Hard Cider Sales in New York Gets Some Help from Federal Law

From Empire Farm & Dairy magazine:

By MARC HELLER
Empire Farm & Dairy
 
WASHINGTON — A small change in federal tax policy may help give some extra kick to New York’s apple cider industry — all the way to Europe.
 
Congress agreed in December to treat hard cider more like beer — instead of wine or champagne — for purposes of a federal excise tax, which may spur cider makers to make their brews a little stronger to compete with beer, said Jim Allen, president of the New York Apple Association, a trade group.
 
Under the law, called the Cider Act, cider with an alcohol content of up to 8.5 percent will be taxed at the lower rate of 23 cents per gallon that also applies to beer. Previously, hard cider with an alcohol content greater that 7 percent faced the same $1.07 per gallon rate as wine, or as much as $3.30 per gallon depending on the level of carbonation.
 
The law puts U.S. producers on a more even keel with competing countries, meaning export markets may open, apple industry representatives said.
 
Smaller producers will see an even bigger benefit, keeping a 17-cents-per-gallon rate that they pay, and which will apply to all of their hard-cider production, said Mark Seetin, director of regulatory and industry affairs for the U.S. Apple Association, a lobbying group for growers.
 
Sen. Charles Schumer (D-N.Y.) was a chief sponsor in the Senate. In the House, Upstate New York lawmakers widely supported a similar version of the bill, sponsored by Rep. Chris Collins (R-Clarence). The Senate Finance Committee reported that the cost to the federal Treasury, in foregone revenue, is negligible.
 
Schumer said the definition of hard cider used in the Internal Revenue Code was outdated, especially given how the industry has grown and how the process of making cider is just inexact enough to send the product beyond the old limits unintentionally.
 
“Under this legislation, apples that would otherwise be sold at a loss or thrown away, are now ripe for the cider press,” Schumer said in a news release after the bill’s passage. “By modernizing the definition of hard cider, our hard cider industry would pay less in taxes and be able to expand and compete.”
 
Congress passed the tax change as part of a year-end tax and spending measure. Advocates fell short on a related goal to also ease excise taxes on craft beer, wine and spirits, although Congress could revisit that issue later this year or in 2017.
 
According to the U.S. Department of Agriculture, New York ranks second to Washington state in apple production and has more apple cider producers than any other state, with more than 50.
 
Apples are big business in the state, with 55,000 acres in production and 694 commercial growers, the New York Apple Association said. That translates to about 10,000 direct agricultural jobs in growing, harvesting and packing, for instance, the association said.
 
New York cider makers such as Angry Orchard, in Walden, could expand into higher-alcohol varieties, Allen said. Angry Orchard makes cider with a 5.5 percent alcohol content, and the company touted the new law on its website. Among other gains, producers will be able to use fruit such as pears, in addition to apples, and U.S. law will be more in tune with competing countries, said Ryan Burk, the company’s head cider maker.
 
“Our cider friends in other parts of the world were already aligned with these standards, so these regulations will level the playing field for American cider makers to export cider abroad, and allow folks all over the world to get a taste of the great cider we are producing here in the U.S.,” he said.
 
“The cider industry in New York is growing, and new cider varieties are being budded and planted,” Allen said. “The craft cider business is certainly trailing the craft beer in volume, but it is reaching the same consumers and same age groups.”
 
Nationally, hard cider has expanded fast. Ratings by the Nielsen Company show that sales of cider in the United States grew from $78 million in 2011 to $470 million in the year ending in January 2015.
 
Drinking habits of younger Americans are largely at play, Nielsen said. In addition, cider tends to be a “gateway” drink, which people buy along with beer, for instance, the company said.
 
“The changes in hard-cider taxation will greatly benefit smaller hard-cider producers, and by making U.S. standards compatible with those of the EU, cider makers will potentially have access to European markets as well,” Seetin said.