FET Reduction Continuation: Fingers Crossed
I know many of us have been counting on (or more so, expecting) the FET reduction to be extended post-2019. However, there have been some rumblings at high offices at the TTB and various government offices that do not believe the FET reduction will be extended beyond December 31, 2019. While I am not one to develop a strategy on hearsay, it did cause me to pause to ensure that our clients and fellow craft distillers are prepared in case the FET reduction, in fact, does not continue.
It’s better to prepare than put off in case the FET reduction is discontinued
One of the best exercises you can do is to simply run your financial model with the revision [back] to your COGS with the original FET of $13.50/proof gallon. This will help you assess cash flow and various impacts on any open and/or planned CAPEX measures. Another good measure is to review pricing and programming with your distributor partners and ensure your tactical amounts can be adjusted, if necessary, come January 2020.
It’s important you do not pull the plug immediately on any plans or support you currently have. You can cause more damage by over-adjusting versus generally curtailing back. At the same time, if you have the margin and capital, continuing your plans – or perhaps even increasing them – is likely to place you ahead of those who cannot.
Regardless of what happens, use this exercise to review your strategic plan to make sure you do use your reduced tax to the best of your ability. A boost of nearly $10 per case can go a very long way.