Hawaii-2018-SB2712-Introduced

PART I

SECTION 1. The legislature finds that under the current definition of "cooler beverage" the tax rate applied is only applicable to wine or beer based beverages. This application results in beverages that are spirits based being taxed as distilled spirits. As a result, if a local distiller wants to make a ready to drink "cooler beverage" that contains one ounce of a distilled spirit and eleven ounces of another consumable liquid, then it is taxed as if the entire contents are alcohol. Despite the growing number of local distilleries, the tax treatment may be the primary reason there are no locally produced ready to drink spirits-based beverages. Currently, there are several companies on the mainland exporting small volumes of cocktails in cans or bottles but there is no local option.

The purpose of this part is to amend the definition of "cooler beverage" to include beverages that contain distilled spirits and blending materials to encourage local distilleries to produce ready to drink beverages that contain distilled spirits.

SECTION 2. Section 244D-1, Hawaii Revised Statutes, is amended by amending the definition of "cooler beverage" to read as follows:

""Cooler beverage" means either a:

(1) Wine cooler containing wine and more than fifteen per cent added natural or artificial blending material, such as fruit juices, flavors, flavorings, or adjuncts, water (plain, carbonated, or sparkling), colorings, or preservatives, and that contains less than seven per cent of alcohol by volume; [or]

(2) Malt beverage cooler containing beer and added natural or artificial blending material, such as fruit juices, flavors, flavorings, colorings, or preservatives, and that contains less than seven per cent of alcohol by volume[.]; or

(3) Spirit beverage cooler containing distilled spirits and added natural or artificial blending material, such as fruit juices, flavors, flavorings, colorings, or preservatives, and that contains less than twelve per cent of alcohol by volume."

PART II

SECTION 3. The legislature finds that the current taxation scheme on beer is confusing and burdensome. Unlike other alcoholic beverages, a lower tax rate is imposed on draft beer, which is statutorily defined as beer in an individual container of seven gallons or larger. However, the container size requirement does not align with industry practices. Many beer sellers, including many local small brewers, dispense what is commonly referred to as draft beer from containers smaller than seven gallons.

The legislature further finds that the higher tax rate applied to non-draft beer discourages the business of local brewers, who may not be able to distribute in larger containers or who may benefit from individually packaging their beer.

The purpose of this part is to eliminate the tax disparity between beer dispensed from containers of seven gallons or more and beer in all other packaging.

SECTION 4. Section 244D-1, Hawaii Revised Statutes, is amended as follows:

1. By amending the definition of "distilled spirits" to read:

""Distilled spirits" means an alcoholic beverage obtained by the distillation of fermented agricultural products, and includes alcohol for beverage use, spirits of wine, whiskey, rum, brandy, and gin, including all dilutions and mixtures thereof, but does not include beer, [~~draft beer,~~] cooler beverage, or wine."

2. By amending the definition of "liquor" to read:

""Liquor" has the same meaning as set forth in section 281-1 and includes alcohol, and the liquor categories: beer, [~~draft beer,~~] cooler beverage, distilled spirits, and wine."

3. By repealing the definition of "draft beer".

["~~"Draft beer" means beer in an individual container of seven gallons or more.~~"]

SECTION 5. Section 244D-4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Every person who sells or uses any liquor in the State not taxable under this chapter, in respect of the transaction by which the person or the person's vendor acquired the liquor, shall pay a gallonage tax which is hereby imposed at the following rates for the various liquor categories defined in section 244D-1:

For the period July 1, 1997, to June 30, 1998, the tax rate shall be:

(1) $5.92 per wine gallon on distilled spirits;

(2) $2.09 per wine gallon on sparkling wine;

(3) $1.36 per wine gallon on still wine;

(4) $0.84 per wine gallon on cooler beverages;

(5) $0.92 per wine gallon on beer other than draft beer;

(6) $0.53 per wine gallon on draft beer;

[On] For the period July 1, 1998, [~~and thereafter,~~] to June 30, 2018, the tax rate shall be:

(1) $5.98 per wine gallon on distilled spirits;

(2) $2.12 per wine gallon on sparkling wine;

(3) $1.38 per wine gallon on still wine;

(4) $0.85 per wine gallon on cooler beverages;

(5) $0.93 per wine gallon on beer other than draft beer;

(6) $0.54 per wine gallon on draft beer;

On July 1, 2018, and thereafter, the tax rate shall be:

(1) $5.98 per wine gallon on distilled spirits;

(2) $2.12 per wine gallon on sparkling wine;

(3) $1.38 per wine gallon on still wine;

(4) 85 cents per wine gallon on cooler beverages; and

(5) 54 cents per wine gallon on beer;

and at a proportionate rate for any other quantity so sold or used."

PART III

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect on July 1, 2018.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2712
TWENTY-NINTH LEGISLATURE, 2018
STATE OF HAWAII