Notice of Committee Passage for Senate Bill 5049 - Update: 10 Year Analysis Complete

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SB 5049, titled AN ACT Relating to taxation of low-proof beverages, has been passed by the Senate Committee on Labor & Commerce. The Office of Financial Management has identified this bill as requiring a ten-year projection of increased cost to the taxpayers or affected fee payers.

Ten-year projection:

Department of Revenue:

CURRENT LAW:

"Spirits" means any beverage containing alcohol that is obtained by distillation, including wines with more than 24 percent alcohol by volume.

The regular retail sales tax does not apply to sales of spirits unopened in the original container.  However, it does apply to sales of spirits by the drink (glass).

There are two types of spirits (liquor) taxes: a spirits liter tax and a spirits sales tax.  

The spirits liter tax is a tax on the sales of spirits in the original container and is based on the volume sold. The tax rate for consumers is $3.7708 per liter. The tax rate for on-premises retailers such as restaurants and bars is $2.4408 per liter.

The spirits sales tax is a tax on the selling price of spirits in their original container. The tax rate for sales to consumers is 20.5 percent. The tax rate for on-premises retailers is 13.7 percent.

PROPOSAL:

The bill draft defines “low proof beverage” as any beverage which contains more than 0.5 percent and less than seven percent alcohol by volume, but excludes wine, malt beverages, or malt liquor.

This bill does the following:

Exempts low proof beverages from the spirit license issuance fee administered by the Liquor and Cannabis Board (LCB) under RCW 66.24.632.

Exempts low proof beverages from spirits taxes.

Low proof beverage will be taxed at a rate of 99 cents per gallon to be imposed on a distillery or craft distillery that self-distributes low proof beverages to retailers or directly to consumers.  

Low proof beverages will continue to be subject to the following taxes:

 -Business & Occupation (B&O) taxes apply to the manufacture and/or sale of spirits.

 -Retail sales tax collected on drinks containing spirits sold by restaurants, bars or other establishments that have an on-premises license.

EFFECTIVE DATE:

The bill takes effect 90 days after final adjournment of the session in which it is enacted.

ASSUMPTIONS:

The revenue impact for this proposal is indeterminate.

Based on research and limited information currently available to the department, four spirits-based products currently being marketed in Washington that would qualify under the proposal are:

     - Joia Spirits Sparkling Gimlet (6% alcohol by volume, ABV)

     - Cutwater Vodka Soda (5% ABV)

     - Gin & Tonic Pre-mixed Cocktails (6.2% ABV)

     - Ketel one Botanical Vodka Spirits Peach (3.6% ABV)

Under the proposed law, these four products will no longer be taxed as spirits, which will incur a loss of spirits tax revenue; however, the amount of revenue loss is unknown.  

Other than the examples above, spirits-based 'low proof beverages' do not appear to be marketed in this state; therefore, the amount of revenue gain from the proposed law will be unknown.

LOCAL GOVERNMENT IMPACT: Indeterminate

Ten-year projection prepared in consultation with the following agencies:

Department of Revenue

The following legislators voted do pass:

Senator Mark Schoesler
Republican
(360) 786-7620
mark.schoesler@leg.wa.gov

Senator Karen Keiser
Democrat
(360) 786-7664
Karen.Keiser@leg.wa.gov

Senator Curtis King
Republican
(360) 786-7626
Curtis.King@leg.wa.gov

Senator John Braun
Republican
(360) 786-7638
john.braun@leg.wa.gov

Senator Rebecca Saldaña
Democrat
(360) 786-7688
rebecca.saldana@leg.wa.gov


The following legislators voted to refer the bill without recommendation:

Senator Steve Conway
Democrat
(360) 786-7656
steve.conway@leg.wa.gov

Senator June Robinson
Democrat
(360) 786-7674
june.robinson@leg.wa.gov


The following legislators voted do not pass:

Senator Jim Honeyford
Republican
(360) 786-7684
Jim.Honeyford@leg.wa.gov

Senator Derek Stanford
Democrat
(360) 786-7600
Derek.Stanford@leg.wa.gov



Legislative Bill Information Website: http://apps.leg.wa.gov/billinfo/

Initiative 960 Website: http://www.ofm.wa.gov/tax/default.asp