Tagged: alcohol law

Chicago Liquor License

Classifying Your Beverage Isn’t a Matter of Taste – It’s About Money

Anyone who’s read Richard Unger’s wonderful work “Beer In the Middle Ages and the Renaissance” understands that the medieval history of beer isn’t just taste, quality, ingredients, and anecdotes about witches and overindulging monks – it’s money.  Fermented beverages and laws involving them are inextricably linked with the government’s purse strings.

Alcohol production and taxes are fait accompli, which is the origin and explanation for the majority of regulatory structures and laws that control production, distribution, and consumption.

So when the Nebraska Supreme Court recently took up the question of whether a flavored malt beverage (think Mike’s Hard Lemonade or Smirnoff Ice) was a beer or a spirit, they weren’t indulging in the kind of philosophical exercise that you’d expect in the waning hours of a meeting at your local homebrewers’ association.  The Nebraska Supreme Court was determining how much the state was going to make off a gallon of the stuff and noted the point in the first sentences of their opinion in Project Extra Mile v. The Nebraska Liquor Control Commission:

We are asked to decide whether a flavored malt beverage is a beer or spirit under the Nebraska Liquor Control Act. It makes a difference. Beer is taxed at 31 cents per gallon; spirits are taxed at $3.75 per gallon.

The debate about flavored malt beverages usually concerns whether they’re improperly aimed at the youth market and has been around for a while.  In 2007 the New York Times wrote about them, and in 2009, the National Conference of State Legislatures posted a short article on the debate that’s a decent primer.

In Project Extra Mile, the Nebraska Supreme Court was faced with a few questions based on a lack of legislative action.

The Nebraska legislature hadn’t passed a bill on how to classify flavored malt beverages.  In fact, a bill had been introduced to follow the federal regulations on the subject back in 2006 and it was never passed by the legislature.  But, even though the legislature hadn’t decided, the Nebraska Liquor Control Commission still needed to determine how to tax FMBs under the Nebraska Liquor Control Act because they were served in, and imported to, Nebraska – they couldn’t hide their head in the sand. And the NLCC determined FMBs were beer by doing just what the legislature had attempted to do by statute, adopting a rule enacting the Tax and Trade Bureau’s regulations from 27 C.F.R. parts 7 and 25: