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

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SSB 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:

Liquor and Cannabis Board:

This bill assesses a $0.99/gallon tax on "low-proof beverages" which is defined as “any beverage that is 16 ounces or less and that contains more than .5 percent alcohol by volume and less than seven percent alcohol by volume, but does not include wine, malt beverages, or malt liquor.”  This tax is to be paid by spirits distributors on sales to spirits retailers, distilleries and craft distilleries when self-distributing to spirits retailers or directly to consumers, or the holder of a spirits out-of-state certificate with a direct shipment endorsement, when self-distributing to spirits retailers.

ASSUMPTIONS: The revenue impact for this proposal is indeterminate. Based on research and limited information currently available, 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.

Department of Revenue:

PROPOSAL:

The bill creates a new category of alcoholic beverages: “low proof beverage” as any beverage which is 16 ounces or less and contains more than 0.5 percent and less than seven percent alcohol by volume, but excludes wine, malt beverages, or malt liquor.

The “low proof beverages” are removed from the definition of “spirits” from spirits sales and liter taxes (RCW 82.08.150); however, this will make “low proof beverages” become subject to retail sales and use tax.  

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, and a holder of a spirits out-of-state certificate with a direct shipment endorsement that self-distributes to retailers.  

The new per-gallon tax is administered by LCB.

The bill exempts low proof beverages from the spirit retail license issuance fee under RCW 66.24.630(4)(a).

Low proof beverages will continue to be subject to the business & occupation (B&O) taxes on manufacturing, wholesaling, and retailing activities.

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 be no longer 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
Liquor and Cannabis Board

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