Don Poffenroth: Tax code needs to change for spirits-based canned drinks

By Don Poffenroth

If you are an adult living in Washington who enjoys the convenience of a canned drink that isn’t beer, our state’s tax code muscles your options around and the impact is on your wallet.

Ever since the sale of liquor was privatized in 2011, beer has been taxed at 26 cents per gallon and spirits have been taxed at $24 per gallon.

About five years ago, low-alcohol canned products, like White Claw and Truly hard seltzers, started getting really popular. These are malt-based alcohol products, which means that you are paying a pretty low tax when you buy them at the store. Unfortunately, if you prefer spirits-based canned cocktails like what we make at my local company, Dry Fly Distilling, you are paying more than 50 times higher in tax than what is assessed on a malt- or wine-based seltzer.

In 2011, lawmakers did not anticipate consumer preference for low-alcohol, lower calorie, ready-to-drink beverages. Now, the Legislature is considering a proposal to bring more parity to what people pay for what they like to drink, so that consumer choice isn’t dictated by an old tax code.

I was born and raised in Spokane. After a few decades working in the food industry, I had the opportunity to start my own company and founded Dry Fly Distilling in my hometown. Since 2007, our success has been built on hiring local workers and sourcing local ingredients. All of the grain in our products comes from within 30 miles of our city. All of our ingredients are grown on farms that are more than 100 years old. I’m proud to feature agricultural partners whose excellence supports Dry Fly products on store shelves in 40 states. Even if you are in Massachusetts, you will be able to find one of our canned cocktails that are Washington-distilled right here in Spokane.

Unfortunately, if you are shopping for products like ours at a grocery store in this community, you are up against a tax code that has not been updated to reflect your preferences.

For example, a six pack of beer-based, canned cocktails like White Claw or Truly will cost you about $12, while the same low-alcohol canned drink made with spirits can cost over $30. Both products contain less than 7% alcohol, but a distilled product with the same alcohol content will be nearly three times the overall cost.

If you prefer spirits-based seltzers instead of malt- or wine-based canned drinks, you are going to get a little bit of sticker shock when you check out at the store. In fact, we hear from grocers that a lot of people just return the spirits-based canned cocktails to the cooler when they see how much the tax adds to the price. This just doesn’t make sense when the malt-based, spirits-based and wine-based products are all low-proof, sold by the can and lower in calories. Often, they even have the same types of flavors, such as black cherry, strawberry and grapefruit. But if you are someone who prefers spirits and not beer, you will be forced to ring up a grocery bill that has more of a tax burden than if you just settled for the beer-, wine- or malt-based drink.

The bills before the legislature (SB 5375 and HB 1344) both have bipartisan support. Washington brewers and winemakers make other excellent products loved by many. And the new proposed tax code would still favor beer- and wine-based canned drinks, but would allow for better tax parity for spirits-based drinks set 10 times higher instead of the current 50 times higher rate. It’s not perfect, but it would be real progress to help support consumer choice.

At Dry Fly Distilling, we are proud that people all over the country are enjoying a product made right here in Spokane. During the pandemic, that success was really tested when we used our facility to manufacture sanitizer instead of spirits and while our business has recovered, many small distilleries did not survive the crisis. Today, I’m hoping that our state’s taxes encourage adult consumer access to local products based on their personal preference instead of trying to make that choice for them. This may not be the legislation that fixes all the challenges in our state, but it is one that prioritizes what people want by ensuring they aren’t penalized by an antiquated per gallon tax when they are packing a cooler for a camping trip or stocking up for March Madness.

Don Poffenroth was born and raised in Spokane. He founded Dry Fly Distilling in 2007, a local distillery that sources all of its grain from farms within 30 miles of Spokane.