Nebraska Legislature Votes in Favor of Tax-Payers, Retailers, Producers

Nebraska Legislature Votes in Favor of Tax-Payers, Retailers, Producers
April 17, 2012

Nebraska legislators have passed a bill to ensure flavored malt beverages are taxed as beer rather than at the far higher rate for distilled spirits. The bill is awaiting the governor’s signature.

Forty-seven states and the federal government define flavored malt beverages (FMBs)—sweetened alcoholic malt beverages—as beer. In Nebraska, however, a Prohibition-era law strictly distinguishes beer from distilled spirits.

With the advent of hybrid products such as FMBs, the Nebraska Liquor Control Commission aligned the state’s policy with federal guidelines and classified them as beer, thus allowing Nebraska beer-only licensees to sell the product and for FMBs to be taxed at the same rate as beer—31 cents per gallon—as opposed to the $3.75 per gallon rate applied to spirits.  

Response to Ruling

In March, however, the Nebraska Supreme Court struck down that decision when ruling on a suit brought by activists for preventing underage drinking. The court ruled the liquor commission had overstepped its authority in redefining state liquor law and stated the classification must be made by the legislature.

Anticipating the court’s decision, Nebraska Sen. Russ Karpisek (Wilber) introduced a bill (LB 824) to amend the 1935 Nebraska Liquor Control Act to explicitly include flavored malt beverages within the act’s definition of beer. The bill passed the legislature with a 37-6 vote and was presented to Gov. Dave Heineman (R).

As law, the amended definition would provide much-needed consistency for consumers, retailers, and producers, according to supporters.

“There are a lot of retailers, pizza places, and gas stations in Nebraska that have beer-only licenses,” said Karpisek. “They wouldn’t be allowed to sell FMBs if they were defined as liquor.”

Could Lose Market

“We’ve heard from beer-only retailers telling us that if FMBs were taxed as spirits, they’d take them off their shelves,” said Sen. Colby Coash (Lincoln). “Most would not get an extra liquor license. You’d lose the market.”

Coash said without the law consumers would bear the brunt of a higher tax. “You would be decreasing access to the product among legal-aged drinkers.”

Opponents argue the higher tax on FMBs, or “alcopops” as critics call them, would reduce underage drinking.

‘Alcopop’ Fears

“Alcopops come in colorful, attractive packaging. They are sweet and easy to drink and appealing to young people,” argued Nebraska Sen. John Harms (Scotts Bluff County) in a hearing to amend the bill. “The more expensive the product, the less teenagers will go after it.”

In response, Karpisek said evidence suggests underage drinkers prefer hard liquor and flavored vodkas that are already taxed as spirits.

“Singling out FMBs is not going to curtail underage drinking. FMBs will remain illegal for people under 21, and we haven’t seen any documented correlation between underage drinking and this product,” Karpisek said.

Brien Farley (brien.farley@gmail.com) writes from Genesee, Wisconsin.