Commonsense bill will boost small businesses, support consumer choice & raise tax revenue

The Distilled Spirits Council of the United States (DISCUS) welcomes the introduction of HB 2888 – commonsense legislation introduced by Representative Leo Biasiucci to modernize Arizona’s tax laws and provide fairer treatment for spirits-based ready-to-drink (RTD) cocktails.

Despite many spirits RTDs having the same or lower alcohol-by-volume (ABV) than beer-based RTDS, they are taxed 18 times higher in Arizona. This state-level tax disparity is on top of a federal-level tax disparity, where spirits RTDs are taxed at more than twice the rate of beer- and wine-based RTDs.

“Taxing spirits-based canned cocktails eighteen times higher than similar beer-based seltzers with the same alcohol content makes no sense and harms local businesses and consumers,” said Adam Smith, vice president of state government relations at DISCUS. “The government shouldn’t be in the business of picking winners and losers in the marketplace, but that is exactly what Arizona’s unfair tax structure does. We applaud the introduction of HB 2888 which would lift the burden of unfairly high taxes, supporting consumer choice and allowing the growing local craft distilling industry to continue to flourish.”

The distilled spirits industry is a significant driver of economic activity in Arizona, contributing to the vibrancy of the manufacturing, hospitality, tourism and agriculture industries. There are currently 27,300 jobs in the state depending on the spirits industry, generating more than $2.26 billion in state economic activity each year. Providing fairer tax treatment for spirits RTDs will allow the industry to contribute even more by generating as much as $16 million in additional sales and excise taxes for the state.

Providing fairer tax treatment for spirits RTDs will also help protect consumer choice and increase convenience in Arizona. A survey found that consumers increasingly prefer spirits RTDs over beer- or wine-based alternatives, citing taste and the variety of available flavors as primary reasons for that preference. If more craft distillers enter the market because the tax rates are lower, that, in turn, provides more innovation and more unique products on the shelf for consumers to choose from.

Arizona is one of many states taking a closer look at this issue to ensure that producers of spirits-based RTDs are being taxed fairly, recognizing that treating beverages differently based on the myth that some alcohol is “softer” than others sends a dangerous message to consumers.