Spirits RTDs are currently taxed 55 times more than similar beer-based RTDs at the state level
The Distilled Spirits Council of the United States (DISCUS) today applauded the Washington Senate’s Labor and Commerce Committee’s unanimous passage of SB 5375, a bill to reduce the tax burden on spirits ready-to-drink (RTD) cocktails.
Currently, spirits-based RTDs are taxed 55 times higher than malt-/beer-based seltzers despite having the same or similar alcohol content.
“Ready-to-drink cocktails are becoming increasingly popular, and this legislation will help remedy the excessive and discriminatory tax on these products,” said Adam Smith, vice president of state government relations at DISCUS. “This bill helps Washington meet the growing consumer demand for spirits RTD products by creating a more level playing field for those entering the market, including Washington craft distillers. Spirits RTDs often contain the same or lower amounts of alcohol than beer- and wine-based beverages, so there is no reason to treat them differently. SB 5375 would support a growing local industry and allow it to continue to flourish.”
The current 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. The bill was amended during the committee and DISCUS is reviewing those amendments.
The distilled spirits industry is a significant driver of economic activity in Washington, contributing to the vibrancy of the manufacturing, hospitality, tourism and agriculture industries. There are currently 32,300 jobs in the state depending on the spirits industry, generating more than $2.95 billion in state economic activity each year. Providing fair tax treatment for spirits RTDs will allow the industry to contribute even more.
Providing fair tax treatment for spirits RTDs will also help protect consumer choice and increase convenience in Washington. A recent 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.
Washington is one of many states taking a closer look at this issue to ensure that producers of spirits-based RTDs are being taxed fairly and that consumers have equal access to these products in the marketplace. Twenty-four states already have lower tax rates for lower-abv spirits-based products.