Proposed Tax Cut on Canned Cocktails in NJ Fought by Beer Makers
TRENTON – State legislators are thinking about lowering taxes on hard cider and pre-mixed canned cocktails, although beer makers large and small are fighting the idea.
Liquors with alcohol by volume lower than 9.9% would be taxed at the same rate as beer – 12 cents a gallon, rather than the current rate of $5.50 a gallon.
John Granata, co-founder of Jersey Spirits Distilling Company in Fairfield Township in Essex County, said state taxes on a 4-pack of 12-ounce cans cost him $2.06 and that it would be hard to sell it for the $18, $20 or more it would take to make it worth it.
“That’s why my distillery found this to be a loss leader that’s not leading any sales,” said Granata, who is also president of the New Jersey Distillers Guild. “It’s just we’re losing money if we put it on the shelves, so we’re not going down that path.”
Eric Orlando, executive director of the Brewers Guild of New Jersey, said space in liquor stores is already hard to come by for craft beers.
“The more advantageous pricewise it is to carry this classification of alcohol beverages is going to shrink that shelf space even greater,” Orlando said.
Despite beer manufacturers’ objections, the Senate Law and Public Safety Committee endorsed the proposed tax cut, sending it to the budget committee.
“It’s not often, as a Republican, we see bills coming through to cut taxes,” said Sen. Anthony Bucco, R-Morris. “So, I understand your concerns, but whenever we get a chance to cut the taxes here in the state, we like to do that.”
Lawmakers have been talking about overhauling New Jersey’s liquor licenses at a series of intermittent hearings over the past two years, in hopes of taking action in the post-election, lame-duck session.
Among the ideas being considered to help distilleries include direct delivery to customers, which wasn’t allowed, even when rules were loosened early in the pandemic.
Mark Elia, owner of Long Branch Distillery, said New Jersey’s craft distilleries need parity with their peers in the state’s alcohol industry.
“We’re fragile compared to restaurants and bars and breweries and wineries, and these vulnerabilities in conjunction with a great deal of restrictions puts us in further peril,” Elia said.
Kevin Hagan, government affairs director for the New Jersey Liquor Store Alliance, said such changes would unravel the business model of manufacturers, distributors and retailers.
“Every computer, every phone becomes a liquor store, and when you do that, you don’t need the people behind the counter. You don’t need the stock folks. You don’t need the drivers,” Hagan said. “And these are things that become a reality.”
Jeff Warsh, executive director of the New Jersey Wine & Spirits Wholesalers Association, said direct sales would hurt bars and restaurants are already devastated by the pandemic.
“Creating a direct-to-consumer pathway for a super-hot category like craft spirits directly reduces revenues for New Jersey’s small family-owned hospitality businesses, when they can least afford it,” Warsh said.
Warsh said before the pandemic, there were around 1,400 inactive retail liquor licenses in New Jersey. He says it’s estimated there are now 2,000 more – amounting to 45% of all retail liquor licenses, mostly meant for use by bars and restaurants.