Alcoholic Beverage Tax Regulations

Why Started:

In December 2006, the Board granted a petition from California Friday Night Live requesting the Board to tax Flavored Malt Beverages (FMB) as distilled spirits. As part of the rulemaking process, from February 2006 through June 2006, interested parties meetings were held to discuss the issues and in July 2007, based on the recommendation presented in the formal issue paper, the Board approved proposed regulations to tax FMB as distilled spirits.

Year Started:

In April 28, 2008, the Board submitted the proposed regulations to the Office of Administrative Law (OAL). The regulations became partially operative on July 10, 2008, with a fully operative date of October 1, 2008.

Recent Developments:

In the fall of 2008, a Budget Change Proposal (BCP) was submitted to the Department of Finance (DOF) requesting resources to:

  • Implement the regulations,
  • Maintain an internet listing of alcoholic beverage products that have successfully rebutted the presumption, and
  • Perform follow up testing for products where an alcoholic beverage manufacturer has filed a form to rebut the presumption.

In the spring of 2009, a revised BCP was submitted to the DOF, requesting only the resources and funding necessary to perform testing of the products. The revised BCP was ultimately denied.

Excise Taxes Division (ETD) staff provided a report and testing plan to the Board at its March 17, 2009, meeting. The Alcohol and Tobacco Tax and Trade Bureau (TTB) has conducted a one day training class and ETD will be scheduling site visits (tours) with two alcoholic beverage manufacturers that have volunteered to describe their manufacturing processes. Then, ETD staff plans to perform testing, which will consist of on-site audits of alcoholic beverage manufacturer's during the late summer/early fall of 2009, with a final report to the Board in the winter of 2009.

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