Bipartisan legislation offers excise tax relief sought by U.S. hard cider makers

American producers of hard cider have been seeking to level the tax playing field with their competitors in the beer industry. Relief may be soon at hand.

Congressmen from Portland, Ore., and New York’s Niagara region earlier this month introduced legislation in the House that would ease the excise tax burden on America’s small, but growing hard cider industry.

Chris COllins

Chris Collins

Earl Blumenauer

Rep. Earl Blumenauer (D-Ore.) and Rep. Chris Collins (R-New York)  introduced the bipartisan Cider Industry Deserves Equal Regulation (CIDER) Act, H. R. 2921, which would have the federal excise tax on cider structured more like the tax on beer, which is 22 cents per gallon. New York Sen. Charles Schumer reportedly is planning to introduce similar legislation in the Senate.

When the alcohol content exceeds 7 percent, cider is taxed as wine, based on a sliding scale that goes as high as $1.07 per gallon for producers making more than 100,000 gallons a year. Cider makers must pass on the higher taxes to consumers or absorb them.

The tax on cider varies, depending on its alcohol and carbon dioxide content, which vary from harvest to harvest based on weather and small changes in production techniques.

jim silver

Jim Silver

“Even under normal harvest circumstances, dessert apples like Fuji and Gala, which we use, can easily ferment beyond the 7-percent-alcohol threshold that breaks the tax barrier and turns cider into “apple wine,’ ” said Jim Silver, general manager of the Standard Cider Co., producer of True Believer and True Companions Ciders, on Long island’s North Fork. “In the worst case scenario, the cider maker is now compelled to put a garden hose into the tank to assure himself that the finished product will be under that threshold – obviously not an ideal situation, especially if that producer wants to make the best cider possible.”

Because of the narrow way that hard cider is currently defined in the tax code, these small variations can lead to cider being taxed at a rate 15 times higher than what the law intended, according to a press release issued by the congressmen.

The Blumenauer-Collins bill would broaden this definition to include pear, as well as apple cider and to greatly reduce the chance that improper taxation would occur.

“Cider making is sometimes closer to an art than a science,” said Blumenauer.  “As the American apple and pear hard cider industry becomes more prominent on the world stage and cider becomes a beverage choice for more Americans’ developing palettes, we need to ensure that cideries have every opportunity to expand and meet the needs of this growing market without an unfair tax burden.”

Collins added. “This bill will help spur growth in the American apple industry by allowing it to be more competitive on an international level.

Cider makers, who have been pushing for the changes, cheered the bill.

“This bill bravely and wisely cuts a path to ensuring cider gets a real chance to succeed,” said Silver.

“We are very pleased that Congressmen Blumenauer and Collins are working to assist cideries not only in our part of the country, but nationally as well,” said Sherrye Wyatt, executive director of the Northwest Cider Association, which represents producers in Washington, Oregon, Montana, Idaho, and British Columbia.  The changes proposed by the congressman “will update the existing federal definition of cider to better reflect the industry and keep American cider competitive in the international marketplace,” she said.

“Blumenauer and Collins’s cider bill comes at a crucial time for the small but quickly growing cider industry,” said James Kohn, owner of Wandering Aengus Ciderworks in Salem, Ore. “The current excise tax for fermented ciders does not capture accurately the ciders we produce or most of the ciders in the U.S. And this is very confusing to current producers and the growing number of new cider producers in Oregon and the Northwest. This Cider Bill will end this confusion and ensure ciders are taxed consistently.”

Mike Beck, president of the U.S. Association of Cider Makers, called the introduction of the legislation “a critical first step towards making the United States hard cider industry more competitive internationally and treated more fairly under the tax code.”

Sales of domestically produced cider more than tripled in 2012 from 2007, climbing to $601.5 million, according to IBISWorld, a market research company.

1 Comment

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One Response to Bipartisan legislation offers excise tax relief sought by U.S. hard cider makers

  1. Anthony Nappa

    Alan,
    This article is important because this legislation is extremely important for leveling the playing field for small cider producers. As someone who loves cider and has made it in the past and hopes to make it in the future I am concerned with the issue.
    But you got the story incorrect;
    Still Hard Cider is taxed at $0.226/gal with a small producer credit of $0.056/gal = $0.15/gal below 7% alcohol
    while wine is taxed (above 7%) @ $1.07/gal with a small producer credit of $0.90 = $0.17/gal
    The issue is Sparkling hard cider is taxed as sparkling wine (champagne) which is taxed at $3.30-$3.40/gal depending on how its made, even with a $0.90 credit its about $2.50/gal
    This proposed law is to change the rules on sparkling cider to make it taxed the same as hard cider, making it $0.15/gal not $2.50/gal

    My favorite ciders are sparkling and this law will open the door for many small apple farms it the state.

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