The CIDER act was finally passed. What does this mean for NY wineries, breweries and cideries? It allows cider producers to produce a wider portfolio of products and still qualify for the tax breaks given to cider before it is taxed at the higher rates for other fruit wines or sparkling fruit wines. It also eliminates the discrepancy between the 7% federal limit on ABV and the state 8.5% ABV.
The savings? This change could save cideries about $3-$3.80 per gallon on taxes. The CIDER Act will allow for Cider made with up to 6.4 grams CO2 per liter and an ABV up to 8.5% to qualify for the TTB cider tax rate of only 22.6 cents per gallon. There is one important thing to note. While these changes generally increase the cider varieties that can be made, if other fruit flavorings are added (for example, blackberry perry or raspberry apple cider), these fruit-flavored ciders are generally taxed as a fruit wine and must pay the full $1.07/gal tax subject to a $0.90/gal credit on the first 100,000 gallons produced.
The most important parts of the new law are the revised definition of hard cider. It now includes:
- Alcoholic beverage derived primarily from apples, apple juice concentrate and water, pears, or pear juice concentrate and water;
- contains no fruit product or fruit flavoring other than apple or pear;
- contains 0.5% – 8.5% ABV; and
- carbonation level of which does not exceed 6.4 grams per liter.
The increase in the ABV is important for several reasons: first, with the sophistication of the consumer palette in the craft alcoholic beverage market, consumer expectations and demand for cider cover a broader range of flavors and alcohol content, and increasing the allowable ABV puts US cideries in a more competitive position internationally in the cider market. Now dry ciders can be produced for the same price as mass produced sweet ciders. Second, it recognizes and adjusts for the reality of cider making that apples produce a less predictable alcohol content than grapes because of the greater variety of apple types and range of growing conditions. Allowing a pure product to be sold without diluting it with water is better for both the producer and the consumer. Third, perry (pear cider) can now qualify as a hard cider. Lastly, the increased carbonation level allows more product variety and manufacturing methods (especially the champagne method and double fermentation).
 Previously, all cider over 7% ABV was taxed at the wine rate of $1.07 per gallon and any cider with more than 3.9g/l of CO2 got hit with the champagne/sparkling wine tax rate of $3.30 (artificially carbonated) or $3.40 (naturally carbonated) per gallon.
Tracy Jong has been an attorney for more than 20 years, representing restaurants, bars, and craft beverage manufacturers in a wide array of legal matters. She is also a licensed patent attorney.
Her book Everything You Need To Know About Obtaining and Maintaining a New York Retail Liquor License: The Definitive Guide to Navigating the State Liquor Authority will be available next month on Amazon.com as a softcover and Kindle e-book.
Her legal column is available in The Equipped Brewer, a publication giving business advice, trends, and vendor reviews to help craft breweries, cideries, distilleries and wineries build brands and succeed financially.
She also maintains a website and blog with practical information on legal and business issues affecting the industry. Follow her, sign up for her free firm app or monthly newsletter.
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Tracy Jong Law Firm