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Benchmark Tax Ruling in California

Aug 17, 2007 - The California tax policy board voted Tuesday to tax flavored malt beverages at the same rate as liquor rather than beer, in an effort to curb underage drinking.

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The California Board of Equalization approved by a 3-2 vote to classify the beverages as distilled spirits, which will raise the tax rate from 20 cents per gallon -- the rate for beer -- to the hard liquor rate of $3.30 per gallon.

This includes "any alcoholic beverage, except wine, which contains 0.5 percent or more alcohol by volume from flavors or ingredients containing alcohol obtained from the distillation of fermented agricultural products." This will likely re-classify some oak barrel-aged beers and possibly other craft beers as a distilled spirit.

This issue is likely far from over however, as FMB producers indicated they may challenge the ruling claiming the Board does not have the authority to make this decision.

The adoption of this new definition is scheduled to take affect July 2008.

Anti-alcohol groups quickly seized on this "victory" claming that the higher cost of these beverages will make them less attractive to underage drinkers. The drinks could also become less accessible because convenience stores with beer and wine alcohol licenses may not be able to sell the sweet concoctions.


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