Minnesota’s High Cocktail Tax Tops Most Neighboring States

Whether you're ordering an Old Fashioned at your favorite bar or buying a few bottles of liquor to take to the cabin, did you know Minnesotans pay significantly more in state taxes than many of our neighboring states?

That old adage of there being only two things you can be certain of in life-- death and taxes-- is certainly true here in the Land of 10,000 Lakes. Hopefully, you've been able to keep clear of the Grim Reaper, but we can't steer clear of those darn taxes in Minnesota. In fact, when it comes to the tax on cocktails, the Bold North has one of the highest rates in the country.

What Counts as Distilled Spirits in Minnesota?

To be clear, we're talking about Minnesota's state tax on distilled spirits, not a tax that applies only to mixed drinks. But what are we talking about when we say distilled spirits? They're a category of beverage commonly referred to as liquor or hard alcohol, including:

• Vodka
• Whiskey
• Bourbon
• Rum
• Gin
• Tequila
• Brandy

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And while beer sales have been flat in Minnesota and across the country, this Axios story notes that distilled spirits have now been the best-selling alcohol category in the U.S. for four straight years, driven in part by the popularity of those ready-to-drink cocktails and hard seltzers.

Of course, alcohol taxes vary dramatically across the U.S. The state of Washington has the nation's highest distilled spirits tax at $36.68 per gallon. On the other end of the spectrum, however, both Wyoming and New Hampshire currently don't even collect an extra tax on distilled spirits, according to the Tax Foundation.  

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Here's How Minnesota's Liquor Tax Compares to Nearby States

Meanwhile, here at home, Minnesota taxes distilled spirits at $8.74 per gallon, according to information from the Tax Foundation. While it's much less than Washington's rate, it still ranks among the 15 highest state liquor tax rates in the country.

Just take a look at the rate our neighboring states charge, and note that Minnesota's rate of $8.74 is much higher than several neighboring states:

• Wisconsin: about $3.25 per gallon (ranked 41st)
• North Dakota: about $4.26 per gallon (ranked 32nd)
• South Dakota: about $4.93 per gallon (ranked 33rd)
• Illinois: $8.55 per gallon (ranked 20th)
• Iowa: $15.14 per gallon (7th highest nationally)

Minnesota Drinkers Pay More Than Just the Liquor Tax

But wait, there's more: If you've purchased any distilled spirits recently, then you know that Minnesota drinkers pay more than just the state's liquor excise tax. Alcohol purchases are also generally subject to Minnesota's 6.875 percent state sales tax, along with an additional 2.5 percent liquor gross receipts tax on qualifying sales, plus any applicable local sales taxes, as well.