June 17, 2008

Diageo and Flavored Malt Beverage Coalition File Suit Against California’s BOE

Diageo-Guinness USA, a division of Diageo, and the Flavored Malt Beverage Coalition filed suit against California's Board of Equalization challenging regulations that will reclassify flavored beer, which is malt based, as a distilled spirit, increasing the taxes on these products by more than 1600%.

The complaint seeks to invalidate the Board of Equalization (BOE) regulations as illegal on a number of grounds, including that the BOE does not have the authority to classify alcohol beverages for taxation purposes and that flavored beer is beer, not distilled spirits, as a matter of law, and has been taxed as beer by the BOE for decades.

Kellye Walker, general counsel at Diageo North America, said: "The Board of Equalization has the authority to tax within existing classifications, but it does not have the authority to reclassify alcohol beverages for the purpose of taxation. The power to reclassify lies solely with the Department of Alcohol Beverage Control. The BOE has completely overstepped its jurisdiction."