The California Board of Equalization overstepped five years ago when it voted to tax flavored malt beverages, known popularly as "alcopops," as hard liquor instead of beer, a state appellate court has ruled.
The Sacramento-based 3rd District Court of Appeal, in a decision released Monday, described the bottled drinks, such as Mike's Hard Lemonade and Smirnoff Ice, as "hybrids" of beer and distilled spirits but based its decision on a state agency's classification of them as beer.
The difference in taxation is immense. California taxes beer at 20 cents a gallon but hard liquor at $3.30 per gallon.
Anti-alcohol activists argued that the makers of the drinks marketed them to young people and pressed for the higher taxes to raise prices and discourage sales. The Board of Equalization's three Democrats agreed while its two Republicans voted against the hard liquor classification.
Diageo Guinness USA, which markets Smirnoff brands, and the Flavored Malt Beverage Coalition challenged the Board of Equalization decision in court, noting that an alcopop's alcohol content was similar to beer's, but lost at the trial level before winning the appellate court decision.
"The Legislature did not delegate authority to the board to adopts its own classification of alcoholic beverages," Justice Harry Hull wrote in the 3-0 decision.