Kombucha: Tax, labeling and legislation

Kombucha: Tax, labeling and legislation

Presented: November 4, 2015

Published: Wednesday, November 4, 2015

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The American Herbal Products Association (AHPA) presented the third in a series of kombucha webinars on Nov. 4, providing regulatory and technical guidance to the kombucha industry from several industry legal experts.

AHPA's kombucha tax, labeling and legislation webinar provided broad overviews of the regulatory landscape for kombucha products, investigated granular requirements for kombucha sold in several product classes and addressed emerging regulatory and legislative issues to help the kombucha industry meet the growing demand for innovative, high quality products.

Justin Prochnow, shareholder at Greenberg Traurig, LLP, provided an overview of bottle recycle labeling requirements (bottle bills or container deposit laws).

"A container deposit law requires a minimum refundable deposit on beer, soft drink and other beverage containers in order to ensure a high rate of recycling or reuse," Prochnow said. "These state laws mandate what you need to put on the label for recycling and redemption purposes."

Prochnow noted that there is no federal container deposit law, but beverages sold in certain states must comply with respective state requirements. He gave a review of the states that do require this information and what information needs to be on kombucha product labels to comply with these laws.

William Garvin, shareholder at Buchanan Ingersoll & Rooney PC, and Robert Lehrman, attorney at Lehrman Beverage Law, PLLC provided background that focused on federal regulations for various kombucha products. Garvin and Lehrman pointed out that kombucha makers must first determine which regulatory category their product fits into, which can be challenging because kombucha is a unique product that can fit into several product classes like non-alcoholic food/beverage, alcoholic beverage, dietary supplement, or medical food.

"Right off the bat, you want to be thinking about how you want to be regulated and are you doing what you need to be doing to be regulated in that product class," Garvin said. He stressed the importance of product claims and said that the Food and Drug Administration (FDA) often uses these claims to determine which regulations apply to the product.

Garvin said kombucha products with an alcohol content that never reaches 0.5 percent are regulated by FDA while kombucha products with higher alcohol content are regulated by the U.S. Treasury's Alcohol and Tobacco Tax and Trade Bureau (TTB). Garvin also reviewed the labeling regulations for non-alcoholic kombucha and Lehrman presented labeling requirements for alcoholic kombucha products.

"Kombucha law can be confusing, but it is important you get it right" Lehrman said. "Kombucha has the distinction of almost fitting into more product classes than most other foods and beverages, but in general the government doesn't like products that are marketed in more than one class."

According to Lehrman, that while kombucha doesn't fit neatly into existing alcoholic beverage product classes, it is most similar to beer and is likely to be regulated under beer regulations.

Pete Evich, vice president at Van Scoyoc Associates, gave a summary of the Craft Beverage Modernization and Tax Reform Act, legislation endorsed by AHPA that could provide some regulatory and tax relief to certain kombucha makers.

"The bill could also serve as a vehicle to create a federal definition of kombucha so this product doesn't have to be forced into an existing product class," Evich said. He said that the bill has recently enjoyed additional support in Congress, but it still needed additional support and would likely have to be included in a larger tax bill in order to be passed.

The AHPA webinar series was made possible by the generous support of kombucha manufacturers KeVita and Tapuat.


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