of liquid that is 100 proof, or 50% alcohol. Some tax discounts are available to small brewers.
North Carolina's general sales tax of 4.75% also applies to the purchase of liquor. As an Alcoholic Beverage Control State, the sale of liquor and spirits is state-controlled and only permitted in state alcohol stores, also called "ABC Stores". The state earns revenue from these sales, so there is no additional excise tax on liquor.
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Federal tax on liquor
North Carolina's general sales tax of 4.75% applies to the purchase of liquor. On top of this, there is a federal tax on liquor of about $13.50 per gallon, although this varies based on the alcohol content. The federal tax is collected from the brewer/distiller by the Alcohol and Tobacco Tax and Trade Bureau and is generally passed on to the consumer in the beverage's price.
North Carolina is an "Alcoholic Beverage Control state", meaning that the sale of liquor and spirits is state-controlled. Liquor sales are only permitted in state-run alcohol stores, also called "ABC Stores". Distillers pay a federal tax on liquor they produce for sale, as well as a 30% state excise tax, any taxes set by county or municipal ABC boards, and several smaller state distribution taxes. These taxes are built into the price tag of a bottle of liquor on the ABC store shelf.
The North Carolina excise tax on distilled spirits has risen to the fifth-highest in the country, according to recent data from the Distilled Spirits Council of the United States. Consumers pay an average state excise tax of $14.66 per 750ml bottle of 80-proof liquor. The North Carolina liquor tax was ranked as the eighth highest in a study in 2016—at $12.48—but rose three spots in the 2017 study.
The high excise tax rates on distilled spirits in North Carolina have been criticised by industry experts as bad for business. Bill Owens, president of the American Distilling Institute, has stated that small craft distilling operations are harmed by high excise taxes as they "have to pass that on to the price of a bottle and it makes [craft distillers] noncompetitive". The American Craft Spirits Association is working at the federal level to reduce the federal excise tax on spirits, lobbying Congress in July to reduce the tax by 80%.
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Frequently asked questions
North Carolina's general sales tax of 4.75% applies to the purchase of liquor.
The North Carolina excise tax on spirits is $14.66 per 750 ml bottle of 80-proof liquor. This is the fifth-highest in the country.
The wine tax in North Carolina is $1 per gallon, affecting 750 ml bottles of 11% alcoholic wine.
The beer tax in North Carolina is 62 cents per gallon, affecting 12-ounce containers of 4.75% beer.
Yes, there may be additional taxes such as case and bottle fees, wholesale taxes, and retail and distributor license fees. Establishments that sell mixed drinks with liquor must pay an additional mixed beverage tax.
