BEFORE THE DEPARTMENT OF REVENUE
OF THE STATE OF MONTANA
In the matter of the amendment of ARM 42.13.701 pertaining to Production Increments Used in the Calculation of Taxes on Beer
NOTICE OF PROPOSED AMENDMENT
NO PUBLIC HEARING CONTEMPLATED
TO: All Concerned Persons
1. The Department of Revenue proposes to amend the above-stated rule.
2. The department will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, please advise the department of the nature of the accommodation needed, no later than 5:00 p.m. on July 16, 2021. Please contact Todd Olson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or firstname.lastname@example.org.
3. The rule as proposed to be amended provides as follows, new matter underlined, deleted matter interlined:
THRESHOLD INCREMENTS USED IN THE CALCULATION OF TAXES ON BEER (1) Section 16-1-406, MCA, requires each barrel of beer sold in Montana to be taxed. This tax is based upon the total number of barrels of beer produced by a brewer in a year. For purposes of this tax, "year" means the department's fiscal year which begins on July 1 of each calendar year and ends on June 30 of the following calendar year. "Annual" or "annually" are synonymous with the department's "year."
(2) The brewer production increments and graduated per barrel tax rates provided in 16-1-406, MCA, correspond to a brewer's reported annual production regardless of whether the beer is produced nationally or internationally.
(a) For the purposes of production reporting and calculating taxes owed, a brewer who has produced 10,000 barrels of beer or less in the preceding year will begin the next year at the $1.30 per barrel tax rate. The month after the brewer exceeds a production increment, the per barrel tax rate will increase to the next production increment amount. For example, if the 5,001st barrel is produced on May 20, the tax rate will be $1.30 for all of the month of May. The per barrel tax rate will increase to $2.30 beginning with the month of June and will continue at that rate for the remainder of the year or until the month after the next production increment is exceeded.
(b) For the purposes of production reporting and calculating taxes owed, a brewer who has produced 10,001 barrels of beer or more in the preceding year will begin the next year at the $4.30 per barrel tax rate.
(c) For the purposes of production reporting and calculating taxes owed, a new brewer will begin the year at the $1.30 per barrel tax rate. The month after the new brewer exceeds a production increment, the per barrel tax rate will increase to the next production increment amount. If a new brewer produces more than 10,000 barrels in the first month of the year, all its production will be taxed at the $4.30 per barrel tax rate for the year.
(3) A brewer must notify both the department and its wholesalers, in writing, by the end of the month when a production increment is exceeded, resulting in the brewer moving to the next production increment.
(1) The month after a brewer exceeds a production threshold, the tax rate will increase to the next incremental tax rate. For example, if the 5,001st barrel is produced on May 20, the tax rate will be $1.30 for all of the month of May. It will increase to $2.30 beginning with the month of June's production and will continue at that rate until the month the next threshold is exceeded, if applicable. Each brewer will notify both the department and its wholesalers, in writing, by the end of the month in which it exceeds a production threshold.
(2) In situations where a brewer produces over 10,000 barrels nationally and internationally in the first month of the fiscal year, all of its production will be taxed at $4.30 for the year.
(3) The number of barrels of beer produced by a brewer in a year is the total of all barrels produced nationally and internationally.
(4) For purposes of this tax, a year is the state's fiscal year, July 1 through June 30.
AUTH: 16-1-303, MCA
IMP: 16-1-406, 16-1-409, MCA
REASONABLE NECESSITY: Based on an inquiry from industry and the department's subsequent review of ARM 42.13.701, the department finds it necessary to propose amendments to the rule regarding the department's administration of beer production reporting and tax provisions contained in 16-1-406, MCA.
Specifically, the current version of the rule does not provide adequate procedural guidance when production for one year transitions into the next and does not provide adequate substantive guidance for graduated production and tax methodology for brewers whose production falls within either of the two tiers under 10,000 barrels of beer versus that for brewers whose production exceeds 10,001 barrels. The department proposes the addition of new (1) and (2) to lend this necessary support and give greater deference, without repetition, to the system established under 16-1-406, MCA.
In addition to the amendments clarifying processes and tax administration, the department proposes to relocate and restate rule sections for improved organization and increased clarity. New (3) is a restatement and relocation of the reporting requirement at the end of current (1); and current (3) and (4) have been restated and relocated to proposed (1) and (2), respectively, for improved consistency.
4. Concerned persons may submit their data, views, or arguments concerning the proposed action, in writing, to Todd Olson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or e-mail email@example.com and must be received no later than August 10, 2021.
5. If persons who are directly affected by the proposed action wish to express their data, views, or arguments orally or in writing at a public hearing, they must make written request for a hearing and submit this request along with any written comments to the person named in #4 no later than 5:00 p.m., August 10, 2021.
6. If the agency receives requests for a public hearing on the proposed action from either 10 percent or 25, whichever is less, of the persons directly affected by the proposed action; from the appropriate administrative rule review committee of the Legislature; from a governmental subdivision or agency; or from an association having not less than 25 members who will be directly affected, a hearing will be held at a later date. Notice of the hearing will be published in the Montana Administrative Register. The number of hearing requests necessary for the department to conduct a public hearing is 12, which is approximately 10 percent of the number of domestic breweries and beer wholesalers who are impacted by these rule changes.
7. The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices. Notices will be sent by e-mail unless a different mailing preference is noted in the request. Such written request may be mailed or emailed to the contact person in #4.
8. An electronic copy of this notice is available through the Secretary of State's web site at sosmt.gov/arm/register.
9. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.
10. With regard to the requirements of 2-4-111, MCA, the department has determined that the amendment of the above-referenced rule will not significantly and directly impact small businesses.
/s/ Todd Olson /s/ David R. Stewart
Todd Olson David R. Stewart
Rule Reviewer Authorized Signor
for the Department of Revenue
Certified to the Secretary of State June 29, 2021.