The first tax on a domestic product by the U.S. government was on distilled alcohol (1791). Since then, alcohol production and sale has been aggressively regulated by the federal government, ostensibly (if nothing else) to ensure the integrity of this revenue stream.
Today, the Alcohol and Tobacco Tax and Trade Bureau (TTB) of the U.S. Department of the Treasury maintains a rich and amusing tapestry of rules. A product is legally an alcoholic beverage if it contains at least 0.5% alcohol by volume and is fit for beverage purposes.
TTB offers two different means of determining whether something is "fit for beverage purposes."
- Organoleptic Analysis: This is essentially a taste test by a panel of six people. If at least four agree that "the product has flavor qualities that would prevent the average person from mistaking it for an alcoholic beverage" then it is exempt from tax and regulation because it is "unfit for beverage purposes."
- Formulaic Fitness: A number of ingredients, when included in an alcoholic liquid in sufficient levels, render it unfit for beverage purposes (as far as the TTB is concerned).