Spirits industry pushes for states to lower taxes on canned cocktails

John Granata, co-founder of Jersey Spirits Distilling and president of the New Jersey Craft Distillers Guild, has been pushing for lower excise taxes in New Jersey for years. For the first time, however, it seems like state legislators are finally listening.

“It was a surprise that legislators were even entertaining it,” Granata said.

The spirits industry has an effort underway to lobby states to lower taxes on canned cocktails to more closely mimic those placed on beer and hard seltzer.

Excise taxes have been placed on alcohol dating back to the early days of the United States, but since the repeal of Prohibition, spirits have been taxed higher than other forms of alcohol by the federal government and states. Liquor’s high alcohol content carries a taboo that separates it from beer and wine in the eyes of some lawmakers and watchdogs. Producers, importers, wholesalers and even retailers in some states have to pay excise taxes on alcohol, although they typically pass the cost down to consumers.

Granata’s distillery started selling canned cocktails during the pandemic as a way to offset on-premise sales lost during the health crisis. New Jersey had been slow to legalize to-go cocktails. Most of Granata’s ready-to-drink beverages have an alcohol by volume of roughly 10%.

“Once we got into that, we started thinking about the taxes,” Granata said. “The state taxes became a stumbling block in trying to do things on an even larger scale. With the price points that were already set, it became challenging.”

On top of federal excise taxes, Jersey Spirits Distilling pays $5.50 per gallon in excise taxes to New Jersey on those drinks because they contain spirits, while a beer manufacturer would only pay 12 cents for the same amount, even if beer had a higher ABV. If New Jersey passes a bill moving through its state legislature, the distillery would pay 15 cents for every gallon of its canned cocktails.

The pandemic and consumers’ desire for convenience have driven up the sales of canned cocktails. In 2020, U.S. consumption of canned cocktails grew 52.7% from the previous year, accounting for 6.9% of the total volume in the alcoholic ready-to-drink category, according to IWSR data. The higher sales have encouraged liquor companies to take the offensive in a fight for tax parity.

“With all of the attention that came organically, we started getting much more engaged,” said Les Fugate, vice president of state and local public affairs for Jack Daniels distiller Brown-Forman. “We’re always looking for the opportunity for our products to get treated the same, and this is the perfect way to demonstrate that alcohol is alcohol is alcohol.”

The spirits industry thinks that canned cocktails can see even more growth if distillers could pay lower excise taxes,…