California would tax drinks flavored with spirits as liquor instead of beer
California authorities have moved to reclassify sweet alcoholic drinks flavored with spirits – generally known as “alcopops” – as liquor instead of beer, a decision that could boost taxes on the drinks from 20 cents per gallon to $3.30.
Drinks such as Smirnoff Ice, Mike’s Hard Lemonade and Bacardi Silver would cost as much as $2 more per six-pack if the State Board of Equalization changes its classification of the drinks from beer to distilled spirits.
California would be only the second state to treat “alcopops” as hard liquor. Maine was the first.
Controller Steve Westly, a member of the Board, said he is confident that will happen next year after several months of public hearings.
“When you’re selling a product that is flavored with distilled spirits, that you’re marketing as distilled spirits, I think common sense dictates that it should be taxed as distilled spirits,” said Westly. “I see no public policy rationale why we should provide a lower tax rate to companies that are promoting distilled spirits to young people in California.”
Last month Santa Clara County sued the state tax collection agency to force it to raise taxes on “alcopops,” contending that the marketing of the drinks targets teenagers. The suit also claimed that California loses more than $40 million a year because the drinks are taxed as a beer.
The change also would remove the products from an estimated 24,000 retailers that hold licenses to sell only beer and wine.
A spokesman for Westly said the suit had little to do with putting the matter before the Equalization Board and that Westly had been thinking about the issue for a while.
There are also national implications: Only Maine now taxes the beverages as distilled spirits, but attorneys general around the country have been weighing a change.
The tax board’s action kicks off a public hearing process that will last at least nine months before staff members bring recommendations to the board for a final vote.
“It’s a move to gather the facts,” said Gary Galanis, vice president of corporate relations for Diageo, owner of the Smirnoff brand.
He argued that the beverages should be classified as beer because they are derived from a malt base. The beer color and taste are stripped away, and distilled spirits added.