The Distilled Spirits Council of the United States (DISCUS) submitted testimony to the North Dakota House Finance and Taxation Committee yesterday in favor of HB 1303, a bill to reduce the tax burden on consumers and businesses by lowering the tax rate for spirits ready-to-drink (RTD) cocktails containing less than 12.5% alcohol-by-volume (ABV).

Adam Smith, vice president of state public policy for DISCUS, noted in his testimony that the RTD category has transformed over the past several years and while increased variety has greatly increased consumer choice, consumers of spirits-based RTDs products are being unfairly burdened by higher taxes.

“Unfortunately, North Dakota consumers are forced to pay much higher taxes for a spirits-based RTD products even if the product has the exact same or similar ABV as a malt-, sugar- or wine-based RTD,” Smith stated in his testimony. “At 5 percent ABV, the North Dakota tax rate on spirits-based RTDs is more than 15 times the malt- and sugar-based RTD state tax rate.”

Under the proposed bill, the tax rate on spirits-based RTDs would be reduced from the current rate of $2.50/gallon to $0.60/gallon, which is the current excise tax rate for wine containing 17-24% ABV.

Representatives of the beer industry also submitted testimony highlighting a deeply flawed study that falsely claims that the average price of spirits ready-to-drink cocktails went up 65 percent in Nebraska. Comparing the price of spirits RTD brands from 2017 to different brands in 2022 is unsound since the majority of the brands available today were not even in the marketplace in 2017. There are more premium products entering the RTD marketplace, meaning new products at higher price points, not older brands increasing prices.

“This is clearly an attempt by the beer industry to hold on to the unfair advantage their malt-based RTDs have in the marketplace,” said Smith. “It’s unfortunate to see such misleading information being used at the expense of consumers. The bottom line is consumers do benefit when spirits-based RTDs are taxed more fairly – it allows more craft distillers to enter the market, spurs innovation and brings consumers more options in the marketplace.”

In his testimony, Smith also pointed out the importance of recognizing alcohol is alcohol.

“Drinking responsibly and in moderation depends on how much you drink, not whether that drink is made of beer (malt), sugar, wine or spirits,” Smith stated in his testimony. “A malt-based RTD with 5 percent ABV has the exact same alcohol content as a spirits RTD with 5 percent ABV. There is no difference. 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.”

North Dakota 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.