CLACKAMAS COUNTY, Ore. (KOIN) — The Department of Health and Human Services (HHS) has directed the Food and Drug Administration to cease plans to levy a $14,060 fee on craft distillers who produced hand sanitizer during the coronavirus pandemic.
“Small businesses who stepped up to fight COVID-19 should be applauded by their government, not taxed for doing so. I’m pleased to announce we have directed FDA to cease enforcement of these arbitrary, surprise user fees. Happy New Year, distilleries, and cheers to you for helping keep us safe!” HHS Chief of Staff Brian Harrison said in a statement.
The reversal follows a national outcry, and comes just hours after KOIN 6 News spoke with the president of the American Craft Spirits Association (ACSA) about the surprise payments.
Within weeks of the first confirmed coronavirus cases, distilleries all over Oregon and Washington switched gears and started producing hand sanitizer in response to the nationwide shortage. Now, those businesses have been hit with a surprise $14,060 fee from the Food and Drug Administration.
“There’s a huge amount of confusion … and a lot of concern,” American Craft Spirits Association President Becky Harris told KOIN 6 News.
Harris found out about the fee on December 29, when a small distiller got notified by the FDA. Payment is due on February 12, 2021.
The CARES Act in March included a user fee of $14,060 for over-the-counter drug monograph facilities. Hand sanitizer is considered an over-the-counter drug.
“(The fee) was never really communicated to small distilleries who were coming in here from a totally different worldview and dealing with different agencies,” Harris said. “So even the prospect of a fee was nowhere on our radar.”
One of the most baffling parts to Harris is that it’s a flat fee. It doesn’t matter if the distillery made 1 gallon or 100,000 gallons of hand sanitizer, if they donated it to first responders, or if they sold it so they could continue to pay employees while tasting rooms were shuttered during state lockdowns.
“Any distillery my size is gonna pay the same fee that a large, multi-national corporation who makes hand sanitizer is going to pay too,” she said.
More than 800 distilleries around the country helped produce hand sanitizer during the shortage, including Rogue Spirits and Hood River Distillers in Oregon, and Skunk Brothers Spirits in Stevenson, Washington.
News of the fee comes on the heels of a celebration in the industry. Over the weekend, President Donald Trump signed the Craft Beverage Modernization and Tax Reform Act, preventing the country’s 2,200 craft spirits producers from getting hit with a 400% increase in their Federal Excise Tax (FET).
One of the arguments communicated to congress before the FET reduction was made permanent was that “this was an existential issue for many of our smallest distilleries,” Harris said. “For them, that’s the difference between staying open and closing.”
“I don’t know very many small distilleries that have $14k anywhere that they can go and pay for this fee,” she said.
The industry is scrambling to get something done before the February deadline.
“I know that this is not what Congress intended,” Harris said.