Photo/IllutrationAn advertising event of Sapporo Breweries Ltd. was held in 2014 to restart selling “Goku Zero” as “happoshu” low-malt beers rather than as a third-category beer in Tokyo’s Shibuya Ward. (Asahi Shimbun file photo)

The Tokyo District Court rejected Sapporo Breweries Ltd.’s claim that its beer-flavored alcoholic beverage “Goku Zero,” sold for a year from 2013, qualifies for the lowest tax rate for beer.

The judicial ruling on the beer category is likely the first of its kind in the nation.

There are currently three tax rates for the beverages, with beer at the top, followed by low-malt beer “happoshu” and malt-free third-category beer in the lowest bracket.

The presiding judge of the court said in the Feb. 6 verdict that Goku Zero is not a third-category beer.

The court supported the National Tax Agency’s decision to impose a higher tax rate on the alcoholic beverage based on its examination of the production process and other data.

Further details of the ruling were not revealed, as the court accepted a request from Sapporo Breweries not to disclose evidence in order to protect corporate secrets.

In response to the ruling, an official of Sapporo Holdings Ltd. said, “We will decide on our next measures after examining the court ruling."

A National Tax Agency official said, “We understand that the nation’s assertion was upheld."

Sapporo Breweries began selling Goku Zero as a third-category beer in June 2013. But it temporarily suspended production in May 2014 after the agency asked it to reveal the production process of the drink.

The beermaker then voluntarily paid 11.6 billion yen ($114 million) in back taxes that resulted from Goku Zero losing its lower tax status as a third-category beer.

As further attempts by the firm failed to convince the agency to accept Goku Zero as a third-category beer, Sapporo Breweries launched the recent lawsuit.

The company reviewed Goku Zero’s ingredients and production process and has resold it as happoshu since July 2014.

The tax gap between the three types of beer-related beverages will soon evaporate due to revision in the liquor tax law last year, which may resolve the dispute between the brewery and the tax agency.

The liquor tax for beer will be unified in stages from October 2020 due to the revised tax law and it will become a single tax in October 2026. The beer tax will decrease, while the tax on happoshu and third-category beers will rise.

Beer companies are starting to switch their focus from making happoshu and the third-category beer back to making "real beer," eyeing opportunities such as Japan’s growing craft beer market, because they will no longer be under pressure to produce products that beat the tax when the liquor tax is unified.

However, as the unification of the tax will proceed in stages by October 2026, they can’t ease up on making happoshu and the third-category beer for the time being.

Eventually, the tax is planned to be unified to about 55 yen on a 350-milliliter beverage. The first review is scheduled for October 2020. The tax gap between beer and happoshu will be reduced from about 30 yen to 23 yen, while the gap between beer and third-category beer is to fall from about 49 yen to 32 yen.

However, beverage makers forecast that consumers’ trend of being thrifty will strengthen due to the consumption tax hike to 10 percent, scheduled to start this fall, among other reasons.

New items that have appeared in the market in the third-category beer sector include Asahi Breweries Ltd.’s “Gokujo” and Suntory Holdings Ltd.’s “Kinmugi Gold Lager.”

(This article was written by Takuya Kitazawa and Akifumi Nagahashi.)