Heeding the pleas of teenagers to help curb underage drinking, state authorities Wednesday moved to raise taxes on sugary alcohol beverages and remove them from convenience stores.
Drinks such as Smirnoff Ice, Mike's Hard Lemonade and Bacardi Silver will cost as much as $2 more per six-pack if a state tax board changes its classification of the drinks from beer to distilled spirits.
California would be only the second state to treat "alcopops" as hard liquor.
Outgoing state Controller Steve Westly, a member of the Board of Equalization, said he is confident that will happen next year after several months of public hearings.
"When you're selling a product that is flavored with distilled spirits, that you're marketing as distilled spirits, I think common sense dictates that it should be taxed as distilled spirits," said Westly. "I see no public policy rationale why we should provide a lower tax rate to companies that are promoting distilled spirits to young people in California."
The board voted to accept a petition drafted by teenagers affiliated with the nonprofit group California Friday Night Live, which aims to prevent injuries and deaths caused by teens driving under the influence of alcohol.
"That's our main goal, just to lessen the accessibility for youth so hopefully it will decrease sales to young people," said petitioner Elianna Yanger, 17, of Folsom.
She said she hears her peers at school talk about the sweet-tasting beverages, which mimic cola, lemonade, iced tea and fruit drinks.
"It's mainly girls who drink them, because they're so flavored," Elianna said, "and the guys drink the beer."
Much is at stake for the alcohol industry. Beer is taxed at 20 cents a gallon, while distilled spirits are taxed at $3.30 a gallon. The tax board estimates that reclassifying the beverages would generate an additional $40 million a year for state coffers.
In addition, the change would remove the products from an estimated 24,000 retailers that hold licenses to sell only beer and wine.
There are also national implications: Only Maine now taxes the beverages as distilled spirits, but attorneys general around the country have been weighing a change.
"If California reclassifies, a number of states will take a careful look at this," said James F. Mosher, a lawyer who directs the nonprofit, research-oriented Center for the Study of Law and Enforcement Policy in Felton, Calif.
The tax board's action kicks off a public hearing process that will last at least nine months before staff brings recommendations to the board for a final vote. Makers of alcopops said they welcomed the scrutiny.
"It's a move to gather the facts," said Gary Galanis, vice president of corporate relations for Diageo, owner of the Smirnoff brand.
He argued that the beverages should be classified as beer because they are derived from a malt base. The beer color and taste are stripped away, and distilled spirits are added.
Federal inquiries have failed to back allegations that the alcohol industry markets alcopops to youngsters, Galanis said.
"We're not happy when underage people drink or attempt to purchase our products," he said.
The three Democrats on the tax board voted to adopt the teens' petition, with two Republicans opposed. Two new board members will be sworn in next year, but the partisan breakdown will remain 3 to 2, with Democrats in the majority.
Attorneys for Santa Clara County say that if the Board of Equalization fails to boost taxes on alcopops, they will revive a lawsuit they filed last month. The suit accuses the tax board of failing to enforce a California law that requires a beverage containing any amount of distilled spirits to be regulated as distilled spirits.
"We're holding our litigation in abeyance until they do what they should do," attorney Scott Dickey said.
The issue will probably wind up in the Legislature next year too, where the alcohol industry both lobbies and doles out generous campaign donations.
Board of Equalization member Bill Leonard, a Republican who voted against the move toward reclassification, said the teenagers raised a legitimate technical question about what is beer, wine or distilled spirits.
But the Legislature wrote the laws that define those beverages and set the tax rates, he said, and deciding whether a curb on alcopops would curb underage drinking is social policy, not tax policy.
"We really need to ask the Legislature to help us," said Leonard.