Source: Wine & Spirits Daily
With the boom in ready-to-drink sales, the taxation and availability of RTDs (particularly spirits-based) has been top-of-mind for producers and legislators. Indeed, Michigan and Nebraska recently passed laws lowering taxes on spirits-based RTDs and several other states are considering similar legislation.
One of those states is New Jersey. The New Jersey Assembly is considering a bill that would equalize the state excise tax for spirits and beer products with 9.9% abv or lower at 12 cents/gallon. Spirits producers currently pay $5.50/gallon.
You may recall, beer industry members formed a coalition against the bill in New Jersey, sending a letter to the state Senate pointing out the disadvantages of equalizing the excise tax on and accessibility of spirits-based RTDs, most notably that tax revenues would decrease [see WSD 06-02-2021].
In response, the Distilled Spirits Council has submitted testimony to the New Jersey Senate Budget & Appropriations Committee ahead of the hearing on the bill later this week.
As aforementioned, New Jersey is not the only state taking a closer look at RTDs, nor is it the only state "in which the beer industry has decried this type of consumer-friendly legislation and leveled myth-based criticisms at the spirits industry," per the testimony penned by DISCUS svp of state public policy Jay Hibbard.
Jay outlines a few "misrepresentations" made in arguments against treating spirits-based RTDs similar to malt-based. To wit:
DISCUS estimates the state would realize more than $34 million in new tax revenue from the category within three years, and that equalizing the tax will increase jobs in the state's spirits industry.
"It is a myth that distilled spirits are 'harder' than beer or wine," writes Jay, pointing to the standard drink definition as containing 14 grams of pure alcohol - that's about 12 fl oz. of 5% beer, 5 fl oz. of 12% wine, or 1.5 fl oz. of 40% abv spirits. "Put simply, there is no beverage of moderation, only the practice of moderation."
DISCUS also alludes to the recent malt-based hard seltzer launches with higher abv, such as White Claw Surge and Truly Extra, both of which are about 8% abv. As such, "it is a myth to suggest that an 8% or 9.9% abv spirits-based RTD should not be treated as a 'low-percentage alcohol' product."
The testimony concludes: "Finally, for all the claims that the sky-will-fall made by the beer industry, should New Jersey adopt a fair and equal state tax rate, the state's action will have no impact on the Federal Excise Tax rate currently imposed on low-alcohol spirits products, which will continue to be taxed at a rate nearly 400% higher than beer products of the same ABV. Beer will continue to enjoy a marketplace price advantage."
We'll have more as the legislation progresses.