Tag archives for “Cider”

TTB Delays Hard Cider Tax Labeling Requirement

In January 2017, the federal laws on alcoholic cider were revised to expand the definition of what constitutes “hard cider” and to revise its federal tax rate. We posted about those and other developments in the “hard cider” arena here and here. Included in those changes to the law was a requirement, to be effective starting January 1, 2018, that the statement “Tax class 5041(b)(6)” appear on any hard cider removed from wine premises or Customs custody for which the “hard cider” tax rate is claimed. However, on December 5, 2017, the TTB published a temporary rule, delaying the new labeling requirement until January 1, 2019. Until the new effective date, the tax class statement continues to be optional. Along with the labeling delay, the TTB has also decided to reopen the public comment period, providing an opportunity for the public to make additional comments over the next two months regarding both the delayed labeling requirement and other “hard cider” regulatory amendments. For more information regarding hard cider licensing and regulatory requirements, contact one of the attorneys at Strike & Techel.

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TTB Publishes Industry Guidance for Producers of Hard Cider

Recently, the TTB published Industry Circular No. 2017-2, providing guidance for producers of hard cider. This guidance details the new criteria for the hard cider tax rate, which went into effect on January 1st of this year. We addressed those changes, as well as the old criteria for the hard cider tax rate, on our prior blog post, “Federal Definition of “Hard Cider” Will Be Expanded in 2017”. As a recap, the current definition of hard cider eligible for the lower hard cider tax rate, is a product that meets the following criteria:

  • Contains no more than 0.64 gram of carbon dioxide per 100 milliliters;
  • Is derived primarily from apples or pears, or from apple juice concentrate or pear juice concentrate and water;
  • Contains no fruit product or fruit flavoring other than apple or pear; and
  • Contains at least one-half of 1 percent and less than 8.5 percent alcohol by volume.
In addition to reiterating the current definition of hard cider, the TTB Industry Circular addresses guidance for hard cider producers on several other topics, including: Fruit Flavorings: The Industry Circular reminds hard cider producers that if hard cider contains fruit flavorings other than apple or pear, the product is not eligible for the hard cider tax rate. Fruit flavorings include natural fruit flavor, an artificial fruit flavor, or a natural flavor that artificially imparts the flavor of a fruit not contained in that flavor. Note that fruit flavorings do not include flavorings that impart a flavor other than a fruit flavor, such as spices, honey, or hops, so products that include those ingredients may still qualify for the hard cider tax rate. Labeling Requirements: Wines that contain 7% alcohol by volume or higher must conform to the labeling requirements found in 27 C.F.R. Part 4, and must obtain label approval from the TTB. The Industry Circular reminds hard cider producers that although the definition of hard cider that is eligible for the hard cider tax rate now includes hard ciders with up to 8.5% ABV, those cider products that contain 7% ABV or higher are still required to comply with the labeling requirements of 27 C.F.R. Part 4. TTB recognizes that the industry uses the term “hard cider” to include products that may not qualify for the hard cider tax rate. Moreover, TTB does not require that products qualifying for the hard cider tax rate be labeled with the words “hard cider.” In order to preserve this labeling flexibility without creating ambiguity regarding the appropriate tax class, TTB is imposing a new tax class statement on hard cider eligible for the hard cider tax rate: for hard cider removed from wine premises on or after January 1, 2018, the label must include the statement “Tax class 5041(b)(6).” This tax class statement may appear anywhere on any label, or may be on a sticker on the container. The addition of the tax class statement to an approved label does not require a new COLA. Formula Requirements: The Industry Circular also provides guidance on which cider products require formula approval. Generally, hard cider produced in a traditional method from apples or pears does not require formula approval. However, hard ciders that contain other ingredients, such as spices, honey, or hops, will require formula approval. Carbonation: Finally, the TTB’s guidance addresses several issues relating to a hard cider’s carbonation level. If a product contains more than 0.64 grams of carbon dioxide per 100 milliliters, that product is classified and taxed at the higher tax rates applicable to “sparkling wine” or “artificially carbonated wine.” The acceptable tolerance for error with respect to carbonation levels is 0.009 grams of carbon dioxide per 100 milliliters of hard cider. Producers of hard cider must test and keep records of carbonation levels. For more information regarding hard cider licensing and regulatory requirements, contact one of the attorneys at Strike & Techel.

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Federal Definition of “Hard Cider” Will Be Expanded in 2017

On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”) (LINK). The PATH Act provides for changes to the definition of “hard cider,” which will bring valuable tax rate changes for some makers of cider and perry. Currently, “hard cider” is defined as a “still wine derived primarily from apples or apple concentrate and water, containing no other fruit product, and containing at least one-half of 1 percent and less than 7 percent alcohol by volume.” 26 U.S.C. § 5041(b)(6). Because the current definition of hard cider states that the wine must be still, the definition excludes ciders with carbonation in excess of 0.392 grams of carbon dioxide per 100 milliliters. 26 U.S.C. § 5041(a). The current definition also excludes perry, which is wine made from pears. Finally, the alcohol content of many wines made from cider apples ranges from approximately 5% to 8.5% alcohol by volume, and cider products with more than 7% alcohol do not meet the current hard cider definition. Beverages that meet the definition of hard cider are taxed at the rate of 22.6 cents per gallon. 26 U.S.C. § 5041(b)(6). This rate is much more favorable than the $1.07 per gallon tax rate on still table wines, as well as the $3.40 per gallon tax rate on sparkling wines, and the $3.30 per gallon tax on artificially carbonated wines. 26 U.S.C. § 5041(b). Passage of the PATH Act will be welcome news to the cider and perry producers who have advocated for an expansion of the definition of hard cider in order to get the lower tax rate. Beginning on January 1, 2017, the definition of hard cider will be a wine that meets the following parameters:

  • Contains not more than 0.64 grams of carbon dioxide per 100 milliliters;
  • Made from apples, pears, or concentrate of apples or pears and water;
  • Contains no other fruit product or fruit flavoring other than apple or pear; and
  • Contains at least 0.5% and less than 8.5% alcohol by volume.
For more information on cider and perry, see our July 29, 2015 blog post “Comparing Apples and Pears” (LINK), and contact one of the attorneys at Strike & Techel for further guidance.

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Comparing Apples and Pears

The cider and perry industry is booming. More and more producers are entering the market, and existing producers of other alcoholic beverages are expanding into cider and perry production. Although commonly associated with beer, cider and perry are actually considered wine under federal law, and can be interchangeably labeled as apple wine or cider, and pear wine or perry. Production of cider or perry requires a bonded winery permit from the Alcohol & Tobacco Tax and Trade Bureau (“TTB”). It must be made wholly from the alcoholic fermentation of sound, ripe apples, or sound ripe pears (the addition of sugar, water, or alcohol is permitted in specified quantities). The TTB recently updated its FAQs with a section on cider, which can be found HERE. A cider or perry which is over 7% alcohol must be labeled in the same manner as wine, and a Certificate of Label Approval (“COLA”) must be obtained for the product from the TTB. If it is under 7%, the product is subject to Food and Drug Administration (“FDA”) labeling rules, including a required nutritional statement (see our recent blog posts on FDA alcoholic beverage labeling HERE and HERE). If any flavoring materials are added, like honey, spices, or artificial flavors, the product requires formula approval, even if it is under 7%. Each state has its own regulatory framework for cider and perry. For example, in California, a Type 2 Winegrower can make cider and perry, and a licensed Type 1 Beer Manufacturer may also produce cider and perry without any additional state license (although they still need the TTB bonded winery permit). In New York, Breweries, Farm Breweries, and Farm Wineries can make cider and other “pome fruit” wines, including perry (again with the TTB winery permit). Interestingly, in New York, a product marketed as a cider or perry, up to 8.5% alcohol, must be brand label registered, and is not eligible for the standard wine exemption from registration. If you have any questions about producing cider or perry, please contact one of the attorneys at Strike & Techel. Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2015 • All Rights Reserved •

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Maybe That’s Not Beer You’re Drinking

A professor once told me: “Always define your terms.” That statement rings true in much of the law and it turns out, also for beer. In today’s age of health consciousness and gluten intolerances, beers crafted from sorghum, rice, or wheat are starting to make inroads into the mainstream market. But from the perspective of the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), those products don’t qualify as “malt beverages.” Only beverages made from both malted barley and hops meet the definition of “malt beverage” under the Federal Alcohol Administration Act (“FAA Act”). Thus, the labeling regulations that apply to these non-traditional beer products actually come from the Food and Drug Administration, as opposed to the TTB. Some TTB/FAA Act requirements do still apply – namely the government health warning and product classification required by the Internal Revenue Code to ensure proper tax classification and collection. Additionally, formula approval may be required through the TTB. Wine beverages containing less than 7% alcohol by volume, such as many wine coolers and cider products are also subject to FDA labeling requirements because their low alcohol content causes them to fall outside of the TTB/FAA Act definition of “wine” and therefore outside of TTB’s labeling jurisdiction. Note that although sake is made from rice, it’s considered a wine product for labeling purposes and a malt beverage for tax purposes (confusing, right?), so it falls under the TTB/FAA Act labeling requirements, provided the product contains 7% or more alcohol by volume. How to identify these new products as “gluten-free” remains difficult as no final guidance has yet been issued by the FDA or TTB about the true definition of “gluten-free.” For more information about using “gluten-free” on alcoholic beverage labels, see our post from earlier this year. The landscape for labeling these non-traditional products is complicated. If you have questions, feel free to contact a Strike & Techel attorney.

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