Bill In Congress Aims To Stop Kombucha From Being Taxed Like Beer

Senate Finance Chairman Ron Wyden (D-Ore.) and U.S. Representative Earl Blumenauer (D-Ore.) have reintroduced legislation to put a stop to federal alcohol taxes on kombucha companies.

If you’re not a regular kombucha drinker, chances are that you’ve seen it for sale in Whole Foods stores—or on tap in your favorite cafe. Kombucha is a fermented drink made from tea, sugar, bacteria, and yeast, as well as some flavorings. Kombucha is brewed and allowed to ferment (like beer or kimchi). After the fermentation process, the drink is a bit carbonated and tastes a bit sour or tart.

The taste is a bit reminiscent of a sour ale—and for good reason. Some of the key ingredients, like yeast and sugar, are similar, and alcohol is a natural byproduct of fermentation. But, the alcohol levels are typically much lower in kombucha than in beer. The length of time the kombucha ferments can impact the alcohol levels, but it typically weighs in below 0.5%, allowing it to be sold as a non-alcoholic beverage. That’s why you see low-alcohol kombucha in grocery and convenience stores for sale with no age restrictions.

In contrast, the ABV—or alcohol by volume—for beer is typically 4-8%, with the average ABV weighing in at less than 5%, according to the Beer Institute. That means that a person would have to consume between five and ten bottles of kombucha to equal the alcohol in one beer.

But despite the differences in ABV, the two are taxed the same. Under the tax code, kombucha is subject to the same excise taxes intended for beverages with significantly higher alcohol content.

Wyden wants to change that. “It’s time to update alcohol tax laws to exempt kombucha from excise taxes,” he says. “My KOMBUCHA Act would do just that to protect small businesses and create more jobs in Oregon and nationwide.”

KOMBUCHA is in all caps for a reason. You know that legislators love acronyms, and this one has one, too: KOMBUCHA is short for ‘‘Keeping Our Manufacturers from Being Unfairly taxed while Championing Health Act.’’

The KOMBUCHA Act would amend the tax code to add a subparagraph (4) to section 5042. That section already exempts non-alcoholic cider and wine for personal or family use. The new subparagraph (4) would exempt kombucha with an ABV of less than 1.25% from the same kinds of federal excise taxes as wine or beer. The text of the bill is here.

“It is outrageous that kombucha is taxed like beer. This is an antiquated legacy of the prohibitionist era and it is past time to end it. Our legislation will relieve small businesses from these unnecessary tax burdens and support a growing industry in Oregon and across the country,” said Blumenauer.

That industry is probably bigger than you think. According to Wyden and Blumenauer, by 2025, the economic impact of the industry is projected to be $5.25 billion. They also report that more than 7,500 people work directly in the country’s kombucha industry.

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