US: Equalization Board approves malt beverage tax

By | 12 June 2008

The Office of Administrative Law (OAL) has approved the State Board of Equalization's (BOE) regulations allowing flavoured malt beverages to be taxed as distilled spirits rather than beer.

The board approved the regulations on 8 April to clarify the definition of "distilled spirits" under the Alcoholic Beverage Tax Law.

OAL approval deems the regulations effective and they will be fully implemented by BOE on 1 October, making flavoured malt beverages taxable at the distilled spirits rate of $3.30 per gallon rather than at the beer rate of $0.20 per gallon.

"I believe that the ultimate effect of this regulatory change will be positive," said Judy Chu, chair of BOE. "It will send a signal to youth that alcopops are hard liquor - because these drinks will now have costs that are similar to hard liquor. It will make it harder for young people to access alcopops, and that can only be helpful in reducing underage drinking."

The new regulations create a "rebuttable" presumption that all non-wine alcoholic beverages, including flavoured malt beverages, will be taxed at the higher rate.

Manufacturers have the obligation to prove their product does not meet the definition of a distilled spirit.

OAL approval on 10 June allows the manufacturer to argue their products do not meet the new definition effective immediately. The regulations will be fully operative and the higher taxation rate will begin on 1 October.

BOE estimates that this change will bring in $41.4m annually in combined sales and excise taxes.

Sectors: Beer & cider, Spirits

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