CS FOR SENATE BILL NO. 82(L&C) "An Act relating to the state alcoholic beverage tax for certain wine and other beverages." This was the second hearing for this bill in the Senate Finance Committee. Co-Chair Wilken stated that this bill "reduced the tax burden for all small Alaskan wine producers. Currently wine is taxed at the rate of $2.50 per gallon at the time it is sold in the state or consigned in the State. SB 82 exempts the taxation for the first 100 gallons of wine, each month per taxpayer. Department of Revenue estimates tax loss to the State to be $18,400." He noted a new fiscal note dated 2/17/04. DOUG LETCH, Staff to Senator Gary Stevens overviewed the sponsor statement, updated 4/23/04, into the record as follows. SB 82 "An Act relating to the state alcoholic beverage tax for certain wine and other beverages." This bill will aid Alaska's four small wineries; two of which are located on Kodiak Island, a third is in Haines, the forth is in Anchorage. When the 22nd Alaska Legislature passed into law House Bill 225, breweries were allowed to keep the former tax rate of $.35 per gallon on sales of the first 60,000 barrels of beer sold in the state. Wineries were not given similar consideration; as a result, the tax on wine rose from $.85 per gallon to $2.50 per gallon. This important revenue measure, while helping breweries, has, unfortunately, put Alaska's small, emerging wineries at a competitive disadvantage in the marketplace. Recognizing that a revision to current state statute to allow wineries an exemption similar to breweries would lead to a substantial revenue loss, SB 82 attempts to level the playing field for our small wineries by offering a tax exemption of 100 gallons per month. This figure was derived after much consultation with winery operators and the Department of Revenue. The 100 gallon per month figure is also an attempt to minimize revenue loss from unintended beneficiaries, while keeping within the constrictions of interstate commerce law. The bill also includes language that will further reduce unintended revenue loss by treating as a single taxpayer, two or more taxpayers who have a relationship, as defined in 26 U.S.C. 267(b)(Internal Revenue Code). By supporting SB 82, you will help this developing Alaska industry produce a competitively-priced product, allowing them to continue to contribute new revenue to the state's changing economy. Mr. Letch shared that Senator Gary Stevens sponsored this legislation on behalf of the wineries located on Kodiak Island to assist an emerging industry. STEVEN THOMSEN, Alaskan Wilderness Wine, testified via teleconference from Kodiak in support of the bill. Co-Chair Wilken asked whether this legislation would assist in the expansion of the witness's winery operations. Mr. Thomsen affirmed it would. JOHANNA BALES, Revenue Auditor, Department of Revenue, testified via teleconference from Anchorage, that the Department does not oppose this bill. She clarified the Department supports the 100- gallon exemption per taxpayer, as opposed to the exemption to small breweries, which she stated has become administratively burdensome. Senator Olson asked that given the small amount of revenues involved, why the Department opposes this bill. Ms. Bales corrected that the Department does not oppose this bill and the subsequent exemption. Senator Dyson commented on attempts to encourage cruise ships operating in Alaska to use Alaskan products and he hoped this legislation would benefit this process. Senator Bunde offered a motion to report the bill from Committee with individual recommendations and new fiscal note. There was no objection and CS SB 82 (L&C) MOVED from Committee with a new zero fiscal noted from the Department of Revenue, dated 2/17/2004. AT EASE 9:12 AM / 9:13 AM Co-Chair Green chaired the remainder of the meeting.