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March 31, 2023 3:05pm

Bourbon barrel tax phase out becomes law

After changes on the final day of the 2023 legislative session, lawmakers passed House Bill 5, sponsored by House Appropriations & Revenue Chair Jason Petrie (R-Elkton). House Bill 5 initiates the phase out of the tax on barrels of aging spirits in Kentucky.

Distilling remains Kentucky’s highest taxed industry. The industry has raised concerns that without relief, Kentucky could lose its dominance as the Bourbon capital of the world as distilleries continue to open and locate in communities with lower tax burdens.

House Bill 5 will take effect in January 2026 with the long-term phase out of the tax by complete by 2043. The final version of the bill included provisions to help make affected school districts and local governments whole, shifting liability from the state to the bourbon industry to fill revenue gaps.

Other provisions included in the bill include technical fixes to House Bill 360 that passed earlier this session, including clarification on intent for state and local tax entity tax and definition for telemarketing sales tax.

House Bill 5 was signed into law by Governor Andy Beshear on Friday.