ATO ID 2011/5: Wine equalisation tax: grape wine product and the addition of the flavour of an alcoholic beverage
Date of decision: 21 December 2010
Business line: Indirect Tax

Issue
Is a cosmopolitan flavour, (being the flavour of a recognised alcoholic cocktail) the flavour of an alcoholic beverage for the purposes of regulation 31-3.01 of the A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations)?

Decision
Yes. A cosmopolitan flavour is the flavour of an alcoholic beverage for the purposes of regulation 31-3.01 of the WET Regulations.

Facts
An entity manufactures alcoholic beverages by adding flavours to wine. One of the flavours is a cosmopolitan flavour. A cosmopolitan cocktail is a cocktail consisting of vodka, Triple Sec, cranberry juice, and fresh-squeezed lime juice or sweetened lime juice. The cosmopolitan flavour does not contain alcohol.

Reasons for decision
Summary: A grape wine product is defined at section 31-3 of the A New Tax System (Wine Equalisation Tax) Act 1999 as follows: Grape wine product is a beverage that: The regulation for grape wine products is regulation 31-3.01 of the WET Regulations which states: The requirement for consideration is whether the cosmopolitan flavour is the flavour of an alcoholic beverage as per subregulation 31-3.01(2) of the WET Regulations. The provision is wide and looks at whether a flavour is that of an alcoholic beverage (other than wine). A cosmopolitan is a well known cocktail. Cocktails generally are mixtures of various spirits and or liqueurs and other substances. Cocktails containing alcohol are alcoholic beverages. A cosmopolitan is a cocktail made from vodka, Triple Sec, cranberry juice, and fresh-squeezed lime juice or sweetened lime juice. Vodka and Triple Sec both contain alcohol therefore a cosmopolitan is an alcoholic beverage. Subregulation 31-03.01 of the WET Regulations is not directed at alcoholic beverages themselves, it is directed at flavours of alcoholic beverages. Even if a flavour itself does not contain any alcohol, it is a flavour of an alcoholic beverage if it imparts the flavour of an alcoholic beverage (other than wine). The cosmopolitan flavour imparts the flavour of a cosmopolitan cocktail which is an alcoholic beverage that is not wine, therefore a cosmopolitan flavour is the flavour of an alcoholic beverage for the purposes of regulation 31- 3.01 of the WET Regulations.

Legislative references: A New Tax System (Wine Equalisation Tax) Act 1999 Subdivision 31-A section 31-1 section 31-3 paragraph 31-1(1)(a) paragraph 31-1(1)(b)
Related public rulings and determinations: Wine Equalisation Tax Ruling WETR 2009/1
Subject references: Excise Excise CoE Wine Wine equalisation tax Ready to drink excise Alcohol excise Other excisable beverage Grape wine products