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Oregon Issues New Guidance on Hard Seltzer Classification

Recently, Oregon issued clarification pertaining to the classification of hard seltzers in the state. The guidance, as summarized below, impacts the majority of hard seltzers in the market. Classification of hard seltzer has a number of impacts, most notably on excise tax (or “privilege tax”) rates and licensing needed to produce, import, distribute and sell hard seltzers in the state. Specifically, Oregon has signaled that should the state’s guidance result in the reclassification of a supplier’s hard seltzer product, there may be retroactive tax liability imposed. This alert should assist those engaged in the production or sale of hard seltzer in Oregon in determining whether reclassification is necessary and the implications thereof. For specific questions on the implications of this guidance on your business, please do not hesitate to reach out to McDermott Will & Emery.

Classifications of Hard Seltzer
“Hard seltzer” must meet the following to be categorized as a malt beverage in Oregon:

  1. 100% of the alcohol by volume (ABV) is obtained through the fermentation of grain and the ABV is more than 0.5% but not more than 14%; or
  2. At least 98.5% of the ABV is obtained through the fermentation of grain and the ABV is more than 6% but not more than 14%. Once those criteria are met, not more than 1.5% of the ABV may be obtained through other flavoring agents containing alcohol; or
  3. At least 51% of the ABV is obtained by the fermentation of grain and the ABV is more than 0.5% and not more than 6%.

Once the criteria above is met, up to 49% of the ABV may be obtained through other flavoring agents containing alcohol.

Oregon relies on the federal definition of “grain” to mean barley, canola, corn, flaxseed, mixed grain, oats, rye, sorghum, soybeans, sunflower seed, triticale and wheat, and the subsequent definition for each grain. This may exclude hard seltzers deriving alcohol primarily through the fermentation of cane sugar from meeting the malt beverage definition in Oregon. The state may require verification that a product claimed to be a malt beverage for tax purposes is in fact produced through the fermentation of grain via the submission of an ingredients list or documentation describing the manufacturing process.

“Hard seltzer” must meet the following to be categorized as a wine in Oregon:

  1. An alcoholic beverage obtained by the fermentation of vinous or fruit juice, or other fermented beverage fit for beverage purposes, and contains more than 0.5% ABV and does not contain more than 21% ABV.
  2. Wine may contain distilled liquor and other “non-traditional” ingredients, provided that it does not contain more than 21% ABV.
  3. “Wine” does not include malt beverage, cider or distilled liquor.

“Hard seltzer” must meet the following to be categorized as a cider in Oregon:

  1. An alcoholic beverage obtained by the fermentation of the juice of apples or pears; contains more than 0.5% ABV but does not contain more than 8.5% ABV.
  2. The juice is not required [...]

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Winds of Change Blowing for Craft Brewers

For those who follow developments in the law and craft brewing with equal passion, every year has its share of substantial issues. This year has been no exception, with a pending Supreme Court case; a substantial upswing in federal trade practice enforcement activity; a massive rewrite of US Tax and Trade Bureau (TTB) labeling and advertising regulations; and prospects for extending the biggest cuts in the excise tax on beer since the repeal of Prohibition.

As these developments play out over the next year, we may see changes translate into the marketplace. Find out what you can expect.

Access the full article.

Originally published in The New Brewer, May/June 2019.




TTB Issues Guidance on Application of Consignment Sales Regulations to Freshness Dating and Returns from Retailers

On September 29, 2017, the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) issued Ruling 2017-2, which updates and supersedes older agency guidance on allowable returns of beer and malt beverage products that contain “pull dates” or other indicators of product freshness.

The Federal Alcohol Administration (FAA) Act includes a general prohibition on “consignment sales,” 27 USC 205(d). Congress believed that all transactions should be “bona fide” sales. Id. The intent was to prevent a wide range of unscrupulous practices that might occur if manufacturers and wholesalers furnishing alcohol beverages to retailers on consignment or with the right of return.

The FAA Act prohibition on consignment sales does not apply to “transactions involving solely the bona fide return of merchandise for ordinary and usual commercial reasons arising after the merchandise has been sold.” Id. TTB regulations provide an extensive list of reasons that a manufacturer or wholesaler can accept returns. 27 CFR, Part 11, Subpart D. (more…)




Avoiding Misleading Labeling

Current conventional wisdom in the craft beer business holds that being local helps sell more beer. This has led many brewers to emphasize their local roots on their labels and in their marketing efforts. In some ways, the trend has a “back to the future” feel, as labels and marketing materials once again feature place names that often became the brand names for many of the first generation of craft brewers in the 1980s.

But the emphasis on place can come with a price: the prospect of legal hurdles, including lawsuits, over allegations that a brand name, label, or advertisement misrepresents the beer’s place of production. Legally this subject usually goes by the name “geographic misdescription,” itself a subset of false advertising law. How can brewers minimize their chances of becoming the target of a lawsuit or government investigation alleging that a beer’s labeling or marketing deceived consumers?

Read the full article, originally published in the January/February 2017 issue of The New Brewer.




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