New Jersey Considers New Tax Class for Flavored Malt Beverages
A bill introduced in the New Jersey state Senate last month proposes the creation of a new tax class for flavored malt beverages (FMBs).
Senate Bill 1853, introduced by state Sen. Joseph F. Vitale, specifies that FMBs are not beer and defines them as beverages with at least 0.5% ABV “for which the producer is required to file a formula for approval with the United States Alcohol and Tobacco Trade Bureau.”
The bill would tax FMBs at $4.40 per gallon, far closer to New Jersey’s rate for distilled spirits ($5.50 per gallon) than for beer ($0.12 per gallon). S.B 1853 explained that the higher rate is because the flavorings used in FMBs are created through distillation.
“Though produced in a manner which incorporates certain aspects of beer brewing, much of the flavoring and alcohol in flavored malt beverages is derived from the addition of distilled spirits,” the bill reads. “This production process has the effect of creating an alcoholic beverage that is sufficiently beer-like to be taxed like beer, but sold as something else entirely. Alcoholic lemonades, alcoholic colas and cooler-type products are examples of such products.”
However, not all flavorings are derived from distilled spirits. Some are – such as those that contain ethyl alcohol, which does not contribute to the beverages’ overall ABV – but many are derived from propylene glycol.
Earlier this month, Utah adopted a law that relegated FMBs, hard seltzers and hard kombuchas that use ethyl alcohol-based flavorings to state-run liquor stores, while those with propylene glycol flavors are still allowed to be sold through grocery and convenience stores.
It is unclear if New Jersey S.B. 1853 will tax FMBs using propylene glycol-based flavors at the lower rate for beer, or if hard seltzers will be included in the FMB class, despite most not containing malt. Vitale’s office did not respond to requests for comment.
In addition to creating the new tax class, the bill updates the state’s definition of beer as “beer, lager beer, ale, stout, porter, and all similar fermented malt beverages having an alcoholic content of one-half of one per centum (½ of 1%) or more by volume, but does not include flavored malt beverages.”
The bill was introduced in the state Senate on February 28 and referred to the Senate Law and Public Safety Committee.
Last year, New Jersey’s Legislature considered a bill that would have lowered the state excise tax rate for spirits-based, ready-to-drink cocktails (RTDs) with an ABV up to 9.9% from $5.50 per gallon to $0.12 per gallon. The bill was pulled in June 2021 and was not reintroduced after its sponsor, former Senate president Stephen Sweeney, lost his bid for reelection in November 2021.
Minnesota’s ‘Free the Growler’ Bill Advances
A long-awaited bill that would remove the production cap that prohibits Minnesota’s largest craft breweries from selling beer in growlers advanced in the statehouse on Friday, the Brainerd Dispatch reported.
The bill would allow breweries making as many as 150,000 barrels of beer annually to sell growlers to-go from their taprooms. Under current law, breweries producing more than 20,000 barrels each year cannot sell growlers at their taprooms.
With a vote of 14-1, Minnesota’s House Commerce Committee passed the bill along to the House Ways and Means Committee.
“On balance, this is a bill that gets a lot done that people have been trying to do for a very long time in a way that has spectacularly broad buy-in from stakeholders,” Rep. Zack Stephenson, the author of the bill, told the Brainerd Dispatch. “This presents the opportunity to have a stable liquor regulatory regime in Minnesota that everyone can live with for the next five years.”
The bill also includes the ability for breweries producing fewer than 7,500 barrels annually to sell 4- and 6-packs from their taprooms.
The state’s largest craft breweries – Castle Danger, Fulton, Indeed, Lift Bridge, Schell’s, Summit and Surly – are prohibited from selling growlers due to the existing law, the Brainerd Dispatch reported. Of those who published 2020 production data in the Brewers Association’s New Brewer (all but Schell’s and Lift Bridge), none were near the proposed 150,000-barrel ceiling. Minnesota’s largest craft brewery, Summit, produced 109,273 barrels in 2020, the most recent year for which data is available from the Brewers Association. Surly, the state’s second largest craft brewery, produced 65,000 barrels in 2021, VP of marketing Bill Manley told Brewbound.
To keep its Minnesota-brewed output below the 20,000-barrel cap, Lift Bridge opened a new facility across the state line in Wisconsin last year, the Brainerd Dispatch reported.
Alaskan Brewery Owner Urges Lawmakers to Reconsider Taproom License Cap
One Alaska brewery owner is asking legislators to reconsider part of a bill making its way through the statehouse that would cap the number of taproom and distillery licenses to one for every 12,000 people per municipality.
“S.B. 9 will effectively put an end to the creation of new breweries with tasting rooms across Alaska,” Grace Ridge Brewing co-owner Sherry Stead wrote in an opinion piece for the Homer News.
Stead opened Grace Ridge in Homer more than five years ago, and invested $1.3 million in a new facility last year. Under the state’s existing cap of one license for every 3,000 residents, Homer has three licenses available, two of which are in use. If the bill becomes law, no new taprooms would be permitted to open in the town.
“This policy choice easily leads to local monopolies,” Stead wrote.
S.B. 9 passed the Alaska Senate unanimously on February 9, and was read for the first time in the House of Representatives on the same day. The House finance committee will host a hearing about it on March 30.