ATO ID 2003/951: Addition of sugar to fruit wine
Date of decision: 9 September 2003
Business line: Indirect Tax

Issue
Does the addition of sugar to fruit wine constitute the addition of a flavour and thereby prevent the beverage from being 'fruit or vegetable wine' as defined in section 31-4 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?

Decision
No. The addition of sugar to fruit wine does not constitute the addition of a flavour, and therefore does not prevent the beverage from being 'fruit or vegetable wine' as defined in section 31-4 of the WET Act.

Facts
A base wine is produced from the fermentation of fruit (other than grapes). To increase the sweetness of the wine a sugar syrup made from caster sugar is added to the wine.

Reasons for decision
Summary: In the production of wine, the naturally occurring sugars in the fruit are converted to alcohol. This process is known as fermentation. The amount of naturally occurring sugar in fruit can be measured and this is usually expressed in units of Baume. A higher Baume measurement signifies a higher sugar content. The Baume for fruits used in the manufacture of fruit wine is much lower than the Baume for grapes. Because of the low sugar content in fruit used in producing fruit wine, most, if not all of the naturally occurring sugar may be used in the fermentation process. This will cause the resulting fruit wine to lack sweetness. Accordingly, it is common practice to add sugar to fruit wine to raise the sugar content and thus its sweetness. The definition of a 'fruit or vegetable wine' in the WET Act requires the beverage to be the product of the complete or partial fermentation of the juice or must of fruit or vegetables, or products derived solely from fruit or vegetables. Other conditions must also be satisfied which include the requirement that no liquor or substance can be added that gives colour or flavour, other than grape spirit or neutral spirit. If sugar is considered to be a flavour for the purpose of the fruit or vegetable wine definition, then 'fruit or vegetable wine' that has had sugar added will not be subject to WET. These products will be subject to excise duty. The term 'flavour' is not defined in the WET Act and therefore takes on its ordinary meaning. The Macquarie Dictionary, 2001, 3rd edn, The Macquarie Library Pty Ltd, NSW provides the following meaning: flavour 1. taste, especially a characteristic taste, or a noticeable element in the taste, of a thing 2. a flavouring substance or extract 3. the characteristic quality of a thing 4. a particular quality noticeable in a thing flavouring something that gives flavour, a substance or preparation used to give a particular flavour to food or drink taste 1. to try the flavour or quality of (something) by taking some into the mouth.... 3. to perceive to distinguish the flavour of.... 9. to perceive or distinguish the flavour of anything. Given the above definitions of flavour, flavouring and taste, sugar may be considered to be a flavour. However, in view of the context in which sugar is being used, the term 'flavour' should be considered in relation to the wine industry. In the wine industry wine is generally depicted by its type and style. Type distinguishes wines with significant differences in terms of the general description or characteristics of the wine. For example, wine is red or white, dry or sweet, high or low percentage of alcohol, sparkling or still, fortified or non-fortified. The style of the wine is determined by factors such as its aroma, flavours and whether the wine is light, medium or heavy. These styles can be influenced by any number of different factors such as the type of grape used or blend of grapes, the location at which the grapes were grown, the type of oak used (if the wine is matured in oak), the influence of the wine maker, etc. Wines that fall into a particular type can be produced in a number of different styles. Flavours that make up the wine style are determined by the type of fruit used. These flavours are extracted from the flavour compounds present in the juice and skins of the fruit. It is thus evident that in the wine industry, the sweetness of a wine is not part of the flavour description of the wine (i.e. the style). Sweetness determines the type of wine rather than the style of the wine. Sugar is also referred to separately from flavourings in the Food Standards Code. Standard A6 refers to flavourings and flavour enhancers whereas Standard K1 refers to sugar and related products. The Food Standards also detail the substances that may be added to various alcoholic products. Sugar and flavourings are listed separately where both can be added to the product. As the wine industry does not recognise that sugar contributes to the flavour of wine and taking into account the differentiation between sugar and flavour in the Food Standards Code, it is considered that sugar is not a substance that gives flavour within the terms of the definition of a 'fruit or vegetable wine'. Accordingly, sugar added to a fruit or vegetable wine will not preclude the wine from being subject to WET provided the other conditions for classifying wine as a 'fruit or vegetable wine' are met.

Legislative references: A New Tax System (Wine Equalisation Tax) Act 1999 section 31-4
Related public rulings and determinations: Wine Equalisation Tax Ruling WETR 2009/1 | Wine Equalisation Tax Ruling WETR 2009/2
Other references: The Macquarie Dictionary, 2001, 3rd edn, The Macquarie Library Pty Ltd, NSW
Subject references: Fruit wine Wine Wine equalisation tax