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Alcohol Beverage Taxes: Wine
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(Period Covered: 1/1/2003 through 1/1/2007)
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NOTICE: Data for this policy topic have not been updated beyond 1/1/2007. Current data on State-level alcohol beverage taxes are available from the Federation of Tax Administrators (FTA) at http://www.taxadmin.org/fta/rate/tax_stru.html . FTA data from prior years are available from the Tax Policy Center at http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=349 . Historical data on Federal-level alcohol beverage taxes, dating from 1862 for beer and spirits and 1916 for wine, are available from the Alcohol and Tobacco Tax and Trade Bureau at http://www.ttb.gov/tobacco/94a01_4.shtml .
Note: Clicking the above links will take you to web sites that are not part of the Alcohol Policy Information System. APIS is not responsible for the accuracy, currency, or completeness of information contained on any third-party site, and is not liable for damages of any kind arising from accessing, using, or inability to access or use any third-party site. |
Policy Description
Note: The secondary literature and the laws and regulations related to this policy topic use a variety of terms that are sometimes used in different ways by different jurisdictions. To see definitions for these terms as they are used in APIS, choose the link to Definitions on the right side of this page.
General Information
States levy two major types of taxes on the sale of alcoholic beverages:
- Ad valorem taxes are value-based taxes usually levied as a percentage of the product's retail sales price (which may also be referred to as gross receipts, gross proceeds, retail receipts, or retail proceeds). In a limited number of jurisdictions, the tax is based on the wholesaler's price to retailers or the producer's price to wholesalers. APIS uses the term ad valorem to refer to percentage taxes imposed specifically on alcoholic beverages, as distinct from general sales taxes.
- Volume taxes, also called per unit taxes, are levied as a dollar amount on a specified volume (in liquid measure—e.g., gallons, ounces, or liters) of alcoholic beverage.
Alcohol beverages taxes are not always labeled as such. For example some States call volume taxes "fees" or "levies." For License States, APIS treats as taxes anything that meets these definitions (but see below for exceptions applicable to Control States). Fees that are not based on sales or volume of beverage sold are not included in this analysis. For example, license fees are imposed on licensees as a cost of obtaining a license and are, therefore, not included.
Alcoholic beverages may be taxed in their capacity as a special commodity or as part of a larger category of tax. Some ad valorem taxes, for example, may be applied to food and beverages generally. Similarly, other taxes such as meal taxes or room service taxes may also include alcoholic beverages. Alcoholic beverages may also be subject to general sales taxes. Such taxes are not addressed in this analysis, which documents only taxes that apply specifically to alcoholic beverages.
Taxes may vary within a given jurisdiction by beverage category (Distilled Spirits, Wine, Sparkling Wine, Beer, and Flavored Alcoholic Beverages). In addition, alcohol beverage tax rates are typically based on the level of alcohol content, with higher-alcohol-content beverages generally taxed at higher rates. Accordingly, jurisdictions make taxation distinctions among beverages with varying alcohol content, usually expressed as a range (e.g., <5 percent Alcohol by Volume). As noted in the Definitions for Alcohol Beverages Taxes, these categories of beverages defined by alcohol content-ranges are referred to as "beverage subtypes." Statutes and regulations may specify different ad valorem and volume taxes for different beverage subtypes.
An additional distinction involves whether the alcohol content range is expressed as Alcohol by Volume (ABV) or Alcohol by Weight (ABW). ABV is more common, but many jurisdictions use the ABW measure. In some cases, State statutes do not specify the measure used, and in others a range may be described with both (e.g., 5 percent ABV-10 percent ABW). The APIS tax data specify whether the tax is based on ABV, ABW, or unspecified, and do not attempt to convert to a common measure.
Alcohol beverages taxes within a given State may be quite complex. A single State may impose several separate taxes, including both ad valorem and volume taxes, on a given beverage type or subtype, making it difficult to combine them into a single tax rate. Further, some taxes may apply to only certain alcohol beverage sales within a State (e.g., sales made through certain kinds of licensed outlets) among other variations described below. The APIS comparison tables provide detailed descriptions of the various tax rates applied in a given State.
Special Considerations for Analyzing Alcohol Beverages Taxes in Control States (States with State-Run Retail and/or Wholesale Systems)
In Control States, where the State owns and operates retail and/or wholesale outlets, taxes are in addition to any markups in price that occur within the State stores (see Definitions for Alcohol Beverages Taxes). These markups, which are functionally similar to taxes, may be controlled by statutes, regulations, and/or internal administrative decisions (only statutes and regulations are included in APIS). State stores are authorized to sell only certain alcohol products; the exact product mix varies by State (see the Alcohol Control System policies for analyses of Control State distribution networks). Similarly, the price charged by State-operated wholesalers will include a State-controlled markup when selling to private retail licensees that may be separate from any additional tax levies. States also vary in terms of the extent to which competition is allowed between State stores and private vendors. In License States, by contrast, markups are controlled by private licensees at both the retail and wholesale level.
The APIS analysis of Alcohol Beverages Taxes addresses statutory and regulatory provisions identified as taxes, but omits provisions relating to markups. This limits the ability of users to compare tax rates across States. For example, a Control State's decision to increase the markup of a given alcohol product may be the functional equivalent of a tax increase. Users are encouraged to use caution when examining tax rates in Control States and when comparing these rates across jurisdictions.
Special Considerations for Wine Taxes
States use different methods to classify wines for tax purposes, and the terms used for classification (e.g., still wine, vinous wine, fortified wine, vinous liquor, native wine, light wine, effervescent wine, sparkling wine, champagne, etc.) vary across States as well. Many States include all fruit-based wines, such as hard cider, in their primary wine tax category, although others have separate tax rates for differing types of fruit wine. APIS documents only those taxes that apply to grape-based wines without regard to the labels applied in State statutes or regulations, except in the following cases:
In general, wine taxes can be distinguished based on alcohol content, with tax rates rising with increasing concentrations of alcohol. Wines with high alcohol content (above 15 percent) usually have distilled spirits added and are popularly known as fortified wine. States vary in their treatment of these products. Many States treat them as a separate subcategory, with various definitions and alcohol content ranges. For example, some States define fortified wine as containing both wine and spirits. In some cases, the State definition specifies that the added spirits must be derived from the same fruit used as the basis for the wine (e.g., brandy for grape wine). Some States define fortified wine strictly in terms of its alcohol content—e.g., any wine with an alcohol content over 15 percent—whether or not distilled spirits have been added. Other States have incorporated these fortified wine products into the general definition of wine and have not created a separate definition or subcategory.
Most States have established upper alcohol content limits for wines, usually between 21 and 24 percent. Wines above the upper limit presumably have distilled spirits added and are taxed as distilled spirits. In States that have established a separate subcategory for fortified wine, there is typically a clear distinction between the alcohol content for fortified wine and wine (e.g., wine has an alcohol content of 14 percent or lower; fortified wine has an alcohol content above 14 percent). This is not always the case, however. Some States create an overlap—the upper limit for wine is higher than the lower limit for fortified wine—with the distinction based on whether distilled spirits have been added. APIS comparison tables include jurisdiction or row notes to alert users to this variation.
While most jurisdictions specify an upper alcohol content limit for wine in their statutes or regulations, this is not always the case. For States with no mandated upper alcohol content limit included in their statutes or regulations, the APIS database has used a default "100 percent" notation in the alcohol content field. Presumably, each State establishes an upper alcohol content limit for wine, with beverages above that limit treated as distilled spirits. State agencies responsible for tax collection are probably making this determination through internal procedures that go beyond APIS' data collection capacity.
Note that sparkling wines and flavored alcoholic beverages (FABs) that contain alcohol derived from wine are taxed as wine unless a specific sparkling wine or FAB tax applies (see Alcohol Beverages Taxes: Sparkling Wine and Alcohol Beverages Taxes: Flavored Alcoholic Beverages).
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Policy Description