Alcopop Makers Elude Calif. Tax Hike

Makers of so-called “alcopop” drinks have apparently dodged a tax hike in California by reformulating their products so that they will continue to be taxed like beer, not liquor, the Sacramento Bee reported Dec. 31.

A three-year advocacy effort resulted in California reclassifying alcopops as liquor, which would have seen the drinks taxed at $3.30 per gallon instead of the beer rate of 20 cents per gallon. State lawmakers also approved a bill that required the drinks to carry a large label stating that they contain alcohol.

However, alcopop makers like Diageo got around the tax increase by tweaking the formula so that the drinks do not fall under the state's definition of liquor, which includes any beverages containing more than 0.5 percent of alcohol from flavorings derived from distilled spirits.

“All the leading products have been reformulated,” said industry lawyer Marc E. Sorini. “The only economic impact is higher costs in the industry that may or may not be passed on to the consumer.”

“Our technical team made sure that our product looks and tastes the same as the other formulation,” said Zsoka McDonald, a spokeswoman for Diageo.

“Consumers can't notice a difference.”

Michael Scippa, advocacy director of the Marin Institute, which lobbied for the higher taxes on alcopops, said that the alcohol-content definition may have been a weakness in the law but also was skeptical that the formula really had been changed.

“It is disappointing, but the mere fact that it brought the issue on the radar screen for a lot of policymakers is good,” said Scippa. “It's not like the problems are going to go away overnight just because the products have been reformulated.” The chair of the state's tax board said she would push for the contents of the drinks to be verified so that the true spirit of the regulations is adhered to.

The reformulation also means that the alcopops don't have to comply with the new labeling law.

Read more: Makers of 'alcopops' can't be allowed to pull a fast one on tax (Fresno Bee editorial, Jan. 15, 2009)