A wide-ranging bill that would overhaul how Kentucky regulates and taxes alcohol, cannabis-infused beverages, hemp-derived products, and other intoxicating substances has passed the Kentucky House.
Matthew Koch, R-Paris, a primary sponsor of House Bill 9, said the measure is intended to streamline the state’s regulatory and tax framework for a growing range of intoxicating products while keeping overall alcohol revenue largely unchanged.
“That includes alcohol, cannabis-infused beverages, hemp-derived cannabinoids, and products like kratom, all while laying out the framework to capture any new and emerging products as they come into the marketplace,” Koch said.
The legislation would reorganize Kentucky’s current alcohol tax structure and replace it with a system based partly on the amount of pure alcohol in a product. Koch said the changes are designed to simplify compliance while keeping alcohol tax collections roughly the same.
“We eliminated the cumbersome structure of the existing alcohol tax system to assist us with compliance while maintaining the revenue neutrality,” he said.
If enacted, Koch said Kentucky would become the first state to establish a regulatory fee tied to the pure alcohol content of beverages.
The bill would also create a 4% regulatory retail licensing fee on alcoholic and cannabis-infused beverages beginning July 1, 2027. Koch said other taxes would be eliminated to offset the new fee and keep the overall impact on revenue minimal.
House Bill 9 would also standardize the local regulatory license fee collected by cities and counties, setting a 5% cap within a year. Local governments that reduce the fee to 3% or lower would be allowed to use those funds for any emergency services, rather than limiting spending to alcohol-related responses.
The legislation also includes provisions related to hemp-derived products. Koch said the bill would require clearer labeling and proper laboratory testing to ensure those products are accurately taxed.
Another provision would increase penalties for retailers who sell alcohol to minors.
“Three strikes within two years at the same retail location is a lifetime ban on holding that alcohol license,” Koch said.
During debate, Lisa Willner, D-Louisville, questioned who ultimately pays the taxes on alcohol and related products. Koch said that would not change under the proposal.
“(It’s) the same people who have always paid the tax on these products, and that’s all of us. That’s anybody that purchases alcohol,” Koch said.
Willner said she opposed the measure, arguing it continues to shift costs onto consumers.
In response to questions about revenue, Jason Petrie, R-Elkton, said the alcohol industry currently generates about $170 million in state revenue. He emphasized that the goal of House Bill 9 is to reorganize how taxes are collected rather than increase them.
“This is a realignment of taxes, not to shift it to consumers, because consumers are paying all the taxes now,” Petrie said. “It’s just written into the price. This is just a realignment of where it’s collected.”
The Kentucky House of Representatives passed the bill Tuesday by a 63-31 vote. It now moves to the Kentucky Senate for consideration.
Information from the Kentucky Legislative Research Commission.
