Thanks for the Dec. 31 article, “Privatizing liquor hasn’t brought price down.” I believe that the liter tax actually went up from $3.77 to $6.60 per liter but I may be incorrect. Regardless of this minor item, I believe the new situation actually brings a major tax increase to our state. Your article accurately says the 51.9 percent markup went away and was replaced by a 10 percent tax on distributors and a 17 percent tax on retailers. While the numbers are correct, it may seem to your readers that the two new taxes are less than the old tax. In fact, the new taxes are going to be much higher because they are not taxes on the cost of the liquor but on revenues of the distributors and retailers. The old 51.9 percent was a markup on the cost of the liquor to the state.
I would really like to see a follow-up article later this year on the actual net revenue to the state. When you consider that the old 52 percent markup on cost and the 20.5 percent sales tax and the liter tax were gross revenue to the state, which then had to pay the actual cost of the liquor and the operating costs of the distribution centers and the retail stores to get the net revenue to the state.
The state no longer has any operating costs for the distribution centers or the retail stores and has no cost for liquor but instead they get the 10 percent tax on the distributors revenue that has to cover the distributor liquor costs and their operating costs plus their profit. The retailer then pays a 17 percent tax to the state on revenue that has to cover the retail cost of the liquor from the distributor plus the cost of their store operations plus their profit. On top of all that the state still collects the 20.5 percent sales tax plus the new liter tax.
The bottom line question to the legislators is what is the net impact on the state revenue? Or, looking at it as a state citizen, how much did our taxes go up or down?