New wine tax law is more tolerant of alcohol error, apparently

I have been jumping up and down wondering how the TTB is going to interpret alcohol label tolerance after the new tax law pushed the definition of table wine up to 16 percent.

Last week we got a little clarity. The alcohol label tolerances are not changing ... except they are.

Here's the background. For many years, wine was taxed at about 21 cents per 750 ml bottle if it contained less than 14% alcohol, and 31 cents a bottle if it contained more than 14%.

As part of the tax reform passed by Congress last month, that line of higher taxation moved up to 16%. All wines under 16% alcohol (except sparkling wine, sigh) will be taxed at the lower 21-cent rate. This is good. Winemakers shouldn't have to make decisions based on taxation rate.

However, the label tolerance -- the amount a winery can legally misstate the actual alcohol percentage -- was not addressed in the tax reform. And that was very important. Previously, wines under 14% ABV had a label tolerance of 1.5%, while wines over 14% had a tolerance of 1%. But, and this is key, the label had to be on the correct side of 14%, so that a wine labeled at 13.5% might have 12% alcohol or 14%, but not 14.1%.

Last Friday, the TTB sent out a mailer that answers some questions about the way the tax law will be enforced. One section specifically addresses label tolerance. It says:

"The Act has raised the maximum alcohol by volume content for the lowest still wine tax rate from 14 percent alcohol by volume to 16 percent alcohol by volume. Do the alcohol content labeling tolerance rules set forth in 27 CFR 4.36 still apply?"

"These tolerances remain unchanged. The recent tax law revisions, which amend a number of alcohol excise tax provisions in the Internal Revenue Code (IRC), do not affect TTB’s part 4 regulations, which are based on the Federal Alcohol Administration Act (not the IRC). TTB regulations at 27 CFR 4.36(b)(1) are set forth under the authority of the FAA Act and provide for an alcohol tolerance of 1 percent alcohol by volume for wines containing more than 14 percent alcohol by volume, and 1.5 percent alcohol by volume for wines containing 14 percent or less."

What is NOT addressed in this answer is whether or not 14% is a line that cannot be crossed. I'm sorry, but I don't know the answer to that, and the TTB might not yet either.

Previously, the tolerance was based as much on the label ABV as the actual ABV. Both had to be on the same side of 14%. But now, the tolerance is based purely on the actual ABV, apparently.

What this means is that a wine that says 14.5% on the label might actually contain as much as 15.5%, and it might actually contain as little as 13%, which would have been impossible before.

I believe this means almost all wines now have a 2.5% swing in label tolerance from least to most, which is actually larger than before.

In other words, a wine labeled at 13.9% might actually have anywhere from 12.4% to 14.9%.

It may be academic because wineries usually understate the alcohol. But it is a change -- unless the TTB keeps the 14% barrier.

If not, 14.5% is the new 13.5%: it will be the most popular ABV to print on a wine label, because it gives a nice wide swath of possibility for the winery. It doesn't tell the consumer much, so I'm not in favor of it. But big wine companies will like it.

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