Bill benefits businesses and consumers by lowering taxes on spirits-based RTD products
The Distilled Spirits Council of the United States (DISCUS) and multiple Maryland distillers submitted testimony to the Senate Budget and Taxation Committee today in favor of SB 793, a bill to reduce the tax burden on consumers and distilleries by lowering the tax rate for ready-to-drink (RTD) cocktails.
Under the proposed bill, the tax rate on spirits-based RTDs would be reduced from the current rate of $1.50/gallon to $0.40/gallon.
“There is no reason our small distilleries and our consumers 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 and vice president of the Maryland Distillers Guild. “As constituents who contribute to our state’s economy, pay local taxes and are negatively impacted financially by this unfair tax, we ask those voting on this bill to hear our voice. Creating a more equal tax rate for equal alcohol content just makes sense.”
According to a 2021 DISCUS survey of craft distillers, 62 percent of those not currently producing RTD products cited the higher tax rate as a barrier to entering the market.
Jay Hibbard, DISCUS senior vice president of state government relations pointed out in his testimony that the ready-to-drink (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 consumers are forced to pay much higher taxes for a spirits-based RTD product even if the product has the exact same or similar amount of alcohol as an RTD made with malt, sugar or wine,” said Hibbard.
Rachel Fontana, director of strategic communications at Sagamore Spirit in Baltimore, agrees. “Not only will the excise tax reduction create necessary parity in the alcoholic beverage tax structure, but it also allows us to create salaried manufacturing jobs in Baltimore City,” said Fontana.
Hibbard 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 ‘softer’ than others sends a dangerous message when science has long recognized that standard servings of distilled spirits, beer and wine contain the same amount of alcohol,” said Hibbard. “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-four states already have lower tax rates for lower-abv spirits-based products. In fact, last year bills to reduce the state excise tax on spirits-based RTDs passed in Michigan and Nebraska.
Hibbard completed his testimony by stating, “There is no public policy rationale for maintaining policies that stifle innovation and prevent competition. In fact, we think policies should foster both innovation and competition, and then let consumers decide.”