Despite being marketed as a non-alcoholic beverage, questions often arise regarding the taxation of non-alcoholic beer. This article aims to provide clarification on whether non-alcoholic beer is subject to taxation.
Taxability of Non-Alcoholic Beer
United States
In the United States, non-alcoholic beer is not treated as “beer” under the Internal Revenue Code (IRC) and, as a result, is not subject to federal alcohol excise taxes in the United States (The National Law Review).
Non-alcoholic beer is generally considered taxable when it comes to sales tax. However, it is essential to note that non-alcoholic beer laws vary on a state-by-state basis. (source; source).
European Union
In the European Union, taxability of non-alcoholic beer varies between member countries.
Generally, excise duties on alcoholic beverages are based on the alcohol content, with higher rates applied to products with a higher alcohol content.
While non-alcoholic beer (usually considered to be beer with an ABV of 0.5% or less) is often subject to lower excise duties than regular beer, it may still be subject to sales tax like other beverage or food products.
Other Countries
Non-alcoholic beer taxability varies in other countries around the world.
Some nations may not impose excise duties on non-alcoholic beer due to its low alcohol content, while others might still apply sales taxes, as it falls under the category of food and beverages.
Factors Affecting Taxability
Alcohol by Volume (ABV)
One important factor in determining the taxability of non-alcoholic beer is its Alcohol by Volume (ABV) content.
Non-alcoholic beer, which typically contains less than 0.5% ABV, is not treated as “beer” under the Internal Revenue Code (IRC) and, as a result, is not subject to federal alcohol excise taxes in the United States (The National Law Review).
This distinction between non-alcoholic and alcoholic beverages is crucial in understanding the tax implications.
Production Process
Another factor that can affect the taxability of non-alcoholic beer is its production process.
Some non-alcoholic beers are made by removing the alcohol after the brewing process. If the original beer contained enough alcohol to be taxed, removing the alcohol might result in a different tax treatment. In most cases, though, the tax status is mostly determined by the end product’s ABV and not the specific steps involved in making it.
In addition to federal taxes, state and local jurisdictions may apply sales taxes on non-alcoholic beverages. These taxes generally apply to prepared foods and drinks sold by restaurants and other food establishments (Brew Publik). The exact tax rates and rules can vary by state and even by city, so be sure to check your local regulations to determine whether non-alcoholic beer is subject to sales tax in your area.
Final Thoughts
Non-alcoholic beer may or may not be subject to taxation, depending on the specific regulations in the applicable jurisdiction. In some cases, non-alcoholic beer is treated similarly to regular beer, being subject to the same labeling and regulations as outlined by the TTB.
However, there are situations where non-alcoholic beverages may not be taxed as alcoholic beverages. For example, the sale of non-alcoholic beverages is not subject to mixed beverage taxes in Texas but may be subject to sales tax.
Additionally, Philadelphia’s beverage tax may apply to non-alcoholic beers if they contain added sweeteners, as mentioned on the City of Philadelphia website.
It is essential for businesses selling non-alcoholic beer to familiarize themselves with the specific taxation rules and regulations within their jurisdiction. This may require consulting state, county, or municipal tax authorities, as well as keeping up-to-date on any changes to relevant tax laws.