Proposal seeks to tax ‘flavored malt beverages’ in N.J.

TRENTON – The prevalence of so-called hard lemonade-type alcoholic drinks in the marketplace has prompted legislation to try and tax their production process.

S3011, sponsored by Sen. Joseph Vitale, (D-19), Middlesex, would create a new taxable category of alcoholic beverages called “flavored malt beverages.’’

The category would be taxed at the rate of $4.40 per gallon.

Vitale could not be reached for comment, but according to the bill language:

“Though produced in a manner which incorporates certain aspects of beer brewing, much of the flavoring and alcohol in flavored malt beverages is derived from the addition of distilled spirits.

“This production process has the effect of creating an alcoholic beverage that is sufficiently beer-like to be taxed like beer, but sold as something else entirely.

“Alcoholic lemonades, alcoholic colas and cooler-type products are examples of such products.”

The proposed law would divide the tax revenue evenly between the General Fund and the Alcohol Education, Rehabilitation and Enforcement Fund.

The state already has excise taxes on beer, wine and liquor.

For beer: 12 cents a gallon; for wine, .875 cents per gallon; and liquor, $5.50 a gallon.

Eric Shepard, executive editor of Suffern, N.Y.-based Beer Marketer’s Insights, a trade publication, said the effort to tax these types of flavored malt beverages is a developing trend.

“State attorneys general and legislatures are trying to find a way to treat them differently than beer and more like liquor,’’ he said.

Some states, such as New York, want to reclassify such beverages and restrict their sales to liquor stores, he said.

In response, some marketers of these drinks have decided to reduce the products’ alcohol content, Shepard said.

According to Shepard, beer is a $90 billion to $100 billion business in the United States, with the so-called flavored malt beverages accounting for approximately a 2.5 share, or roughly $2.2 billion, of that business.

Proposal seeks to tax ‘flavored malt beverages’ in N.J.