The Distilled Spirits Council (DISCUS) and Maryland distillers submitted testimony to the House Ways and Means Committee today in favor of HB663, a bill to reduce the tax rate for spirits ready-to-drink cocktails (RTDs).
“There is no reason our small distilleries should be forced to pay more than our competitors for products with the same or similar alcohol content,” said Monica Pearce, founder of Tenth Ward Distilling Company in Frederick, MD. “As constituents who contribute to our state’s economy, pay local taxes and are negatively impacted by this unfair tax, we ask the Maryland Legislature to hear our voice. Creating a more equal tax rate for equal alcohol content just makes sense.”
Under the proposed bill, the tax rate on spirits RTDs would be reduced from the current rate of $1.50/gallon to $0.40/gallon.
Andy Deloney, DISCUS senior vice president and head of state public policy, pointed out in his testimony that the RTD category has transformed over the past several years with a wide array of options from malt-based hard seltzers, wine-based flavored spritzers or canned/pre-mixed cocktails.
“Unfortunately, Maryland spirits producers pay much higher taxes to produce a spirits-based RTD product even if the product has the exact same or similar alcohol content as a malt-, sugar- or wine-based RTD,” said Deloney. “For example, at five percent alcohol-by-volume, the Maryland tax rate on spirits-based RTDs is about 17 times the rate paid for a malt-based RTD or beer product. That’s not right and it’s hurting Maryland’s distilled spirits industry.”
Deloney also noted that the Maryland Department of Health’s definition of alcohol clearly states that a 12-ounce bottle of beer or wine cooler, a 5-ounce glass of wine or 1.5 ounces of 80-proof distilled spirits all contain the same amount of alcohol.
“To suggest by statement or policy that some forms of alcohol are ‘safer’ than others sends a dangerous message when science has recognized for decades that standard servings of distilled spirits, beer and wine contain the same amount of alcohol,” said Deloney. “This is a critical aspect of responsible consumption.”
Maryland is one of many states taking a closer look at RTD products to ensure spirits-based RTDs are being taxed fairly and that consumers have equal access to them in the marketplace. Twenty-five states already have lower tax rates for lower-abv spirits-based products.
Deloney concluded his testimony by stating, “The spirits industry has been leading beverage alcohol product innovation for nearly two decades. Today, it is a major contributor to the state of Maryland, generating nearly $2.3 billion in economic activity and $292 million to local communities and the state in taxes. Adoption of House Bill 663 will continue to support this growth and expand upon the thousands of industry jobs across the state.”