Bill Would Soften Tax on Hard Cider

4/6/2013 7:00 AM
By Paul Post New York Correspondent

GRANVILLE, N.Y. — At one time, hard cider was America’s most popular alcoholic beverage.

That all changed right after the Prohibition when hard cider became taxed like wine, considerably higher than beer, and people stopped consuming it in large quantities.

However, hard cider is now enjoying a renaissance. Sales increased 24 percent last year, making it the fastest growing alcohol product on the market.

“The hard cider market is booming,” said U.S. Sen. Charles Schumer, D.-NY. “Sales have more than tripled in five years from $178 million to $601 million. In a few years this is going to be a billion-dollar industry.”

On April 2, he visited Slyboro Cider House at Hicks Orchard, in Granville, N.Y., where he announced plans for new federal legislation that would clarify cider’s tax status and put it on a level playing field with beer. Beverages are taxed based on their alcohol content. The higher the alcohol, the higher the tax.

Cider falls somewhere in between beer and wine, but is currently taxed the same as wine, which apple growers say is discriminatory.

“When they slapped the wine tax on cider, it was no longer consumed in beer-like quantities,” said Nate Darrow, owner of Saratoga Apple, in Schuylerville, N.Y. “It was done to favor beer producers. Cider was overtaxed and has been for a long time.”

Schumer’s legislation, the Cider, Investment & Development through Excise Tax Reduction (CIDER) Act, would change that. Schumer, a Senate Finance Committee member, said he plans to introduce the measure this month with hopes of getting it passed later this year.

“The scope and timing of this bill couldn’t be better,” Slyboro/Hicks owner Dan Wilson said. “The cider industry is kind of exploding right now.”

A newly organized U.S. Association of Cider Makers held its first meeting in Chicago in February, with more than 200 firms in attendance. The group’s president, Stephen M. Wood, of Lebanon, N.H., was among those on hand for Schumer’s announcement.

One of the association’s first orders of business was asking the federal Tax & Trade Bureau to upgrade tax laws, to make them compliant with the current marketplace for hard cider.

Schumer got wind of the proposal and decided to introduce legislation. Specifically, it would reform the definition for hard apple and pear cider in the Internal Revenue Code to increase their allowed alcohol by volume from 7 percent to 8.5 percent, encompassing significantly more hard cider products and allowing them to be labeled and taxed like hard cider, rather than wine.

Wilson said major beer producers such as Anheuser Busch, Coors and Miller all have hard cider products now. However, like the fast-growing craft brewery industry, there’s plenty of room for small players, too.

Hicks opened its cider house seven years ago as a way to diversify and develop a more year-round business.

“We were focused for a long time on just selling here at the farm,” Wilson said. “Now we’re moving into New York City, the single biggest wine market in the country. New York state is a really big state. Vermont is another target for us. If we could develop a New York and Northeast regional brand we’d be very happy with that.”

Last year, his firm sold about 7,500 gallons of hard cider versus 30,000 gallons of fresh sweet cider. Northern Spy and Liberty apples are among the best varieties for hard cider and Hicks, which already had 13,000 trees on 60 acres, recently planted more.

“We’re working to grow more fruit specifically for hard cider,” Wilson said. “Every variety has a different flavor.”

He’s also had to buy some apples from other commercial growers in New York, Vermont and New Hampshire to keep up with demand, which is good for their business, too.

Currently, there are about 20 cider mills and 650 apple farms in New York, the nation’s second leading apple producer behind Washington state.

Schumer said hard cider gives orchards, even those without cider mills, a way to sell high-quality “drops” and hail-damaged fruit that can still be used for making cider.

“It seems like a no-brainer, great apples and a growing market,” he said. “If we could get the tax down to be the same as beer, it would be a huge shot in the arm for New York’s hard cider and apple industries.”

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