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Distillers could get a bigger shot of sales

State bill would boost local distilleries
By Edward Stratton

The Daily Astorian

Published on February 13, 2018 4:56PM

Mike Selberg, owner of Cannon Beach Distillery, was one of two distillers to testify Monday in Salem on behalf of a bill to let the industry avoid state fees on tasting room sales of up to $250,000 a year.

The Daily Astorian

Mike Selberg, owner of Cannon Beach Distillery, was one of two distillers to testify Monday in Salem on behalf of a bill to let the industry avoid state fees on tasting room sales of up to $250,000 a year.

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Larry Cary, owner of Pilot House Distilling, said a bill letting him avoid state fees on the first $250,000 in tasting room sales each year would help his company expand.

The Daily Astorian

Larry Cary, owner of Pilot House Distilling, said a bill letting him avoid state fees on the first $250,000 in tasting room sales each year would help his company expand.

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Two Clatsop County distillers and others around the state could keep all revenue from tasting rooms under a bill pending in Salem.

The Oregon Liquor Control Commission buys in bulk and owns liquor sold retail at liquor stores or distillery tasting rooms. Distillers get 49 percent of the retail profits at liquor stores and 68 percent at tasting rooms.

Senate Bill 1564 would create a tasting room permitting system and allow up to $250,000 in sales per year without fees. The bill would allow multiple tasting rooms away from the distillery and let licensed out-of-state distillers open locations in Oregon.

The change could be a big boon for small distillers such as Astoria’s Pilot House Distilling and Cannon Beach Distillery, where the vast majority of sales are in tasting rooms.

Mike Selberg, owner of Cannon Beach Distillery, sold 571 cases of liquor from his on-site tasting room last year and said he paid the state more than $105,000 in fees, about 33 percent of the liquor’s retail value.

“The OLCC never touched these spirits,” he said. “They never went to an OLCC warehouse or liquor store. We did all the work to manufacture and sell these bottles.”

The fees were nearly twice the distillery’s payroll for four employees and 25 percent of gross receipts last year, he said.

Larry Carry runs Pilot House with his wife, Christina, in Astoria. About 70 percent of the distillery’s sales come from an adjoining tasting room on Duane Street.

“Right now, the way the system’s set up, it’s not a profit center for the distillery,” Cary said. “It’s a profit center for the state.”

A Legislative Fiscal Office report estimated the bill would cost the state $3.4 million in revenue between 2019 and 2021. The loss could be greater if distilleries reorganize and add to the 55 tasting rooms under the $250,000 threshold.

But both Cary and Selberg said the financial relief could allow them to invest more in expansion and employees. The bill has received broad industry support, including from the Oregon Distillers Guild, a craft-distilling trade group. Selberg was one of two distillers to testify during the bill’s first public hearing Monday in Salem.

The state’s largest distiller, Hood River Distillery, maker of popular brands Pendleton Whiskey and HRD Vodka, has come out against the bill. The company argues the bill could undercut the liquor control commission and invite large, out-of-state competitors.

“We believe this legislation weakens the state system,” Hood River CEO Ronald Dodge told Willamette Week. “We didn’t start out with a state subsidy, and we have still been able to benefit from Oregon’s system. The short-term gains included in this bill do not outweigh the potential serious, long-term, harmful consequences.”

The cut in state fees would come on the heels of the Republican tax plan cutting fees on distilled spirits from $13.50 to $2.70 per gallon for the first 100,000 gallons produced.



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