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The American Civil War brought on the need to raise money to pay for the war. In 1862, Congress passed the Internal Revenue Act of 1862 and it took effect on September 1, 1862. This act of Congress placed a $1.00 per barrel tax on beer and a $0.20 tax per proof gallon (a proof gallon is one gallon of 100 proof spirits) on distilled spirits. This law differed from the Excise Act of 1791 in two ways. First, the Excise Act of 1791 had made malt beverages exempt from the tax and secondly, it created a bonding period for distilled spirits that allowed the product to age for six months before paying the tax. This allowed for the initial absorption of the spirit into the wood, making the allowance before the taxes were paid. Brewers accepted the tax but did form the U.S. Brewers Association which succeeded in getting the tax reduced to $0.60 in 1863. 

Two Civil War solders playing cards with a bottle of whiskey, Library of Congress, Brady-Handy Collection

By the end of the American Civil War in 1865, the tax on distilled spirits had reached $2.00 per proof gallon. In 1868, in an effort to stop the production of illegal spirits, the tax was lowered to $0.50 and the bonding period was increased to three years. This allowed legal distillers to sell their spirits at a price competitive with the moonshiners. It worked and moonshining was greatly reduced, but not eliminated. By the 1890s, the tax was raised to $1.10 per proof gallon on distilled spirits and the bonding period was increased to eight years. 

With the repeal of Prohibition in 1933, the tax was raised to $2.00 per proof gallon and rose steadily until it reached the present rate of $13.35 per proof gallon. In 1958, Congress increased the bonding period to twenty years. This is the tax rate and bonding period we have today.

Will he dare do it? Thomas Nast, Harper’s Weekly 1878, Library of Congress