STATE TAX SNAPSHOT: WILL GROWING REVENUES FROM HARD CIDER SALES BECOME THE ‘APPLE’ OF STATES’ EYE?

Consumers are increasingly turning to hard cider as an alternative to wine and beer.  The fact that hard cider is gluten free is also helping to fuel the drink’s popularity. 

As hard cider becomes a hit, more states are regulating farm cideries.  For what once was a gray area for cider producers, clarification, and for some, tax relief is being provided.  This is because states such as  New York are acknowledging this growing market by establishing a new license for farm cideries similar to the licenses already available to farm wineries, breweries and distillers operating within the state.

New York’s farm cidery license will be available for a manufacturer or producer that manufacturers 150,000 or fewer gallons of cider per year made exclusively of apples grown within the state, under A.B. 8047, effective Jan. 15, 2014. Cider, beer, wine and spirits made from crops within New York may be tasted or sold by a licensee.

As states provide cider-specific provisions some reporting requirements may be alleviated.  For instance,  A.B. 8047 amends the tax law to exclude licensed farm cideries from sales tax information return filing requirements.

The new law is likely to encourage others to seek to profit from the hard cider trend.  Alejandro del Peral, an entrepreneur, was so impressed by hard cider while in Vermont that he is now establishing his own cidery, Nine Pine Cider Works, in Albany, New York. Del Peral expects Nine Pine Cider Works to manufacturer, produce, wholesale and retail hard cider and other cider-related products.

Prior to A.B. 8047, entrepreneurs like del Peral did not have a defined place in the market and were limited in what they could provide to consumers or other businesses.  New York’s new provisions carve out a license for farm cideries and allow businesses, such as Nine Pine Cider Works, to be the one-stop shop for hard cider and other cider-related products that del Peral expects it to be.

The new law also benefits farmers that were already established and producing limited cider products.  At Critz Farms, Inc., in Cazenovia, New York, Matt and Juanita Critz started producing cider products in 2011.  When first starting to produce cider products, the Critzes found the tax and regulatory provisions to be very confusing because there were no laws specifically governing cider.  The Critzes had to deal with cider products under a farm winery license, which limited the amount of hard cider that could be produced.  For example, Critz Farms was only allowed to produce four real ciders and four wines.

Under the new law, a business with a farm cidery license may produce eight hard ciders.  The legislation also regulates the operation of the farms and governs the manufacture and sale of cider produced from crops grown within the state.  For instance, unlike other alcoholic products, hard cider may be distributed and sold to both liquor and grocery stores.

Today states such as Indiana and Montana are beginning to carve out a place for cider in the alcohol industry.  They are doing so by giving hard cider its own definition and providing percent of alcohol by volume ranges for hard cider.  The classification will remove some of the gray and allow cider producers to know exactly what tax implications they may face.  However, as more states begin to adopt rules regulating the cider industry, similar to that of New York’s, cider producers stand to not only gain an increase in business but a much needed decrease in state taxes.

 

By: Renee Bartoli

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