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Sour Outlook for California 'Alcopops' Tax

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Beverage makers are ignoring California's new law taxing sweet 'alcopop' drinks as liquor — saying the tax doesn't apply to their products — and the state has been stymied in its attempts to get information on alcopop ingredients, the Los Angeles Times reported March 16.

The law, passed last year, calls for drinks that get most of their alcohol from distillation to be taxed at the higher liquor rate, not as beer. Alcopop manufacturers, however, say that the alcohol in the drinks comes from fermentation — but refuse to disclose their ingredients, saying that they are trade secrets.

Backers of the legislation expected the tax to generate $38 million annually for the state. However, only $9,000 in taxes has been collected since the law went into effect on Oct. 1.

“These drinks are not beer. They don't taste like it, smell like it or look like it. But they are being sold like beer,” said Michael Scippa of the Marin Institute, an industry watchdog group.

The problem, however, is proving it. State and federal officials said there is no standard test for determining the origin of alcohol in the drinks.”Without a verification process, the alcohol companies can claim anything they want,” said Judy Chu, chair of the state Board of Equalization, which collects alcohol taxes.

The federal Alcohol and Tobacco Tax and Trade Bureau has access to the product formulas, but has refused to disclose them to California regulators, saying they are barred from doing so by the Federal Trade Secrets Act. “They consider protecting industry trade secrets more important than protecting the public's health,” charged Jim Mosher, an analyst with the policy research firm CDM Group.

California has written to alcopop manufacturers requesting that they list the ingredients in their products. But beverage companies insist that the information is proprietary, and some officials seem reluctant to spend the money needed to determine the products' ingredients and monitor their manufacture.

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