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Mon April 15, 2013
A Tax Day Story For Hard-Cider Lovers
Is small-batch hard apple cider the next microbrew? It seems everybody and their brother is experimenting with ways to make the potent stuff profitable. Sales of domestically produced hard cider have more than tripled since 2007, according to beverage industry analysts — and that's not counting Europe, where it has held a steady popularity for centuries.
But there's a bit of a hitch that may stunt cider's future growth. Apple blight? Climate change? Finicky millennial tastes? Well, maybe, but Sen. Charles Schumer, D-N.Y., is focusing on the antiquated way the products are taxed.
Schumer, the man who never misses the chance to promote his state's agriculture (have you seen the video of him "cooking" for the presidential inaugural ceremonies?), is proposing legislation he says will supercharge the cider boom for both the Empire State and the whole country.
"New York is the second-largest apple producer in the country, and there's no doubt it should be at the core of the hard-cider industry, which is rapidly growing in popularity," says Schumer. "However, current federal tax rules make it extremely costly for Capital Region producers and consumers alike to produce, market and sell this product, which could prevent New York's hundreds of apple growers and hard cider producers from fully benefiting from the stable income that comes with this new product."
Here's the problem, as Schumer sees it: Under federal law, hard apple and pear ciders cannot exceed 7 percent alcohol by volume – or they become subject to the higher taxes of products with higher alcohol levels, like wine.
But hitting the right level and no higher is tricky when working with a product like apples, which naturally vary in sweetness levels. Since the amount of sugar varies, that means the amount of alcohol produced will ultimately vary, too. Sometimes, those variations can put a particular cider batch's alcohol content above that 7 percent mark.
And there are other factors that can alter how boozy a cider batch is.
"We don't know for sure how efficiently the available sugars will or will not be converted to ethanol," says Chris Gerling of the Cornell Extension Enology Lab. (It's about 51 percent, but not always.)
Gerling has worked with wine and hard-cider producers in New York state for years on ways to boost production, teaching classes and offering advice. But recently, he's become the student, learning a bit of excise tax law, courtesy of the Alcohol and Tobacco Tax and Trade Bureau, as this issue has come up.
"The problem is that cider has to kind of drift between beer and wine in the regulations, and can cross major TTB definition [and/or] tax boundaries with relatively small changes [and/or] fermentation outcomes," Gerling says.
And it gets even more complicated.
Add too much carbonation to the hard cider, and it falls into the even higher tax realm of champagne.
"It's much more of a burden for cider producers than for somebody who's selling sparkling wine for $50 a bottle," he says.
One reason regulations may be outdated is that hard apple cider, formerly the drink of choice for Colonial Americans, fell out of favor once beer got big. People just stopped making it here. It's only in recent years, as more U.S. producers have taken up making cider, that the tax issue has become a growing problem.
The tax issue as it stands now creates all kind of messy labeling issues and potentially confusing price changes for cider makers, Schumer says, and can be an impediment to getting the stuff to market. That's especially true, he says, for the increasing number of small craft brewers and orchards with bushels of imperfect apples looking to turn more fruit into reliable profits, and those looking to plant new cider-specific varieties.
The CIDER Act (yes, members of Congress love acronyms) would change the law to give cider makers up to 8.5 percent alcohol by volume to work with — a range similar to what winemakers enjoy — and bring U.S law in line with the European Union, where hard cider never lost its appeal.
So what would it mean to the U.S. consumer? A few more sweet hard-cider choices.