Distilled Spirits Council urged state committee to consider fairer tax rate for spirits

 The Distilled Spirits Council of the United States (DISCUS) testified before the West Virginia Joint Standing Committee on Finance today urging the legislature to lower the tax rate for spirits-based ready-to-drink (RTD) cocktails – a move that could generate an additional $3 million in tax revenue, according to the council.

Andy Deloney, vice president of state public policy for DISCUS, noted 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.

While this variety has greatly increased consumer choice, he pointed out that consumers of spirits-based RTDs products are being unfairly burdened by higher taxes.

“Unfortunately, West Virginia 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 Deloney.

Deloney cited as an example that the West Virginia tax rate on a spirits-based RTD that has a 6% alcohol by volume (ABV) is 35 times higher than the tax rate on malt- and sugar-based beverages with the same alcohol content. The rate for malt- and sugar-based beverages with a 6% ABV is $0.02 per 12-ounce can versus $0.71 per 12-ounce can of a spirits-based beverage.

“Three neighboring states already have reduced gallonage excise tax rates that apply to spirits-based RTDs,” Deloney stated citing Kentucky, and the fellow control states of Ohio and Virginia. “Spirits-based RTDs cost, on average, 15-20% more in West Virginia compared with all neighboring states except Pennsylvania.”

Deloney stated that the excessive tax burden on spirits producers is also a steep hurdle for West Virginia distillers trying to enter this growing category. According to a 2021 DISCUS survey of craft distillers, 62% of those not currently producing RTD products cited the higher tax rate as a barrier to entering the market.

Deloney also pointed out that the West Virginia Governor’s Highway Safety Program Impaired Driving Brochure states that “a can of beer, a glass of wine, or a wine cooler is just as intoxicating as a shot of liquor. They all contain approximately 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,” Deloney said. “This is a critical aspect of responsible consumption.”

West Virginia is one of many states taking a closer look at this issue to ensure that producers and consumers of spirits-based RTDs are being taxed fairly. Twenty-five 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, Nebraska and Vermont.

Deloney completed his testimony by noting the economic impact the spirits industry has in West Virginia stating, “Today, the spirits industry is a major contributor to the state of West Virginia, generating nearly $239 million in economic activity and $48 million to local communities and the state in taxes.”