Malternatives Targeted for Tax Increase

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Malternatives Targeted for Tax Increase

SAN JOSE, Calif. -- Santa Clara County recently filed a lawsuit against the California tax commission in an effort to increase the taxation of soda-like flavored malt beverages that have become popular among underage drinkers, the Gilroy Dispatch reported.

The malternatives -- such as Mike's Hard Lemonade, Smirnoff Ice and Bacardi Silver -- are classified as "beer," and as such, can be sold in retail outlets that are only classified to sell beer and wine. In addition, many of the drinks are made with distilled spirits, but are taxed as beer, which is 20 cents per gallon, rather than the $3.30 per gallon that is taxed on distilled spirits.

"The county is simply asking that the (California Board of Equalization) do its duty and properly classify the alcohol," county counsel Ann Ravel told the newspaper. "And in so doing, we are hoping to eliminate underage drinking and at the same time, increase the amount of revenue the state of California is lawfully entitled to collect."

However, the Board of Equalization stated that such a change in the rate of taxation would cause a 4.35 million gallon decline in consumption and as a result, increase taxes by $40 million across the state, according to the Gilroy Dispatch report.

In addition, the "alcopops" taxation rate is based on federal guidelines that are followed by the state's Department of Alcoholic Beverage Control, according to Board of Equalization spokeswoman Anita Gore. Changing the classification would require a change in the law, or require the members to change the law's interpretation. "The Board of Equalization follows the law in the way we tax the items we tax," she added, declining to comment further.

The lawsuit's supporters seek enforcement of state laws that classify the flavored malt beverages as distilled spirits. They said that the Board of Equalization is hiding behind national laws that allow the beverages to be taxed at a lower rate, the report stated.

If the beverages are taxed as distilled spirits, underage drinking would be reduced, according to Jim Mosher, a legal research analyst for the Pacific Institute for Research and Evaluation. "The goal by the distilled spirits industry was to get a bigger share of the youth market," Mosher told the Gilroy Dispatch. "This is very sophisticated marketing that's putting our young people at risk."

He added that the malt beverage industry began marketing the drinks in convenience stores to young, entry-level drinkers in the late 90s.

The San Francisco-based law firm of Renne, Sloane and Sakai is representing the county free of cost.