Mezcal Industry Pushes for IEPS Reform Amid Fiscal Pressure

In 2026, the mezcal industry is facing significant challenges to sector growth. The current tax framework applied to these products, combined with a decline in domestic consumption and increasing competition from other beverages, has placed mounting pressure on producers.

Marisol Rumayor, General Coordinator, Mundo Mezcal, and Ramón Isaac Pérez, Commercial Director, Almas Benditas, highlighted that the taxes imposed on mezcal are among the most painful obstacles to the growth of the national industry. According to Pérez, the Special Tax on Production and Services (IEPS) applied to high-alcohol beverages such as mezcal stands at 53%. This is compounded by VAT, income tax, payroll tax and other fiscal costs, significantly increasing the final price of the product.

Rumayor explained that this burden mainly affects small artisanal producers, not only of mezcal but also of other ancestral spirits such as sotol, bacanora and raicilla. These beverages cannot be produced on an industrial scale or substantially reduce costs, as their quality depends on manual labor. In the case of mezcal, traditional methods such as the tahona, stone milling and clay or stone ovens are used, processes that require intensive labor and cannot be replaced by machinery without losing the essence of the product.

To address this issue, the specialists propose reformulating the IEPS. To that end, they have created the Moderniza IEPS initiative, with the objective not to eliminate the tax but to redesign it. Currently, the tax is calculated primarily based on alcohol content rather than on the artisanal production process of the spirit.

“There needs to be a complete modernization of the Special Tax on Production and Services. Establishing a tax that increases solely based on alcohol percentage is contradictory. Mezcal would not be mezcal without a certain level of alcohol, yet having that level automatically costs you 53%,” Rumayor emphasized. Pérez noted that there have already been discussions and dialogue with legislators and authorities; however, there is still no concrete proposal on the table.

Against this backdrop of fiscal pressure, in October 2025 Senator Beatriz Mojica proposed a reform to the IEPS aimed at correcting the distortions of the current system. The legislator proposes replacing the ad valorem model, which taxes beverages based on their sale price and ends up penalizing higher-quality products, with an ad quantum model, calculated according to the amount of pure alcohol contained in each beverage.

The initiative also includes differentiated rates for artisanal production and beverages with Denomination of Origin, with the goal of ensuring that products such as mezcal are no longer penalized for their traditional production processes or their inherent alcohol content. “A lower rate for traditionally made products is an act of social justice. It means supporting producers who continue to cook agave in stone ovens, ferment in wooden vats, and distill in copper or clay stills,” she stated.

On the other hand, high mezcal prices have pushed the spirit out of the domestic market, as many consumers opt for more affordable options such as beer or industrially produced spirits. According to data from the Mezcal Regulatory Council (COMERCAM), mezcal’s volume of international sales is 2.6 times higher than its sales within Mexico.

“Frankly, we are not competitive at the retail shelf level with alcoholic beverages carrying such high taxes. While it is true that some mezcals are produced with greater technological input, 90% of mezcal production is artisanal, which means its prices and costs are higher than those of other beverages on average,” explained Abelino Cohetero, President, COMERCAM.

Cohetero pointed out that in 2024, mezcal production fell by 7.17%, reaching 11.3 million liters. Meanwhile, bottling for the domestic market dropped by 16.68%, totaling just 3.1 million liters. “Before the pandemic, the alcoholic beverage industry posted annual growth of between 20% and 28%. After the health crisis, an economic contraction followed; we have faced three difficult years, but fortunately the sector has begun to stabilize,” he said.

Mezcal currently has 16 Denominations of Origin across the states of Oaxaca, Guerrero, Guanajuato, Michoacan, Puebla, State of Mexico, Morelos, San Luis Potosi, Tamaulipas, Zacatecas, Aguascalientes and Durango. Various types of agave are used in its production, including Espadín, Tobalá, Cupreata and Madrecuixe.

At the national level, annual production ranges between 12 and 13 million L, with Oaxaca accounting for more than 90% of output, according to COMERCAM. Moreover, mezcal represents 18.6% of alcoholic beverage production in the country. Globally, the current value of the mezcal market exceeds US$350 million. Around 80% of production is destined for export, primarily to the United States, followed by Germany, Spain, France, the United Kingdom, Canada, Colombia, Italy, Australia and Japan.

Mundo Mezcal projects favorable growth prospects for the product. Forecasts through 2034 estimate that the mezcal market could reach a value of US$2.3 billion, with an annual growth rate of 14%, driven by the premium, artisanal and culturally rooted segments. Additionally, the FIFA World Cup is expected to help boost growth, at least in the short term.

The mezcal industry generates approximately 55,000 direct jobs, mainly among agave growers, master mezcal producers and distillery workers, as well as 210,000 indirect jobs in distribution, commercialization, handicrafts and cultural promotion.