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Tax on sweet alcohol drinks raised

Teens seeking to curb underage drinking asked the state Board of Equalization to make the change. The liquor industry is opposed.

August 15, 2007|Nancy Vogel | Times Staff Writer

SACRAMENTO -- A group of California teenagers working to curb underage drinking scored a victory Tuesday when state officials voted to impose a steep new tax on sweet alcohol drinks, such as Smirnoff Ice, Seagram's Coolers, Bacardi Silver and Mike's Hard Lemonade.

The state Board of Equalization decided to treat flavored malt beverages as distilled spirits rather than as beer, a move that will boost the tax on a six-pack of the drinks by nearly $2.

"The ruling will send a signal to youth that these drinks are hard liquor because they have costs similar to hard liquor," said board member Judy Chu of Monterey Park, one of the three Democrats to vote for the change.

The so-called alcopop drinks mimic lemonade, cola, fruit punch and other flavors. They don't fit neatly into California's alcohol classifications of beer, wine and distilled spirits.

Before the tax change can take effect, the state must gather information from the alcohol industry about the content of flavored malt beverages sold in California, said board staff members. That could take a year.

The 3-2 vote came eight months after a group of teenagers from around the state petitioned the board for the higher tax.

"I was tired of seeing my peers drink these products," said Jimmy Jordan, an 18-year-old from the Sacramento area who helped draft the petition. "I was tired of seeing people drinking and doing dumb things."

The vote changes the classification of the drinks, which are widely available, only in terms of taxes. The state Department of Alcoholic Beverage Control, which licenses businesses that sell alcohol, still categorizes them as beer, which means they are potentially available for sale in 1,362 more stores and nearly 10,000 more restaurants than if they were considered distilled spirits.

The two Republicans on the board voted against the tax reclassification, saying it would do little to curb underage drinking but could harm thousands of restaurant, convenience store and grocery store owners by reducing sales.

Republican board member Bill Leonard of San Bernardino urged the Legislature to update California's alcohol classification and taxation laws, saying they don't take into account the many new hybrid products.

"No matter what we do today, it won't make sense. The scheme will still be irrational," he said.

Like beer, flavored malt beverages generally contain from 5% to 6% alcohol. To make them, manufacturers start with a malt base, then strip the beer taste and add distilled-spirit flavorings.

Current California regulations tax beer and wine at 20 cents a gallon and distilled spirits at $3.30 a gallon. The new regulation would boost the tax on a 12-ounce bottle of flavored malt beverage from 2 to 31 cents.

Tax board staffers estimate that the change will generate an additional $41 million a year in revenue and reduce by 14% consumption of flavored malt beverages by youths ages 12 to 18.

Representatives of the alcohol industry strongly opposed the move.

"All flavored malt beverages have at least the majority of their alcohol from the fermented beer base," said Marc E. Sorini, an attorney representing major manufacturers.

He said companies could simply change the way they make the drinks. "Our survey suggests that most of the companies would rather reformulate than pay the higher tax," Sorini said.

He also called the tax board the wrong forum to address underage drinking and said the industry will weigh a court challenge.

"What we're talking about here . . . are social policy issues, certainly not something one would expect the tax board to be leading the policy-making on," Sorini said. "This is something frankly the Legislature ought to be doing."

Lynne Goodwin, a program analyst with the nonprofit California Friday Night Live Partnership in Tulare County, helped organize the teenagers who lobbied the Board of Equalization. She welcomed the decision, saying, "I think we're all charged with the health and well-being of young people."

The decision makes California only the second state, after Maine, to classify alcopops as distilled spirits.

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nancy.vogel@latimes.com

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