GRANVILLE -- Dan Wilson would like to see hard cider reign again as the most popular alcoholic beverage in America.
The co-owner of Hicks Orchard said Tuesday his quest has a shot, thanks to a proposed law that would remove a significant tax obstacle.
The Internal Revenue Code taxes alcoholic beverages differently, based on alcohol content and other characteristics. Under today’s definitions, hard cider, which has alcohol content and carbonation levels that vary by season and variety to variety, is sometimes taxed as highly as Champagne.
“The Champagne tax ends up being about $3.30 a gallon at the federal level, which is state taxes aside,” Wilson said. “It’s really not appropriate for the type of product we’re trying to make, which is an alternative to beer or wine and not just a special-occasion thing. So, to develop the industry and make it a much more common drink the way it was 100 years ago, we would really like to have tax rates that are appropriate for this kind of product.”
Wilson said hard cider was at its peak of popularity in the years before Prohibition. But it was supplanted by beer in the post-Prohibition world, he said.
The “CIDER Act,” an acronym for “Cider, Investment & Development through Excise Tax Reduction,” is being proposed by U.S. Sen. Charles Schumer, who visited Hicks Orchard on Tuesday to tour the facility and announce the proposed legislation.
Schumer said the law would establish rules by which hard cider can be taxed the same way as beer, thus leveling the playing field for producers like Wilson and, hopefully, removing a hurdle for other apple growers in the state who may be apprehensive about the tax implications of launching a hard-cider operation.
“It seems like a no-brainer,” Schumer said inside Slyboro Ciderhouse at Hicks Orchard. “Great apples and a growing market. In fact, from the outside, you’d expect New York would already be at the core of hard-cider production.”
Schumer cited the state’s status as the nation’s second-largest apple producer and suggested hard-cider production could bring more tourism, jobs and agricultural stability.
“Beer is currently taxed by federal law at (22.6) cents a gallon, and hard cider should be taxed at the same rate,” Schumer said. “However, the definition of hard cider is much too narrow, and more often than not, the hard-cider products that our New York craft producers
are making are bumped into the wrong beverage category.
“Because of its sugar content, the alcohol content of hard cider fluctuates, and
if it goes even a little bit above 7 percent alcohol by volume — and that’s a not high content compared to other beverages — it gets put in the wine category and it’s taxed at $1.07 per gallon instead. That is close to five times as much.
“And similarly, because hard cider is carbonated over 39 percent by volume, guess what: They tax it as if it were Champagne — $3.30 a gallon.”
Schumer said he hopes the CIDER Act will be passed as part of broader tax reform legislation at the end of this year.
It would define hard cider based on language worked out by members of the The United States Association of Cider Makers, a group officially organized in February.
Steve Wood, owner of Farnum Hill Ciders in New Hampshire, is a member of the new group’s board of directors and traveled Tuesday to Granville to help celebrate news of the proposed law.
The national organization, which has been in the formation stages for about three years, had as its first order of business working on legislation that would clear up the tax issue for hard-cider makers, he said.
“What it does is provide confidence in the way we’re going to be taxed, because the trouble is we’re kind of in a gray area right now,” Wood said. “It’s not so much that we are being taxed heavily
now; it’s that the risk of suddenly finding that your alcohol is a little bit high or your carbonation is a little bit high and a regulator comes in and, all of a sudden, you’re being taxed at a rate that’s five times what you thought you would pay.”
Wood said he thinks the new law will be revenue-neutral to the federal government from the get-go, and because it could boost production of another taxable product, it should be a boon going forward.
Nate Darrow, owner of Saratoga Apple in Schuylerville, said he has been considering adding a winery or hard-cider element to his business for years. The tax uncertainty was one of the things keeping him on the sidelines, though.
“It’s a good thing that they are addressing this discriminatory taxation for apple cider that has been on the books for too, too long,” Darrow said Tuesday. “This just helps streamline the situation. It’s a move in the right direction, and I’m pleased that Sen. Schumer was awake to this situation.”
Darrow, who said Tuesday there was material on his desk about winery equipment, wasn’t sure when he would make a decision on whether to branch out. But he said he’s going to watch the CIDER Act’s progress as part of his due diligence.