Good news may be on the horizon for kombucha manufacturers. If passed, a bill to reduce excise taxes, compliance burdens, and regulations for small beer, wine, cider and distilled spirit producers would include certain kombucha manufacturers.
Kombucha—a fermented beverage—often contains small amounts of alcohol that is naturally produced by traditional manufacturing processes. When kombucha contains 0.5% alcohol or more by volume at any time, it comes under the jurisdiction of regulations of the U.S. Treasury's Alcohol and Tobacco Tax and Trade Bureau (TTB).
The legislation, the Craft Beverage Modernization and Tax Reform Act (S.1562 and H.R. 2903), was introduced in the U.S. Senate by Sen. Ron Wyden (D-OR) and in the House of Representatives by Rep. Erik Paulsen (R-MN). While the legislation would benefit all producers, it’s designed to provide greater financial and regulatory relief for smaller volume companies. Among other provisions, the bill would:
- reduce excise taxes for beer, wine, cider and distilled spirit producers;
- simplify formulation and label approvals by exempting common ingredients from lengthy TTB approval process ;
- increase collaboration between brewers by removing restrictions on tax-free transfers and repealing unnecessary inventory restrictions;
- exempt beverage producers from complex capitalization rules for aged products and level the playing field between U.S. businesses and their international competitors;
- expand TTB program integrity funding to crack down on tax cheats, while providing additional funding for TTB regulatory functions and label approvals; and
- expand current TTB information sharing to all excise taxes administered by U.S. Customs and Border Protection (CBP).
The American Herbal Products Association (AHPA) announced its endorsement of the Craft Beverage Act earlier this week. According to a press release issued by AHPA, endorsing the legislation is part of a broader effort to assist the rapidly expanding kombucha industry. AHPA is planning a kombucha education program to support compliance with federal kombucha manufacturing and sale regulations.