[SPEAKER_01]: Recently, somebody sent a viral video that was on Instagram about some outrageous claims about Brown Foreman's taxes, and I'm here to debunk it.
[SPEAKER_01]: So if you want to hear what the truth is, then stick around.
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[SPEAKER_01]: Now, somebody tagged me in this video and there are some pretty outrageous claims.
[SPEAKER_01]: If you haven't seen it, here it is.
[SPEAKER_00]: Regal on the whiskey we make, we owe the government thirteen dollars and fifty cents a proof gallon.
[SPEAKER_00]: A barrel at a hundred twenty five proof is sixty six proof gallons.
[SPEAKER_00]: So, every barrel we fill, we owe the government eighty hundred ninety four dollars and new make taxes day one.
[SPEAKER_00]: Ground form and loan pays roughly four million dollars a day.
[SPEAKER_00]: New make taxes.
[SPEAKER_00]: Twenty million a week.
[SPEAKER_00]: One million a year and you're four to seven years from where you're cooking that money when you finally dump that whiskey put it in a bottle and sell it to the district.
[SPEAKER_01]: Okay, so in this video, this individual appears to be giving a tour at a Brown Forman facility, and he claims that they pay thirty dollars in fifty cents per proof gallon of government excise tax on every gallon of whiskey that they make.
[SPEAKER_01]: In the video, he also claims that a newly filled barrel has sixty six proof gallons of whiskey at one hundred and twenty five proof.
[SPEAKER_01]: He claims that every single barrel that they fill, they end up owing the government, eight hundred and ninety four dollars.
[SPEAKER_01]: And he very specifically says on day one.
[SPEAKER_01]: He claims that brown form and pays four million dollars a day in, and I quote, new make taxes, right?
[SPEAKER_01]: He says that that adds up to twenty million dollars a week, which adds up to one billion dollars a year.
[SPEAKER_01]: And then he goes further and says that that is a very onerous thing to have to do because they don't get to sell that whiskey to for four to seven years.
[SPEAKER_01]: And that's when they recoup the billions of dollars in exercise tax that they've paid to the federal government.
[SPEAKER_01]: Now,
[SPEAKER_01]: Some of what he said was true.
[SPEAKER_01]: Some of what he said is untrue and therefore extremely misleading.
[SPEAKER_01]: So let's get into what the actual details are.
[SPEAKER_01]: So the federal government does charge an exercise tax per proof gallon of whiskey that is true.
[SPEAKER_01]: But there are three tiers of tax based on your production level.
[SPEAKER_01]: So for tier one, and this part is very important for your first one hundred thousand gallons of production.
[SPEAKER_01]: which I will admit Brown Foreman produces way more than a hundred thousand gallons per year.
[SPEAKER_01]: But for your first hundred thousand, you only pay two dollars and seventy cents per proof gallon.
[SPEAKER_01]: The second tier, which covers you from one hundred thousand gallons, to twenty two point one three million gallons, is actually thirteen dollars and thirty four cents.
[SPEAKER_01]: Okay, and then above that twenty two million one hundred thirty thousand gallons, that's when you start paying the thirteen point five.
[SPEAKER_01]: Okay, so his number thirteen point five is accurate, but only above twenty-two million one hundred thirty thousand proof gallons per year.
[SPEAKER_01]: Now, the reason why the tears are significant is because Brown Foreman has a bunch of different distilled spirits, plants licenses.
[SPEAKER_01]: And each distilled spirit plant gets to produce that hundred thousand dollars at that two point seven rate, okay?
[SPEAKER_01]: and each one gets to go up to the twenty two million gallons at the thirteen point three four rate.
[SPEAKER_01]: And so the reality is because they have so many DSPs, they're actually not paying thirteen point five on every gallon, okay?
[SPEAKER_01]: The average is going to be somewhere significantly lower than that.
[SPEAKER_01]: But that's not all that makes this misleading.
[SPEAKER_01]: Now there are six or six proof gallons in a newly filled barrel.
[SPEAKER_01]: but you do not pay tax on the whiskey when it goes into the barrel.
[SPEAKER_01]: He claims that it's eight hundred and ninety four dollars per barrel because the exercise tax is charged right then.
[SPEAKER_01]: But the reality is you don't pay tax the exercise tax on whiskey until it is taken out of the bonded area of your warehouse.
[SPEAKER_01]: So when you hear that term bottled and bond, when you have a DSP license, you literally, as part of your application process, have to send a map of your location, and you literally highlight the areas of your map that are your production and aging areas, and those areas are considered to be bonded areas of your warehouse.
[SPEAKER_01]: And then you have areas where you like, do logistics and shipping, and those areas are considered to be outside of the bonded areas.
[SPEAKER_01]: And once you move a barrel of whiskey from your Ronin area to your non-bonded area, which is typically where your bottling line is, that's when you have to put that into your next exercise tax report and that's when the taxes become due.
[SPEAKER_01]: And it has been that way since nineteen sixty four.
[SPEAKER_01]: There was a problem where there was a bunch of whiskey that was being aged and taxes were coming up and were due.
[SPEAKER_01]: And whiskey demand was going down.
[SPEAKER_01]: And one of the largest producers of whiskey fought to have excess taxes changed so that you don't pay it until you pull the whiskey out of bond.
[SPEAKER_01]: And having not done that, there would have been more bankruptcies and problems inside the industry.
[SPEAKER_01]: Now, this makes it very significant, because remember he said there's sixty-six proof gallons in a barrel and he calculated there's eight hundred ninety four dollars per barrel in the video.
[SPEAKER_01]: But once a barrel has aged, it loses a significant portion of its volume due to evaporative loss or what a lot of people call angel share loss.
[SPEAKER_01]: And so you're actually, even though you produce sixty-six gallons of approved gallons of whiskey and put it in that barrel, you are never gonna pay tax on all of that whiskey that you produce because a bunch of it's gonna evaporate in the air and you will never owe a single penny of tax on that.
[SPEAKER_01]: And as kind of a point to that, you
[SPEAKER_01]: can go to a production company like mgp or castle and key or, you know, their several companies out there, bar sum urban company, and you can buy newly made barrels of whiskey from them for about eight hundred and fifty dollars, okay?
[SPEAKER_01]: And there's a couple of reasons why they're able to do that.
[SPEAKER_01]: One, they're not paying eight hundred and ninety four dollars per barrel in taxes, otherwise they'd be losing almost fifty bucks every time they sold a barrel.
[SPEAKER_01]: It's possible that they do that because they never pay the taxes on it.
[SPEAKER_01]: Whoever buys that barrel ends up paying the taxes on it because all of these barrels are transferred in bond.
[SPEAKER_01]: So you can move whiskey barrels from one bonded warehouse to someone else's bonded warehouse.
[SPEAKER_01]: You just have to file some paperwork with the government.
[SPEAKER_01]: and it's called a TIB, a transfer in bond, okay?
[SPEAKER_01]: And so all of that's not true.
[SPEAKER_01]: So they don't ever actually have to pay the taxes and then wait for it a seven years as he claimed in this video.
[SPEAKER_01]: Their taxes are not due until they pull out a bond.
[SPEAKER_01]: They pull out a bond, they bottle it, they ship it to a wholesaler that wholesaler typically has thirty day net terms to pay.
[SPEAKER_01]: But you don't pay the tax the day that you pull it out of bond.
[SPEAKER_01]: It's going to go into your next excite tax report, which is spread out far enough apart, that you're going to be outlaying that cash.
[SPEAKER_01]: It about the same time that the money comes in from your wholesaler.
[SPEAKER_01]: So that whole thing that he was trying to make you feel bad for Brown Foreman, because they have to pay billions of dollars in taxes and wait years to recoup it, that's actually untrue all the way around.
[SPEAKER_01]: Oh, I'm testing my new whiskey glass that I had designed.
[SPEAKER_01]: Why?
[SPEAKER_01]: Well, there's a company out there that's a real Karen.
[SPEAKER_01]: And she threatened to sue us.
[SPEAKER_01]: Really?
[SPEAKER_01]: Yes, I. Yeah.
[SPEAKER_01]: So we had been in producing some traditional tulip shape whiskey glasses.
[SPEAKER_01]: Oh, yes.
[SPEAKER_01]: We never used the name.
[SPEAKER_01]: Right.
[SPEAKER_01]: But they claimed to own the shape of the glass.
[SPEAKER_01]: And since I'm just a little guy, I couldn't fight.
[SPEAKER_01]: Right.
[SPEAKER_01]: But do you know what that motivated us to do, Wes?
[SPEAKER_01]: What?
[SPEAKER_01]: To go out and design a glass that was actually made for high proof American spirits.
[SPEAKER_01]: So the company that had the problem with us, their glass was originally designed for low proof Scotch whiskey.
[SPEAKER_01]: Oh, okay.
[SPEAKER_01]: eighty eighty six proof that type of thing.
[SPEAKER_01]: And you know what I'd noticed every time I would know is a really high proof high quality.
[SPEAKER_01]: Oh, spirit in the United States.
[SPEAKER_01]: Yeah.
[SPEAKER_01]: Out of this glass, all I got was ethanol.
[SPEAKER_02]: Yeah, little burn there.
[SPEAKER_02]: I felt that.
[SPEAKER_01]: And so we went out and we designed this glass that's actually designed for those higher-proof spirits.
[SPEAKER_01]: And I'm so confident in this glass that if anybody were to go to our website and buy one, I'm offering a money-back guarantee.
[SPEAKER_01]: Wow!
[SPEAKER_01]: If you get that glass to your house and you find yourself one of these traditional tulips shaped glasses and you know it's a high-proof spirit side by side, you can't tell the difference.
[SPEAKER_01]: I will gladly give you your money-back.
[SPEAKER_02]: So what you're saying is they can really stick it to the Karen and support the little guy by going to bourbonrilltalk.com and ordering one of these with absolutely no risk, they can get their money back if they don't prefer it, nosing it to the other.
[SPEAKER_01]: Absolutely.
[SPEAKER_01]: And if you love small business and you like sticking it to Karen's, that's the way to go.
[SPEAKER_02]: Stick it to Karen, bourbonrilltalk.com.
[SPEAKER_02]: Cheers.
[SPEAKER_01]: Now, what I found very interesting is that he claimed Brown Foreman paid a billion dollars a year in exercise checks.
[SPEAKER_01]: And when I heard that number, I thought that that was insane and that there was no way that it was true, because I had read that Brown Foreman was a little over a four billion dollar year company.
[SPEAKER_01]: And I'm like, there is no way that Brown Foreman is spending over twenty five percent of all revenues generated just on exercise tax.
[SPEAKER_01]: I turned out to be mostly wrong.
[SPEAKER_01]: In fact, his number was a little bit low.
[SPEAKER_01]: I was able to find this in the twenty twenty four, because Brown Foreman is a publicly traded company.
[SPEAKER_01]: Publicly traded companies have financial disclosure requirements.
[SPEAKER_01]: You can go to their website and you can download their annual report.
[SPEAKER_01]: And when I downloaded Brown Foreman's annual report, I was able to find this statement that shows that in twenty twenty four, they paid one point one five billion dollars in exercise tax.
[SPEAKER_01]: And that is a great big number.
[SPEAKER_01]: And so how's it possible that everything that I just told you was true about how the tax gets collected?
[SPEAKER_01]: But even his number for how much they're paying in taxes is low.
[SPEAKER_01]: Well, that's because the XI's tax category is also going to include
[SPEAKER_01]: This state exercise taxes, which in some instances are very high and very onerous on the producer.
[SPEAKER_01]: And so that exercise tax category would include, and both the state of Kentucky and Tennessee charge a state exercise tax on production.
[SPEAKER_01]: And so that category is going to include the x-ice tax for state and federal.
[SPEAKER_01]: So when you average that out over everything, it does turn out to be one point one five billion dollars.
[SPEAKER_01]: Now, it also turned out that when I've been hearing those sales numbers, those sales numbers are net of the x-ice tax.
[SPEAKER_01]: So I thought that they were a little over a four billion dollar year company.
[SPEAKER_01]: Their actual gross revenue, including the x-ice tax, is over five billion.
[SPEAKER_01]: But they are paying about twenty percent of their gross revenue into exercise taxes in the state in the federal government, which is why whiskey is such an important component for the US government's budget.
[SPEAKER_01]: Whiskey has generated more tax revenues than any other category besides petroleum.
[SPEAKER_01]: We funded wars with it.
[SPEAKER_01]: It used to be part of a soldier's pay to get whiskey from the federal government.
[SPEAKER_01]: And so whiskey is much of a part of American culture and development is anything else you can think of.
[SPEAKER_01]: It's more American than Apple Pie and baseball.
[SPEAKER_01]: So I hope that this was kind of instructive for you and that you learned something.
[SPEAKER_01]: You know, in the end, Brown Forman does in fact pay over billion dollars in taxes, but the information this video was a little bit inaccurate and so I wanted to get the truth out there so that you'd be educated.
[SPEAKER_01]: So I thought what we do is a brown form and giveaway.
[SPEAKER_01]: So we're going to have three winners of a one out sample pack and that sample pack will include Jack Daniels ten year old forster one seventeen and the one that I have is the one that's finished in a pitted sharecast.
[SPEAKER_01]: And my old forster birthday bird button.
[SPEAKER_01]: So this is going to be a pretty epic sample pack.
[SPEAKER_01]: If you want to enter the way and all you have to do is like this video, subscribe to the channel, ring the bell when you subscribe, which is a little button you can click and it's going to notify you of future content pieces and future giveaways because we don't give away on every episode.
[SPEAKER_01]: But most importantly, you have to go to the YouTube channel and below the play head.
[SPEAKER_01]: Expand the video description, find the link that says free giveaway, click it and fill it out.
[SPEAKER_01]: We use that information to run a randomizer.
[SPEAKER_01]: We'll post the results publicly online for accountability.
[SPEAKER_01]: Reach out to the winners, get your dress, and ship your samples.
[SPEAKER_01]: Absolutely for free.
[SPEAKER_01]: And if you like this channel and you want to support us, we have three different ways.
[SPEAKER_01]: We have a Patreon, which we talked about at the beginning of the video.
[SPEAKER_01]: We also have really amazing whiskey merchandise.
[SPEAKER_01]: I promise you, if you go check it out, you're going to find something that you can't live without.
[SPEAKER_01]: at BourbonRillTalk.com.
[SPEAKER_01]: And last but not least, I am a residential real estate agent in the Dallas and Houston metro areas.
[SPEAKER_01]: And if you need residential services and either market, I'd love to hear from you.
[SPEAKER_01]: You can find links to support us for all three ways in the video description on YouTube.
[SPEAKER_01]: And if this your first time tuning into the channel, I'd love to tell you a little bit about our show philosophy.
[SPEAKER_01]: We are about bringing people together around whiskey.
[SPEAKER_01]: And that is the personal mission of mine because I lost the love and the suicide that was missing some of those social connections.
[SPEAKER_01]: And when I saw how whiskey helped build those kinds of connections, I thought, maybe if I get you connected to whiskey, the whiskey of the rest of the job and get you connected to others.
[SPEAKER_01]: So we built this channel.
[SPEAKER_01]: We ended up building our own communication for them called Bourbon Real Talk Community, which is a free Facebook base whiskey enthusiast community.
[SPEAKER_01]: To my knowledge, it's the largest American base enthusiast community on
[SPEAKER_01]: Facebook, American whiskey base on Facebook.
[SPEAKER_01]: And it is totally troll-free.
[SPEAKER_01]: We don't allow any of the negativity we've seen in some of the other forms out there.
[SPEAKER_01]: And it's been so successful.
[SPEAKER_01]: And we've melded together so well as a family.
[SPEAKER_01]: We were able to start a five-on-one C-three called LivestayProject.org.
[SPEAKER_01]: that focuses on suicide prevention and intervention.
[SPEAKER_01]: And so that's been great.
[SPEAKER_01]: So, you know, check that out.
[SPEAKER_01]: It's free.
[SPEAKER_01]: The other thing that we learned is we were going through this process and we were seeing some negativity is that if those individuals can be negative and show hate to a stranger online, there's nothing that keeps us from loving a stranger online.
[SPEAKER_01]: And that's why we end every episode the same way and that's this.
[SPEAKER_01]: If you woke up this morning and you're unsure whether or not any will love you, just know that I love you.
[SPEAKER_01]: And I'll see you next time on Bergman Real Time.