The Case For (and Against) Including Tax in Your Beer Prices
When opening a new brewery taproom, owners are faced with myriad large-scale decisions relating to build-out, design, and operations. While the details of determining pricing schemes, pour sizes, and sales specifics might not be at the forefront of planning, they are certainly all critically significant to the financial success of your taproom.
One such detail to consider is the handling of sales tax, and the jury is still out on whether to include or exclude sales tax in your pricing, with compelling arguments weighing in on both sides.
A Complicated Decision
Those in favor of including sales tax in the price of beer and merchandise in their taprooms site positive reasons, such as simpler cash management, streamlining transactions, and even potentially increased tips for bar staff. While those in opposition claim loss of revenue – especially when additional credit card processing fees are considered – and the possibility for the customer perception that overall prices are too high (when altered to include tax).
With pros and cons weighing in from each direction, the decision “To Tax or Not To Tax” can present itself as a complicated and potentially costly consideration for your brewery.
Less Change, Larger Tips, No Surprises
At HiHo Brewing CompanyOpens in new window in Cuyahoga Falls, Ohio, owner Ali Hovan has included taxes in the price of her beers since opening day. The inclusion of sales tax keeps her cash transactions simple, eliminates the need for making change, and allows her customers to simply pay the price they see on the menu. In addition, the taproom staff at HiHo claim to see larger tips as a result, as opposed to the customers just leaving random change on the bar.
“Our prices have always included tax, because we feel it is important that what you see on the menu is what you pay. There are a lot of reasons for this, but at heart it is an issue of integrity for us.”
Gay Gilmore, Optimism Brewing
Others agree, citing speedier transactions, happier customers, and larger tips for the bar staff. For Gay Gilmore of Optimism Brewing in Seattle, Wash., the heart of the issue is integrity – customers pay the price they see on the menu with no hidden charges and no surprises.
But while this list of positives does seem appealing, there are certainly other factors to consider.
The Price of Including Tax
Depending on demographics, location, and customer base, the arguments toward including taxes in product price can come with a sizeable price tag for the taproom. With sales taxes and potential local or food and beverage taxes (which range nationwide), the brewery winds up covering that cost out of the total product price, often causing the need to raise the per-pour cost in order to cover the expense. Add that cost to potential credit card surcharges, and profits diminish even further.
At Switchyard Brewing Company in Bloomington, Ind., owner Kurtis Cummings claims the debate on including tax or not has been a hot topic in the taproom for the last six months. With 95 percent of all transactions in the last year at their brewery having been credit card, not cash, the goal of “simplifying transactions” seems a moot point, and he sees the inclusion of taxes in their pricing as “leaving money on the table”… to the tune of 7-8 percent of all income.
Simple Transactions Aren’t Always Simpler
The argument for simplifying transactions or streamlining cash sales also sees opinions on both sides of the fence.
“The fact is, the vast majority of our business is debit or credit cards, so making change ‘easy’ is pointless. Think about it – when you see a t-shirt at Target, the price doesn’t include sales tax. Folks are used to that.”
Barbara Gerovac, Anaheim Brewery
Barbara Gerovac of Anaheim Brewery in California claims that the vast majority of their business is debit or credit cards, so making change “easy” is pointless. She also compares taxes to retail sales of other items, noting that customers are used to seeing a price tag and knowing that it doesn’t include tax.
To further complicate matters, the occasional discount a brewery may offer to a customer can confuse the “round number” pricing anyway, rendering it a moot point. If a $7 pint receives a 10 percent discount, the bar staff is right back to dealing with change and odd numbers. At Red Bear Brewing in Washington, D.C., they simply round transactions up to the nearest quarter when providing change, eliminating the need for small coins and simplifying the cash-out process without affecting their bottom line by much at all.
Communication Is Key
While there are passionate opinions on both sides of the decision over whether “To Tax or Not To Tax,” one thing remains consistent: the importance of clear communication to the customer.
Regardless of your brewery’s choice on the subject of taxes, ensuring that your customers are clear on your practices will allow them to enjoy their experience in your brewery without concern or confusion over what they’ll ultimately be paying, thus keeping the focus where it belongs – on consuming great independent craft beer.
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Article Retrieved from Brewers Association, written By Melissa Romano .