Bill that would lower tax on 'ready-to-drink' cocktails fails in House floor vote

Feb. 7—BISMARCK — A bill introduced to lower the tax rate on "ready-to-drink" cocktails containing distilled spirits, failed its floor vote on Tuesday, 59-35.

The floor vote follows a 13-1 vote do not pass recommendation from the House Finance and Taxation Committee.

House Bill 1303 sought to reduce the tax rate on ready-to-drink cocktails containing less than 12.5% alcohol by volume to 50 cents per gallon, down from its current rate of $2.50 per gallon.

Bill sponsor Rep. Mike Motschenbacher, R-Bismarck, said taxing ready to drink cocktails at the spirits rate puts producers at a disadvantage.

"Currently, if you have a diluted beverage that hits the market, it is automatically taxed at $2.50 per gallon, which is the tax rate used for distilled spirits," said Motschenbacher. "To bring this into perspective, beer in either cans or bottles, is taxed at 16 cents per gallon. That means a can of High Noon, or any other ready to drink cocktail is taxed 16 times that of a can of Bud Light. I ask is that fair?"

Rep. Dick Anderson, R-Willow City, and a member of the Finance and Taxation Committee, rejected notions that the bill would lower prices for consumers of ready to drink cocktails or help the state's distillers.

"The main reason we're urging a no vote on this, is because we didn't think the tax credit would be passed on to the consumer," said Anderson. "Secondly, while there are some people who make diluted beverages in North Dakota, most are made outside the state."

The Beer Institute, a national trade organization representing the industry, released a statement in support of the bill's rejection.

"We are pleased the North Dakota House rejected HB 1303, which would have arbitrarily reclassified liquor products as wine to reduce their tax rate — blurring the lines between distinctly different alcohol categories," said Brian Crawford, president and CEO of the Beer Institute. "Legislators were wise to reject this handout for big liquor — saving significant tax revenue while protecting North Dakotan brewers, agricultural suppliers and consumers. We also know from the experience in Nebraska and Michigan, where similar legislation was enacted in 2021, that these tax cuts don't result in lower prices for consumers at the store."