I recently stopped at the local liquor store to pick up a bottle of pre-made Old Fashioned from a local Minnesota distillery I'd had my eyes on for a while. I paid just under $40, which is more than I typically pay for alcohol (especially as a primarily beer-drinker); but -- I figured -- I'm supporting a local business rather than buying a commercial, mass-produced product. I wasn't the only one who though the cost was high, though; seeing the receipt on the counter at home, my wife commented, "Wow, sales tax is high!" Sales tax was somewhere between $3-$4, which amounted for nearly 10% of the cost.

As it turns out, Minnesota's sales tax on alcohol in 2021 is one of the highest in the nation, and stiff drinks -- or all distilled spirits -- face the stiffest tax rates. World Population Review explains why and how alcohol is taxed:

 

An alcohol excise tax is usually a tax on a fixed quantity of alcohol. Producers, importers, wholesalers, and sometimes retailers pay alcohol taxes; however, the costs of these taxes are passed down to consumers through increased prices.

In the United States, "a drink" has 0.6 ounces of pure alcohol in it, with "one drink" being:

  • 12 ounces of beer
  • 8 ounces of malt liquor
  • 5 ounces of wine
  • 1.5 ounces of 80-proof distilled spirits or liquor (40% alcohol proof)

World Population Reviews also explains why distilled spirits are taxed higher than other alcohols like beer and wine; in short, it's because spirits have a higher alcohol content.

Taxes on spirits are significantly higher than beer and wine at $13.50 per gallon, while beer is taxed at $18 per barrel and wine is $1.07-$3.40 per gallon. This is because spirits have higher alcohol content than the other categories.

The average alcohol sales tax on alcohol per state in 2021 is 7.69. The top 10 states with the lowest alcohol sales taxes in 2021 are:

1. Wyoming (Null)
2. New Hampshire ($0.30)
3. Missouri ($2.00)
4. Colorado ($2.40)
5. Texas ($2.40)
6. Kansas ($2.50)
7. Indiana ($2.68)
8. Arizona ($3.00)
9. Louisiana ($3.03)
10. Wisconsin ($3.25)

The top 10 states with the highest alcohol sales taxes in 2021 are:

  1. Washington ($32.52)
  2. Oregon ($21.98)
  3. Virginia ($19.93)
  4. Alabama ($19.15)
  5. Utah ($15.96)
  6. North Carolina ($14.63)
  7. Iowa ($13.07)
  8. Alaska ($12.80)
  9. Maine ($12.00)
  10. Michigan ($11.99)

For the past two years Minnesota has ranked No. 14 for highest alcohol tax at $8.96 per gallon in 2021. North Dakota's, South Dakota's and Wisconsin's tax rates -- meanwhile -- are amongst some of the lowest.

In short, if you don't want to pay and arm and a leg for your alcohol, travel to WI, SD or ND to stock up and bring it back with you!

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