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Cider Digest #1688
Subject: Cider Digest #1688, 25 January 2012
From: cider-request@talisman.com
Cider Digest #1688 25 January 2012
Cider and Perry Discussion Forum
Contents:
Excise Tax Position (Steve Wood, Mike Beck)
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Subject: Excise Tax Position
From: Steve Wood <swood@farnumhillciders.com>, Mike Beck <mjbeck@ujcidermill.com
>
Date: Sun, 22 Jan 2012 20:40:05 -0500
We intend to propose the following cider excise tax position at the Cider
Conference in Chicago on February 9:
U.S. Cider History-
Cider (often called "hard cider") was a favorite alcoholic beverage in
early America. After Prohibition, traditional fermented cidermaking
disappeared from commerce in the U.S. Even the word "cider" was changed, to
mean "fresh apple juice." In the early 1980's, a few wineries began making
fermented ciders again. At that same time, there also appeared one or two
specialized cider orchards, growing apple varieties developed specifically
for fermented cidermaking. (The difference parallels the better-known
difference between table grapes and wine grapes.) Since then, American
fermented ciders have grown in market acceptance.
Meanwhile, rising fermented-cider production has created new, two-tier
demand for American apples: a generic market for the mass-produced end of
the cider range, and a higher-end specialty market for dedicated cider-apple
varieties grown for distinctive, higher-end ciders. Promising market
conditions also exist for similar development in pear cider (`perry'), both
for generic processing pears and perry-specific varieties. (Note: Apples and
pears are both `pome fruits.')
Problem Statement-
In three ways, obsolete regulations block the growth potential for
American fermented beverages made from apples (`ciders') and pears
(`perrys').
1) U.S. cider and perry brands compete with beers, but their growth is taxed
far more heavily than the growth of beer brands. Ciders under 7% alcohol
are classified for excise tax purposes as "Hard Ciders." Large producers are
taxed at the same rate as beer: $0.226 per gallon. Ciders containing more
than 7% alcohol are classified as "Wines" and taxed on a sliding scale
according to production volume: $0.17 per gallon at the low end, $1.07 at
the highest (>100,000 gal/year). Again, most beers, at all alcohol levels,
are taxed at $0.226/gal (< 1.86 million gal/year). Equalizing tax rates on
beers, ciders, and perrys would remove an arbitrary obstacle to growing new,
land-based small business in many regions of the country. See chart
http://www.talisman.com/cider/beck-wood.pdf
2) The potential to make new, more marketable styles of American cider is
blocked by the arbitrary, prohibitive `champagne tax' rule. Under the Code
of Federal Regulations (CFR), producers of all ciders can be subject to
various tax rates, ranging from $0.17/gal to $1.07/gal, depending on annual
production volume and alcohol level. If, however, any cider (classed as
"Hard Cider" or as "Wine") contains more than .392% CO2 by volume, the
per-gallon tax burden on that cider rises to $3.30-$3.40/gal. There is no
such CO2 tax trigger for beer. The smallest cider producer incurs a >1840%
tax increase; the largest, a >205% increase. Plainly, current tax structure
suppresses the growth of cider production and sale, especially for small
producers.
3) The regulatory division of ciders and perrys into "Hard Ciders" and
"Wines" impedes rational tax policy. It should be replaced by a general
definition for excise tax purposes.
Proposed Solutions-
1. Impose a flat $0.226/gallon excise tax on all `cider' and `perry' as
defined.
2. Eliminate the "champagne tax" on cider and perry as defined.
3. Define `cider' and `perry' as made of 100% pome fruit, with no limits
on water content, sugar content (pre- or post- fermentation), or percentage
of concentrate.
Benefits-
Rapid growth in the U.S. cider/perry category of the national beverage
market, in orchard and production jobs, in rural development, and ultimately
in total excise tax revenue.
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End of Cider Digest #1688
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