The spirits industry is growing increasingly competitive, and is evolving to meet new consumer preferences for exotic flavors, botanicals, and responsibly-sourced ingredients. The industry is rooted in tradition, but is also innovating in terms of processes, product, and the implementation of new technology. Companies investing in research and development (R&D) to create or innovate can offset their tax liability by claiming the R&D Tax Credit.
Employee wages, raw materials and supplies, and third-party contractor costs associated with research and development activities are considered qualified research expenses (QREs). Companies can receive refunds of up to 22% of total QREs through federal and state tax credits, depending on the state in which your company or firm operates.
Example activities that qualify:
- Improving or developing new fermentation or filtration processes
- Implementing robotics or automation to improve distillation efficiency or product quality
- Exploring secondary maturation techniques to enhance flavor (e.g. sherry or wine casks, stout beer barrels)
- Developing new or improved distillation processes
- Implementing novel recycling or waste management processes
- Producing and testing prototype batches, or optimizing methods to scale production
- Creating software to streamline production, distribution, or the on-site customer experience (tasting rooms)
Do you have these job titles on your payroll, or do you hire third-party contractors to do these jobs?
- Distillery Supervisors
- Fermentation Specialists
- Process Improvement Experts
- QA / QC Personnel
- R&D Directors