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SECTION IV: Lifestyle Related Revenue Raisers Impose a Uniform Alcohol Excise Tax Current Law An excise tax is imposed on all distilled spirits, wine, and beer produced in, or imported into, the United States.54 The tax liability legally comes into existence the moment the alcohol is produced or imported but payment of the tax is not required until a subsequent withdrawal or removal from the distillery, winery, brewery, or, in the case of an imported product, from customs custody or bond.55 Both the tax rates and the volumetric measures on which the taxes are imposed differ depending on the type of beverage. Taxes are lower on the alcohol content of beer and still wines than on the alcohol content of distilled spirits and naturally sparkling wines. Distilled spirits, wine, and beer produced or imported into the United States are taxed at the following rates per specified volumetric measure:
Item Current Tax Rate Distilled Spirits: $13.50 per proof gallon
Wine Still Wines: Not more than 14 percent alcohol $1.07 per wine gallon More than 14 percent but not more than 21 percent alcohol $1.57 per wine gallon More than 21 percent but not more than 24 percent alcohol $3.15 per wine gallon More than 24 percent alcohol Taxed as distilled spirits59 ($13.50 per proof gallon) Hard apple cider: $0.226 per wine gallon Sparkling Wines -- Champagne and other naturally sparkling wines $3.40 per wine gallon Artificially carbonated wines $3.30 per wine gallon
Beer $18.00 per barrel61 On a per ounce basis, distilled spirits are taxed at roughly 21 cents per ounce of alcohol, still wines at 8 cents per ounce of alcohol (assuming an average alcohol content of 11 percent), and beer at 10 cents per ounce of alcohol (assuming an average alcohol content of 4.5 percent). Proposed Option This policy option contemplates imposing a uniform tax based on the alcohol content contained in the product. The excise tax under the proposal is imposed at a rate of $16 per proof gallon on all alcoholic beverages.62 As under present law, domestic wineries having aggregate annual production not exceeding 250,000 gallons would be entitled to a tax credit on the first 100,000 gallons of wine (other than 56 A “proof gallon” is a U.S. liquid gallon of proof spirits, or the alcoholic equivalent thereof. Generally a proof gallon is a U.S. liquid gallon consisting of 50 percent alcohol. On lesser quantities, the tax is paid proportionately. Credits are allowed for wine content and flavors content of distilled spirits. Sec. 5010. 57 Small domestic wine producers (i.e., those producing not more than 250,000 wine gallons in a calendar year) are allowed a credit of $0.90 per wine gallon ($0.056 per wine gallon in the case of hard cider) on the first 100,000 wine gallons (other than champagne and other sparkling wines) removed. The credit is reduced by one percent for each 1,000 wine gallons produced in excess of 150,000 wine gallons per calendar year. 58 A “wine gallon” is a U.S. gallon of liquid measure equivalent to the volume of 231 cubic inches. On lesser quantities, the tax is paid proportionately. 59 Sec. 5001(a)(4). 60 A small domestic brewer (one who produces not more than 2 million barrels in a calendar year) is subject to a per barrel rate of $7.00 on the first 60,000 barrels produced in that year. 61 A “barrel” contains not more than 31 gallons, each gallon equivalent to the volume of 231 cubic inches. On lesser quantities, the tax is paid proportionately. 62 Because the rate of tax will not depend on the source of the alcohol, the section 5010 credit based on wine content and flavors content of distilled spirits is not necessary and would be eliminated under the proposal.
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