Sotol Producers Push for Tax Reform to Protect Tradition

Sotol producers are calling for changes to Mexico's excise tax system as they seek to improve the competitiveness of traditional distilled spirits and protect a biocultural heritage that supports rural communities across northern Mexico.

The industry's main proposal is to replace the current ad valorem calculation of the Special Tax on Production and Services (IEPS) with an ad quantum system, under which taxes would be based solely on the amount of alcohol contained in each bottle rather than its commercial value. Supporters argue the reform would level the playing field for small-scale producers of artisanal spirits, which currently face higher tax burdens because of their premium prices.

The proposal is being promoted through the Moderniza IEPS initiative, which advocates a more equitable tax framework for Mexico's traditional distilled beverages. According to José Heraclio de Lucas, spokesperson for the movement, the current tax structure places traditional producers at a disadvantage. Distilled spirits are subject to a 53% IEPS based on product value, in addition to a 16% value-added tax (VAT) and, in some states, an additional local tax of up to 4.5%. "It is impossible to compete under those conditions," De Lucas said.

He added that the administrative requirements for registering brands and obtaining permits also prevent many rural producers from entering the formal economy. "There are communities without electricity, water or roads, yet they are asked for invoices for distillation equipment and tax addresses. The system does not reflect the reality of rural Mexico," he said.

Sandro Canovas, social and environmental activist, dedicated to promoting sotol's cultural heritage, said one of the industry's biggest obstacles is the lack of official information. "There is no real census of how many traditional sotol producers exist," he said, noting that the absence of reliable data makes it difficult to design public policies that support producing communities or facilitate access to financing and formalization programs.

The industry is also urging the Mexican Institute of Industrial Property (IMPI) to strengthen enforcement of the Sotol Denomination of Origin following reports of unauthorized production in the United States. "There are entrepreneurs in Texas producing a spirit and labeling it as 'Texas sotol.' That is a violation of our denomination of origin," Canovas said.

He also warned about increasing competition from agave-based distilled spirits produced in countries including Australia, India, Israel and China. "They took endemic agave species to cultivate them abroad, and now they produce spirits that compete with ours," he said, describing the practice as biopiracy.

Sotol, produced from several species of the Dasylirion plant using traditional artisanal methods, is widely regarded as a living biocultural heritage of northern Mexico. The spirit is closely tied to the Sierra Madre and desert ecosystems, with production techniques and flavor profiles shaped by local knowledge passed down through generations.

Producers from Chihuahua, Durango and Coahuila, the three states covered by the Sotol Denomination of Origin, will gather in Mexico City to promote the industry and advocate for fiscal reform during the Second National Forum of Rural Sotol Producers. The discussion will continue at the First National Congress of Rural Distilled Spirits Producers and Traditional Art, where producers aim to expand commercialization opportunities while highlighting the economic challenges facing the sector.