Extras on Excise: New Bad Habit? There Might Be a State Tax for That


The beginning of a new year marks a time when most of us are trying to drop bad habits. But if 2015 is a guide, both citizens and lawmakers will likely struggle to accommodate new ones.  Last year, numerous jurisdictions amended their alcoholic beverage regulations to account for the non-liquid form of spirits. Other states imposed taxes on e-cigarettes. The controversy over new bad habits and state efforts to either ban or tax them will continue to play out in 2016.

Powdered alcohol is a constant bête noire for many legislators, and Sen. Chuck Schumer (D-NY) once called it the “Kool-Aid of teenage binge drinking.” The substance got banned in over 20 state legislatures last year, and is still up for scrutiny in others.

There are two current bills in California that would ban it in that state.

Assemblymember Jacqui Irwin (D) Introduced A.B. 1554 on Jan. 4. The legislation bans possession, use, manufacturing and sales of powdered alcohol.

On Jan. 5, Sen. Bob Huff (R) introduced S.B. 819, which similarly prohibits the substance and excludes powdered alcohol from the statutory definitions for “alcoholic beverage” and “distilled spirits.”

This is a bipartisan, bicameral effort, as the two legislators co-authored each other’s bills.

Of note is that California regulations provide taxation procedures for powdered alcohol. Cal. Code Regs. tit. 18, § 2557 applies normal alcoholic beverage taxes to powdered alcohol, converting weights into liquid measurements. For example, one pound of the substance is the same as 0.16 wine gallons. This regulation has been around for a while, too; it was adopted in 1978.

In Missouri, Rep. Patricia Pike’s (R) H.B. 1786 has already been read twice and referred to the Emerging Issues Committee. It passed, it would make selling, possessing or shipping powdered alcohol into the state a class C misdemeanor.

Last year, Colorado bucked the trend by legalizing and approving excise taxes on the product after the brand Palcohol got the Alcohol and Tobacco Tax and Trade Bureau’s (TTB) approval.

Things are heating up for e-cigarettes as well. Last year saw two more states (Kansas and Louisiana) and the District of Columbia approve excise taxes on the products. Chicago also joined this list of jurisdictions, and its tax went into effect on Jan. 1.

The tax is imposed on the retail sale of the products -- $0.80 per unit, with an extra $0.55 imposed on each fluid milliliter of consumable solution.

While there are no federal taxes on e-cigarettes, Congress has passed a bill regulating the product for the first time.

On Jan. 11, Congress approved the Child Nicotine Poisoning Prevention Act of 2015 (S. 142), which requires child-resistant packaging for liquid nicotine. The bill will be sent to President Obama to sign.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should powdered alcohol be prohibited or taxed?

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