Industry Seeks to Dodge Taxes on Alcopops September 9, 2005
News Summary
Alcohol companies and their allies in the California legislature want "alcopop" drinks classified as beer, not liquor, in order to avoid higher excise taxes on distilled spirits, the Los Angeles Times reported Sept. 6.California Attorney General Bill Lockyer wants products like Mike's Hard Lemonade, Smirnoff Ice, and Bacardi Silver to be treated as liquor; the drinks are made with a malt base, like beer, but also have distilled-spirit flavorings. Under current state law, the drinks are treated like beer and taxed at 20 cents per gallon, rather than the $3.20-per-gallon rate for distilled spirits. They also can be sold at stores licensed to sell beer but not liquor.
Lockyer has asked the state Board of Equalization and the Department of Alcoholic Beverage Control to reclassify the drinks as liquor; the board recently issued a study concluding that such a move would cut consumption of alcopops -- long suspected of appealing to young and underage drinkers -- and raise $40 million more in tax revenue.
"Flavored malt beverages are sweet-tasting alcoholic drinks that mimic familiar nonalcoholic beverages like cola, lemonade, iced tea and fruit-flavored water," Lockyer said. "Many ... are 'branded' in the name of a distiller ... in the apparent hope that new drinkers will start with these sweet 'branded' drinks and move to the distiller's brand of hard liquor when the drinkers mature."
But Assemblyman Greg Aghazarian (R-Stockton) has used some parliamentary maneuvers to block the reclassification. "It's already against the law to sell [alcohol] to a minor," he said. "Our concern should be in enforcing the laws that are on the books." The family of the lawmaker's wife sells grapes to the wine industry. Backers of Aghazarian's measure include Anheuser-Busch Cos., the California Grocers Association, the California Retailers Association, Miller Brewer Co., 7-Eleven and the Wine Institute.
Earlier this year, the federal Alcohol and Tobacco Tax and Trade Bureau ruled that alcopops could be classified as beer as long as no more than 49 percent of the alcohol in the drinks came from distilled liquor. But a Lockyer spokesperson said, "Since the repeal of Prohibition, states have been free to chart their own alcoholic-beverage policy."
Maine is the only state that currently treats alcopops like distilled spirits.
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