How is the federal excise tax on beer calculated?

The federal excise tax on beer is calculated based on production output, meaning the quantity of beer that a brewery produces. Specifically, the tax is tiered based on the number of barrels produced annually. This system is designed to support smaller producers; breweries that produce less beer benefit from a lower tax rate compared to larger brewers.

For example, the first 60,000 barrels produced by a small brewery are taxed at a reduced rate, encouraging new and smaller breweries to enter the market. As production exceeds certain thresholds, the tax rate increases, reflecting the brewery's capacity and output. This method aligns tax liability with the brewery's scale of production, promoting growth while ensuring that larger operations contribute a fair share to federal revenue.

The other options focus on factors like beer type, brewery location, or a uniform tax rate for all producers, which do not accurately reflect how the federal excise tax is structured in practice.