More Maryland Liquor Law: Define “BEER!”

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While waiting for the hearing on SB-616, Kim and I sat in on the hearings of other bills on the docket. These ranged from SB-675 which sought to outline voting districts in Carroll county to SB837 which proposed to allow for wine sales at a new retail complex in Prince George’s County. These bills weren’t very exciting, but one other bill was actually quite interesting and I think exemplifies the difficulty of licensing and lawmaking when it comes to alcoholic beverages. (Image from wikipedia)

At face value, Senate Bill 745 seems quite straightforward. Senator Colburn proposed the bill to acknowledge that by definition, Flavored Malt Beverages (FMBs) such as Jack Daniels coolers should be classified as “beer” for wholesale licensing and retail distribution purposes. Seems easy enough, right? Beer and FMBs have similar alcohol content, are sold together on store shelves, and both are carbonated, light alcoholic beverages. In the present system, FMB’s are defined as “distilled spirits” yet taxed at the rate of beer which is $0.09 per gallon. In contrast, “distilled spirits” are taxed at $1.50 per gallon. Why FMB’s aren’t currently taxed at the rate of spirits (which they are defined as) is beyond me. Regardless, this new bill would protect FMB’s by saying they are “beer” and maintain their tax rate (and licensing) at the current “beer” level.

The opponents of the bill were the first to make their testimony.

The first opponent of the bill to have his testimony heard was State Attorney General Douglas Gansler. The Attorney General began with a “show and tell” of sorts. He emptied a bag containing 5 different FMB’s and asked the Committee whether these “looked like beer?” The FMBs ranged from clear liquids in fancy glass bottles, to red fruit punch-looking drinks. “Clearly, these are not beer” he testified. Attorney General Ganslers’ main argument was that these FMBs were gateway alcohol products and were the drink of choice for teenagers and young adults, especially females, under the age of 21. He conceded that the current classification as spirits was unfair, but opposed placing these in the category of “beer.” He offered a recommendation of a third class of beverage that would be specific to FMB’s, have a tax rate between the $0.09 and $1.50 of beer and spirits, and have restricted distribution limiting these beverages to liquor stores and removing them from common store shelves.

Another opponent of the bill displayed three cans of carbonated beverage and asked the Committee to identify which was the energy drink and which two were the “Alco-Pop”, a term used for alcoholic beverages that are carbonated, sweet, and canned like soda-pop. The Alco-Pop’s even contained caffeine, ginseng, and other common energy drink ingredients that are marketed towards a younger crowd and sold on shelves just a rack away from traditional soda-pop in some stores. It was clear to many of us listening to the hearing that FMB’s are in fact not beer, seem to be intended for a younger demographic, and should be considered their own class of alcoholic beverage.

It all seemed pretty straightforward, until the proponents of the bill made their case.

As one would expect, the proponents of SB-745 include the same wholesale and retail supporters and lobbyists (the bad guys!) as those opposed to the MD-616 direct shipping bill. They argued that FMB’s are in fact beer since they are made in a process similar to beer (they begin as malted beverages then are fortified with flavors and spirits) and contain the same (or similar) alcohol content. Further, they detested the statements that these products are marketed towards underage drinkers, with one even giving the example of his middle-aged wife enjoying these beverages. The final, and strongest argument that was presented in support of the bill posed a question of logistics and implementation of a third class of beverage specific for FMB’s. The argument was made that defining a new class of beverages would create a nightmare for the state Comptroller and licensing boards as it would require wholesalers and retailers to apply for new licenses. The question was asked “how would we define a beer versus a flavored malt beveraage? Would we have people taste them and classify them on sweetness.” Flavored beers such as cherry and honey ales were brought into question, asking whether these would be FMB’s or beer? This argument was not refuted although the point should have been made that the classes of alcoholic beverage should be determined by method of production rather than taste or color.

Definition of a FMB from Alcohol and Tobacco Tax and Trade Bureau (TTB): “Flavored malt beverages are brewery products that differ from traditional malt beverages such as beer, ale, lager, porter, stout, or malt liquor in several respects. Flavored malt beverages exhibit little or no traditional beer or malt beverage character. Their flavor is derived primarily from added flavors rather than from malt and other materials used in fermentation. At the same time, flavored malt beverages are marketed in traditional beer-type bottles and cans and distributed to the alcohol beverage market through beer and malt beverage wholesalers, and their alcohol content is similar to other malt beverages in the 4-6% alcohol by volume range.”

Seems pretty straightforward to me!

My recommendation is on par with what Attorney General Gansler was getting at: A new 3 group system with beverages placed into a group based on how it is made:

1) Spirits: continued tax at $1.50 per gallon.

2) Beer (defined as made from barley which is malted, no additives): continued tax at $0.09 per gallon

3) FMB (any malted beverage that has added spirits): New tax bracket at $0.47 per gallon (I just like that number)

This was definitely an interesting topic on many levels. I do believe that these FMB’s are targeted towards a younger crowd, which I feel is a big problem. But, is the level of complication that this issue would bring to the Comptroller and state licensing board really worth it? Should FMB’s be considered beer based on the fact that they begin as malted beverages (like beer) and end with a similar alcohol content? What do you think?