Shelton Brothers calls out Brooklyn Brewery in statement on New York fiasco

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UPDATE: Headline changed. Please see this update.

(Belchertown, MA) – The Shelton Brothers, importers for dozens of brands in the U.S., recently drew some fire after its legal wranglings with the state of New York led to the immediate end of tax benefits that in-state companiess received (and out-of-state companies didn’t). Notably, the statement takes a jab at Brooklyn Brewery (bolded below).

We’ve heard that there’s been a bit of banter about the recent New York Supreme Court ruling, mostly by ill-informed and emotionally fraught bloggers. (Keep those death threats coming, folks!) The facts here are really quite simple, though the legal and financial issues are apparently a bit difficult to comprehend. Anyway, here’s what is really going on:

New York brewers weren’t being required to pay label registration fees and taxes that out-of-staters, including ridiculously small guys like us, had to pay. We tried to level the playing field by knocking out these costs, for everybody, but in the end the State of New York decided to level it by making New Yorkers pay, the same way we’ve been paying for years. It’s not what we were hoping for – we would have loved it had these fees been eliminated for us, as well, since we pay way more of them than any New York brewer ever will – but, in the end, the decision is at least fair. As people from outside the State, we can do no more to change the law; New York brewers have to get their own legislature to do that. Now that they are seeing what we’ve had to put up with for years, they’re unhappy, and they’re going to be getting these laws changed. That will benefit us too. It’s just too damn bad that instead of lobbying to change the state law they’re wasting time being furious at us when all we did was point out that we were getting screwed.

I don’t believe that anyone who thought about it would argue that little breweries from out of state should pay more in registration fees and taxes than in-state brewers pay. Small in-state brewers paid no registration fees, and all New York brewers except the largest two paid nothing at all in taxes, while every out-of-state brewer or importer had to pay New York’s registration fees (the highest in the country) and New York’s beer taxes on every drop of beer they sold in the state. This is obviously wrong, and both the New York Attorney General and the State Court agreed that it was wrong, as well as unconstitutional. Because there was no doubt on this point, the case was settled, and it was left to the State – not us – to decide how this discrimination against out-of-state breweries would be remedied.

It’s easier to understand how things work when you take the two issues, brand registration fees and taxes, separately.

Brand Registration Fees

From the beginning, we have paid way more registration fees than anyone in New York – about $20,000 just last year. That amounts to 2.5% of the total paid by all brewers and importers, even though our share of the New York market is statistically insignificant – effectively 0%. That’s why we pushed to have the brand registration system, with its onerous fees, eliminated outright. To start with, it serves no useful public purpose. (If it really mattered, the State wouldn’t have let small in-state breweries ignore it completely.) And it’s just a money-making scheme that is really unfair because it hits the little guys who have a lot of little brands much harder than it hits the huge guys with a few huge brands. Basically, it’s a hideously regressive tax.

The State chose instead to eliminate the discrimination issue by simply making every brewery subject to label registration. That’s because New York is nearly broke, like all states, and wants the cash. We are terribly disappointed that the State went the way it did, but we figure that killing the in-state exemption is the first big step toward wiping out brand registration, and those nasty fees, entirely. We are pretty sure that once New York brewers get a taste of what we’ve been forced to swallow for years, they’ll get fired up and get the law changed.

Beer Taxes

We never had any discussions with the State about how to address the problem that only out-of- state brewers have been made to pay the New York beer taxes. This tax discrimination – though it is so plainly wrong – wasn’t the focus of our case. Actually, we didn’t even know that the State had opted to make New Yorkers pay the tax until we received hate mail from the head brewer at Brooklyn Brewery, who gently informed us that we were the new “Antichrist” because Brooklyn would “lose” half a million dollars as a result of the State’s deconstruction of New York’s discriminatory tax scheme, with the consequence that he and other New York brewers would not be getting bonuses this year – and it was all our fault. He added that New York brewers would shortly be going up to Albany, the seat of New York government, tossing all of our cute little foreign brewers into a burlap sack along with a bunch of heavy rocks, and throwing them in the lake. (Is there a lake in Albany? Maybe he meant the Hudson River.)

We have certainly seen evidence of follow-through on that last threat. Credulous bloggers in New York, slavishly taking everything their local brewers tell them as truth, have called for a boycott on the terrific beers our little foreign breweries make. This misplaced angry energy will dissipate eventually, and when it does, maybe the New York brewers will start to address the real issues here. It really isn’t for us and other out-of-state brewers and importers to say whether New York should keep its beer taxes or do away with them, as long as we outlanders are not the only ones paying the taxes while New York brewers go tax-free.

If it really is a matter of whether Brooklyn’s head brewer gets a bonus or not, New York has to decide whether it wants to give him and his colleagues that money, or use it for other essential services, like education, fire and police protection, etc., etc. I know how I’d vote on that. Unfortunately I don’t live in New York. But New Yorkers should be asking why tax breaks intended to reduce the cost of New York-brewed beers are being pocketed by some brewery big- wigs. And people are mad at us?

The truth is that the brewers themselves can avoid this dilemma very simply. They just have to factor this new cost into their pricing – as the rest of us have had to do all along. In the last week, brewers, and their blogger thralls, have been churning shamelessly simplistic claims that New York brewers will collectively “lose” $3 million. In reality, the state tax will add less than two cents to the cost of a pint of beer (the NYC tax that only applies to sales in that municipality is even less), and those costs will be passed along with scarcely any notice by the consumer. Keep in mind that New York consumers are already paying that pittance for beer from out-of-state, and – boycotts aside – they’re still drinking it. Clearly, the New York brewers’ world is not going to fall apart if they are made to pay taxes like the rest of us. Consumers will see an insignificant rise, or no rise at all, in the price they pay for New York beer. The head brewer will get his bonus. And the market is made fair. And certainly no one is going to go out of business, as has been suggested in some of the less thoughtful blogs.

If any New York brewers tell you now that they can’t raise their prices, even so slightly, because that will make their beer more expensive than beer from their small out-of-state competitors, that is nothing but an unwitting admission that up until now they’ve just been pocketing the savings they enjoy from that unfair tax exemption, rather than passing it along to consumers in the form of lower prices.

So all of this howling and fulminating about the persecution of New York’s small brewers is a complete crock of spent grains. I can half understand that it’s a new and unsettling experience for some people suddenly to be on a level playing field, but that doesn’t excuse the carping and the vitriol. It’s a wee bit galling, in view of the fact that the same people had no concern at all about the burden that their out-state brethren had to bear, as long as they themselves didn’t have to pay any tax.

The bottom line is that New York, in a supposed effort to give a leg up to its “small” brewers over really large ones, ended up throwing all out-of-state brewers and importers – the really tiny ones, like us, along with the rather large and the really huge ones – into the coarse burlap bag mentioned by the brewer at Brooklyn. There are plenty of ways to help in-state small brewers that don’t involve totally screwing out-of-state small brewers. Presumably, even while a few more emotional types are hysterically trying to vilify us, cooler heads at the New York State Brewers Association are already getting legislators to look at sensible non-discriminatory measures to help small brewers in New York. Even though they haven’t been all that endearing lately, we’ll support them 100% when they do.

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27 thoughts on “Shelton Brothers calls out Brooklyn Brewery in statement on New York fiasco

  1. 2 cents per pint of beer not only hurts the brewers but also the bar owners who choose to sell their pints and pours as tax inclusive. I wouldn’t be surprised to see these bars potentially switching to tax additional. Which could potentially have a much greater impact on the customer.

  2. From Wikipedia: “To throw (someone) under the bus is an idiomatic phrase meaning to sacrifice another person (often a friend or ally), who is usually not deserving of such treatment, out of malice or for personal gain.”

    It absolutely fits here. It’s not unusual for me to pull out the most interesting part of an interview/statement and use it in a headline. I do it all the time. That’s not misleading anyone.

  3. It is ridiculous for NY brewers to be getting away without paying the same taxes that every other brewer has to in order to sell in that state. I agree, now that each and every brewery has to pay the label tax and the distribution tax, maybe they will get off their collective asses and get up to Albany and change the law for everyone, or accept that this is the way that others have been treated and just deal with it. Sorry about Brooklyn Brewery’s bonuses – you should see what mine looked like this year you dick!

  4. Hey Adam,

    How about locating and posting that letter from the brewer at Brooklyn. Now that would be a great read…

    Thanks,
    Tucker

  5. Great piece of propaganda Shelton Bros. The bottom line is you f^&*ed everybody because of your greed.

    Ps. you are not tiny.

  6. I love how people are blaming the distributor or out if state brewer for this. It was the state. Talk to your own people…they decided you needed to pay. I wish we all got the discount.

  7. the issue here, Adam, is that it’s not just a headline to attract readers. you are actively contributing to the public discourse of this, and increasingly many other news stories. when you use that language, it influences public opinion. case in point, go to the shelton brothers facebook page, there is a thread there. folks there are throwing around the ‘under the bus’ argument. now where do you think they got that? You know, i liked your site so much better when you just shared information. it was simply objective. stick to programming, that’s what you’re good at.

  8. So is this directly from Shelton Bros.? Because if it is, they state themselves “That’s because New York is nearly broke, like all states, and wants the cash”, “New York brewers weren’t being required to pay label registration fees and taxes that out-of-staters, including ridiculously small guys like us, had to pay.”
    So they knew there was a problem, and seeked to exploit it? Oh, and they are Importers, not brewers.
    They advertise about 100 European Brewers and almost 500 different beers that they import.
    another quote “From the beginning, we have paid way more registration fees than anyone in New York – about $20,000 just last year. That amounts to 2.5% of the total paid by all brewers and importers, even though our share of the New York market is statistically insignificant – effectively 0%” why are they after New York so bad if their share is “effectively 0%”
    Does anyone else see this?? Saw a hole at a point they could use and used it in their favor??

  9. Shelton, you said it best…you are not NY’ers, which makes sense on why you wouldn’t care about NY breweries. Not every brewery in NY is the size of Brooklyn, but even if they were, these places create jobs for us locals. Tax breaks are in place for a reason, whether it is pennies or hundreds of dollars, they add up over time, if you didn’t believe that you would’ve never opened your mouth on the matter. Thanks for raising costs for the locals. you want our business? Then make your costs competitive. The price of your brews in the store is the same to order direct with freight charges, plus the supply you provide is laughable. Get your act together. You want to play in NY with the big boys, then grow up and be a big boy and not a tattle tale. Giving breaks to local businesses keeps local economies thriving. Whether on a state level or a country level, it isn’t hard to understand. I would boycott your products if they ever actually made it to shelves. Shame that De Struise, Cantillon, and Stillwater allow you to handle their fine brews, but as normal I will continue to trade for them or order overseas since your representation in NY is invisible. You want to be treated the same as NY breweries? Perhaps you should match their supply first? Your douchery is on the level of a politician.

  10. Shelton is really going to be upset that they paid $20K+ for registrations. Perhaps they should focus on developing a single brewery rather than the newest, craziest single-hopped Mikkeller (side note: I love Mikkeller, but for the sake of registrations, many of Shelton Brothers brands coudnt develop a flagship brand if their lives depended on it).

    Registration fees might be onerous for an importer, but that is the risk you take when representing as many breweries as Shelton does. Rather than bash a great local brewery such as Brooklyn, be thankful that they took a chance before many others in the country did on providing the market with so many great beers.

  11. Damnit, I missed the mention about Garrett Oliver (edit: he didn’t specifically name him, no). You’re right.

    But I don’t get the programming reference.

  12. I think the key here is the constitutionality of the taxes, not who was hurt by the outcome. I don’t subscribe to the notion that you can ignore the constitution as long as it’s convenient/beneficial to you, which is the stance that the NY brewers here seem to be taking.

    I think everyone reading this blog wants brewers and importers of good beer to succeed, but we should push for laws that accomplish that within the legal framework.

  13. What mention about Garrett Oliver? To begin with this says they received an email from Brooklyns Head Brewer, that is not Garrett’s job there. Ultimately this is neither here nor there.

    I have a hard time believing that someone from Brooklyn actually sent such nonsense to the Shelton Bros. and if they were going to “out” them at least have audacity to prove it.

    When push comes to shove this is a sad tactic by an increasingly marginalized business venture that has a history of goofy nonsensical complaints about the beer industry. They bad mouthed the more toward bigger bolder beers when their imports began getting dusty on the shelves, calling them gimmick beers and have since gone pretty deep into the gimmick realm themselves.

    Piss poor job by New York State. As a New Yorker, I’ll buy New York and continue to never buy Shelton imported products the same way I have been doing since they started procuring crap gimmick beers like Bad Elf, Insanely Bad Elf, etc etal . Even it means passing up Westveletern when it arrives, so be it.

  14. That simply is not nor has never been his job title there. A google search, really? Just because websites and articles about him incorrectly reference him as head brewer does not make it so.

    Either way, buy New York, buy Brooklyn, buy American Craft, screw the Shelton Bros.

  15. I always prefer a direct source ;)

    Good sourcing, I gave up on Beer Advocate recently. Forget that from time to time the real deals will show up there.

  16. WOW! I have read some self-justifying crap in my time, but that rubbish from Shelton Bros. takes the cake.
    Next time (and there will be a next time) please don’t try and defend the indefensible, just keep your mouth shut. You f#%ked up, big time. But instead of say ‘MY BAD!’ you try and justify your actions by saying that ‘IT’S NOT FAIR.’
    I come from Australia, where our craft beer industry is growing and developing, where the industry is doing its best to battle the giants of the industry. I just hope that the Australian craft beer scene doesn’t end up with such selfish douches dragging the industry backwards just because they think someone else has it easier than them.
    BOO F#&KN’ WHOO Shelton!
    And as far as things being fair? Many countries and communities implement protection measures for things such as meat producers, car manufacturing and grain production, to name but a few. It can help foster growth and confidence in an industry, save and/or create jobs, make business more viable, etc. External, international, interstate taxes have always been a part of business. Why shouldn’t a state help or protect its people and businesses?
    But then people like the Shelton Bros. come along, wanting to make just a little more profit. It doesn’t matter that this comes at the expense of others. There are very few level playing fields in the world of business, the selfish dogs as Shelton need to stop their bitching and moaning , and get on with selling beer.

  17. Having directly dealt with Shelton Brothers beers in the past, I have seen firsthand the outright greed, and slimy legal dealings they have perpetrated. The owner acts as his own attorney, thus no legal fees or care of wasting the state’s court time, or the time and money of those he has sued. All these legal proceedings were initiated by them. Everyone who has ever looked at the pricing of their beers agrees they are expensive. Interesting as some of their products that are now available in plastic key kegs, thus reducing the weight and shipping costs drastically, plastic is way lighter than metal or glass, yet there has been no reduction on their pricing. Only escalation. Cheaper, lighter kegs means more money in their pockets. That saving was not passed on to buyers or consumers. It would be hard to believe they were acting on environmental grounds too. Instate breweries deserved to waive the fees, it is more expensive to do business here than nearly anywhere else. Maybe that is why Mr. Shelton moved out of NY, to keep more for himself.

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