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S. 892: KOMBUCHA


Should this bill be given a “Cheers!” or poured down the drain?

Context

Kombucha, a fermented nonalcoholic black tea or green tea drink, is growing in popularity. From July 2019 to July 2020, sales of refrigerated kombucha and other fermented beverages increased 2.4 percent to $703.2 million.

Under current law, a beverage is taxed and regulated as “alcoholic” if it contains more than 0.5 percent alcohol by volume. Kombucha generally falls under this threshold, but can keep fermenting after it’s bottled as the yeasts continue to eat sugars. As a result, it can sometimes come just above that 0.5 percent threshold by the time it reaches store shelves, subjecting it to taxes and regulations as though it was “alcohol.”

The thing is, in real life, nobody actually drinks kombucha for its alcoholic effects, extremely low as they are. Beer has about 5 percent alcohol by volume, meaning you would have to drink about 10 bottles of kombucha to equal the alcohol equivalent of one beer.

The current 0.5 percent alcohol by volume threshold is a relic of the Prohibition era from a century ago, with even the main advocate William Johnson admitting the threshold was not “intoxicating.”

What the legislation does

KOMBUCHA, or the Keeping Our Manufacturers from Being Unfairly taxed while Championing Health Act, would stop taxing and regulating kombucha like beer, by raising the alcohol by volume threshold for the beverage from 0.5 percent to 1.25 percent.

(Needless to say, the acronym is more than a little forced, with words like “our” capitalized while longer and arguably more important words like “taxed” are not.)

The House version was introduced on March 23 as H.R. 2124, by Rep. Earl Blumenauer (D-OR3). The Senate version was introduced the same day as S. 892, by Sen. Ron Wyden (D-OR).

What supporters say

Supporters argue that the 1.25 percent alcohol by volume threshold reflects what people actually purchase when they’re specifically looking for an alcoholic drink.

“The past year has been incredibly hard on businesses in Oregon and across the country, especially as supply chains have been disrupted. Still, kombucha is one the fastest growing beverage industries in the world,” Rep. Blumenauer said in a press release. “There’s no reason why kombucha brewers and sellers should get taxed like beer. Our common sense legislation would eliminate this burden and support a burgeoning industry that has a major impact on Oregon’s food and beverage economy.”

“The growth of kombucha production in Oregon and nationwide creates jobs and a beverage folks enjoy,” Sen. Wyden said in a separate press release. “It’s been a particularly difficult year for small businesses, and our bill would modernize taxes and regulations so these businesses can continue to grow and sell their products in stores across the country.”

What opponents say

Opponents counter that kombucha is taxed and regulated as though it contains alcohol because — well, it contains alcohol.

In 2015, the Maine legislature voted to lower excise taxes on kombucha, but Gov. Paul LePage (R) vetoed the measure.

“Kombucha is a small sub-category of wine. It is beverage alcohol under federal rules and Maine law. There is no defensible public policy reason why this category of beverage alcohol should receive special treatment,” Gov. LePage wrote in his veto message. “It is unfortunate that the sponsor chose to submit a bill that does nothing to help Maine taxpayers rather than to work to lower taxes for all Maine people.”

(The Maine Senate overwhelmingly overrode the veto, 30–4. While the state House voted to override it as well, 76–62, that 55 percent approval was less than the two-thirds required.)

Odds of passage

The legislation was introduced in both of the two previous Congresses, to no avail.

2017’s House version attracted 11 bipartisan cosponsors, eight Democrats and three Republicans. Then 2019’s House version attracted a larger 20 bipartisan cosponsors, 15 Democrats and five Republicans. Neither version received a committee vote.

The current House version has attracted a notably smaller four bipartisan cosponsors: three Democrats and one Republican. It awaits a potential vote in the House Ways and Means Committee.

2017’s Senate version attracted five bipartisan cosponsors, three Democrats and two Republicans. Then 2019’s Senate version attracted four bipartisan cosponsors, four Democrats and one Republican. Neither version received a committee vote.

The Senate version has attracted an identical four bipartisan cosponsors: three Democrats and one Republican. It awaits a potential vote in the Senate Finance Committee, which seems likely because lead sponsor Sen. Wyden chairs it.

Last updated May 28, 2021. View all GovTrack summaries.

The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on Mar 23, 2021.


Keeping Our Manufacturers from Being Unfairly taxed while Championing Health Act or KOMBUCHA

This bill modifies the definition of brewer for purposes of the alcohol excise tax to exempt kombucha from such tax.