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Sour Outlook for California 'Alcopops' Tax
March 23, 2009

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News Summary

Beverage makers are ignoring California's new law taxing sweet 'alcopop' drinks as liquor -- saying the tax doesn't apply to their products -- and the state has been stymied in its attempts to get information on alcopop ingredients, the Los Angeles Times reported March 16.

The law, passed last year, calls for drinks that get most of their alcohol from distillation to be taxed at the higher liquor rate, not as beer. Alcopop manufacturers, however, say that the alcohol in the drinks comes from fermentation -- but refuse to disclose their ingredients, saying that they are trade secrets.

Backers of the legislation expected the tax to generate $38 million annually for the state. However, only $9,000 in taxes has been collected since the law went into effect on Oct. 1.

"These drinks are not beer. They don't taste like it, smell like it or look like it. But they are being sold like beer," said Michael Scippa of the Marin Institute, an industry watchdog group.

The problem, however, is proving it. State and federal officials said there is no standard test for determining the origin of alcohol in the drinks."Without a verification process, the alcohol companies can claim anything they want," said Judy Chu, chair of the state Board of Equalization, which collects alcohol taxes.

The federal Alcohol and Tobacco Tax and Trade Bureau has access to the product formulas, but has refused to disclose them to California regulators, saying they are barred from doing so by the Federal Trade Secrets Act. "They consider protecting industry trade secrets more important than protecting the public's health," charged Jim Mosher, an analyst with the policy research firm CDM Group.

California has written to alcopop manufacturers requesting that they list the ingredients in their products. But beverage companies insist that the information is proprietary, and some officials seem reluctant to spend the money needed to determine the products' ingredients and monitor their manufacture.

COMMENTS ON THIS ARTICLE:

Posted by Bill Godshall on 24 Mar 09 09:57 AM EDT
Since these drinks contain a similar amount of alcohol as beer, the sound public health and safety policy is to tax them at the same rate as beer. By taxing these drinks at the same rate as hard liquor, this law unintentionally protects liquor (which is more hazardous) and beer (which is consumed and binged by far more teens) from market competition. Tax rates for tobacco, alcohol and other hazardous products should be based upon their health/safety risks and tax burdens.

Posted by dana.sharp-mclean on 24 Mar 09 02:09 PM EDT
Since when do the liver and brain differentiate between the different "sources" of alcohol. Alcohol is alcohol and is as harmful if consumed by youth as beer or in a mixed drink. The officials aren't asking for the recipe (proprietary),just general ingredients (public) in the product to determine regulatory issues. No disclosure of contents, no permissions to sell it.

Posted by Lew Bryson on 29 Jun 09 08:25 AM EDT
I don't understand Scippa's objection. This tax is based on a manufacturing process, not taste, smell, or look. If the drink is produced in the way beer is (as opposed to the way spirits are), then it should be taxed at the beer rate. Simply, this was poor law and policy-making, and Dr. Chu's implication that the producers are lying is offensive.

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