Vermont lawmakers have advanced a bill to lower taxes on and grant wider market access to spirits-based, ready-to-drink (RTD) canned cocktails.
If signed by Gov. Phil Scott, the bill (H.730) will go into effect July 1. It would lower state excise tax on spirits-based RTDs from $7.68 per gallon to $1.10 gallon.
The bill would allow Vermont’s 1,030 private beer and wine retailers to sell the popular products, which include brands such as E. & J. Gallo’s High Noon Sun Sips and Anheuser-Busch InBev’s Cutwater Spirits. Vermont is a control state and only state-run liquor stores are permitted to sell spirits. The bill would establish cocktails less than 12% ABV and in containers with fewer than 24 oz. as a separate entity able to be sold in beer and wine stores.
The Vermont Legislative Joint Fiscal Office (JFO) estimates that wider sales of RTDs will generate $20,000 in sales tax in fiscal year 2023 and $90,000 in fiscal year 2024.
“Revenues are expected to increase as the market grows as a result of more stores selling the product and the overall category growth,” JFO senior fiscal analyst Graham Campbell wrote in a report on H.730.
In addition to tax and market access changes, the bill would require manufacturers and distributors of RTDs to obtain a certificate from the state that would cost $985 annually, which the JFO estimates will raise $50,000 each year.
Beginning in Vermont’s fiscal year 2024, H.730 would also lower taxes for hard ciders less than 7% ABV from $0.55 per gallon (the state’s vinous beverage tax rate) to $0.265 per gallon (the state’s malt beverage tax rate). The JFO estimates that this change will cut cider producers’ taxes by $175,000.
Similar bills to lower taxes and increase distribution of spirits-based RTDs have been introduced in at least 12 states, according to a press release from the Distilled Spirits Council of the United States (DISCUS), who praised the bill’s passage.
“Not only are Vermont spirits consumers inconvenienced by having to go to a separate store to purchase spirits-based ready-to-drink cocktails, but they also incur higher prices due to the excessive tax burden placed on these products,” DISCUS SVP of state government relations Jay Hibbard said in the release.
Earlier this month, Brewers Association (BA) general counsel Marc Sorini updated Craft Brewers Conference (CBC) attendees on 10 states weighing bills similar to Vermont’s:
- Alabama (bill pending, but “unlikely to progress in 2022,” according to Sorini);
- Arizona (defeated);
- Hawaii (defeated in House);
- Kentucky (“stalled”);
- Maryland (defeated);
- Minnesota (“unlikely to progress in 2022”);
- New Jersey (defeated in 2021, pending in 2022);
- Ohio (still being explored, but “yet to materialize”);
- Oklahoma (still being explored, but “yet to materialize”);
- West Virginia (defeated).
Lowering taxes and improving market access for RTDs, which often have similar ABVs to beer, is a legislative priority for DISCUS, as fighting against it is key for the BA.
“The popularity in this new fourth category of liquor products has given a facially attractive argument for the liquor industry to say ‘Hey look, here’s a can of White Claw, here’s a can of High Noon [Sun Sips]. …These are both 5% alcohol, shouldn’t they be taxed the same?’” Sorini said during CBC. “It really treats ethanol as sort of a generic commodity that then has various delivery vehicles, but it should all be treated the same, to which we say, ‘No.’”
In the 52 weeks ending April 23, dollar sales of prepared cocktails have reached $1.15 billion at NielsenIQ-tracked off-premise retailers, a +43.7% increase over the previous year.
In response to the bill’s advancement, Beer Institute director of public affairs Alex Davidson provided the following statement:
“Liquor-based RTDs belong in liquor stores – not on grocery shelves with Vermont brewers. While Vermont legislators recognized that liquor is different from beer, H.730 was a massive handout to the liquor industry at the expense of Vermont taxpayers and brewers. Relinquishing distribution rights and moving liquor-based RTDs out of Vermont’s state-run 802 liquor stores will drastically reduce state revenue and undermine the responsible drinking message that the beer industry has long supported. Vermont has a thriving local beer industry that was hit hard by the pandemic, and as local brewers recover, legislation like this puts the local industry at a disadvantage by giving a tax cut to out-of-state liquor companies.”
Editor’s note: this story was updated at 5 p.m. ET on Tuesday, May 17 to include a statement from the Beer Institute.
Alaska House of Representatives Passes Taproom Bill
The Alaska House of Representatives yesterday approved Senate Bill 9, an alcohol omnibus bill that would cap the number of brewery taproom licenses at one per every 9,000 residents.
An earlier version of the bill, which passed the state Senate in February, would have limited taproom licenses to one per every 12,000 residents, a significant increase from the current limit of one for every 3,000 residents. Existing taprooms will be permitted to continue operating, and the state will not limit the number of breweries that can open, so long as they remain only manufacturing facilities without taprooms.
The bill also grants taprooms one extra hour of operating time, shifting their mandated closing hour from 8 p.m. to 9 p.m., and requires that kegs be registered, allowing for increased tracking capability if kegs should end up in the hands of underage drinkers.
Senate Bill 9 will return to the Senate for a procedural vote before Gov. Mike Dunleavy will receive it.