Contract liquor store owners worried about new fees
Friday, May 4, 2012
The price of a bottle
Current charges under state control
For an 0.75 liter bottle
Average cost $6.50
Mark up (51%) $3.33
Spirits tax (20.5%) $2.01
Flat tax $2.83
Private sales as of June 1
Estimate for an 0.75 liter bottle
Average cost $8.78
Includes 10% distributor fee
and 17% retail fee
Mark up (52%) $4.57
Spirits tax (20.5%) $2.73
Flat tax $2.83
SOURCE: Washington State Liquor Control Board
A contract liquor store in Amboy is closing after Saturday, one of 10 contract stores that will close over the next week at the request of store managers.
The Amboy store, at 39714 N.E. 216th Ave., is the only Clark County store on the closure list released late Friday by the state Liquor Control Board. Private liquor sales begin in Washington on June 1.
OLYMPIA -- Contract liquor store owners and others who bid on the former state-run liquor stores at auction, raised concerns Thursday at a state Liquor Control Board meeting. They were worried about fees they’re facing once the state transitions to private sales June 1.
The owners said the double-digit fees could result in layoffs or store closures.
The fee that stood out Thursday was a 17 percent fee the owners will have to pay on all spirits sales revenue, including wholesale sales, such as to restaurants and bars.
For some, wholesale sales represent a significant portion of their business, which means the store owners likely will have to mark up their prices in order to collect the fee, which could scare off business, they said.
The state has about 162 contract liquor stores, 90 percent of which plan to make the transition to private sales, Liquor Control Board spokesman Brian Smith said.
Communication was another issue raised by the store owners who said they didn’t feel like they were kept in the loop or were even aware of some of the fees. The board defended its communication process.
“This has not been a secretive process,” board member Chris Marr said.
The fees, which go into a liquor revolving fund, will be
distributed to the state and local communities, spokesman Smith said after the meeting.
During the meeting, contract liquor store owner Bonnie Roulstone, who operates a store in Clearview, Snohomish County, was among several owners who asked the board to delay for one year the implementation of the 17 percent fee.
Roulstone has run her store, Clearview Spirits & Wines, for two years and about 40 percent of her business is tied up in sales to restaurants and bars, she said. The 17 percent fee isn’t going to close her business, but she had considered layoffs, Roulstone said.
Jas Sangha of Lacey, who represents a group of about 80 who purchased former state-run stores during the state’s online auction, also raised concerns about the fees for the contract liquor store owners as well as his group.
“The 17 percent fee will effectively wipe out many contract liquor stores, which were supposed to be held harmless,” he told the Liquor Control Board.
Roulstone and others said by delaying the fee it would give them the chance to address the issue in the state Legislature, similar to what craft distillers did during the last legislative session. As soon as the craft distillers learned about the fee, they were able to address it and get it eliminated for their businesses, she said.
Although the board was sympathetic to their concerns -- and another public hearing is set for May 24 -- the board said it was limited in what it could do.
“I don’t see legally where we have the flexibility to change the implementation date on fee collection,” Marr said.
“We didn’t write the initiative,” board Chairman Sharon Foster said. “We will continue to look where we can be helpful, but I do believe a legislative fix is your only fix.”
Thursday’s discussion about fees, including distributor fees, also unearthed some existing arguments about whether the initiative would truly lower the price of booze compared to what the state charged.
A study by the state Office of Financial Management concluded that the private price markup on the cost of liquor would start at 52 percent -- about equal with the state’s markup of 51.9 percent -- but could go as high as 72 percent, spokesman Smith said.
Northwest Grocer’s Association lobbyist Holly Chisa, who also was at the meeting and who helped draft the initiative, defended the price-lowering qualities of the initiative, saying it gives store owners the option of warehousing their own product or forming cooperatives, for example, to give them more buying power.
Easier said than done, Roulstone said. Board member Marr added that ultimately whether the price of liquor falls will be determined after June 1.
Spokesman Smith said Thursday’s meeting was another step in the sometimes challenging countdown to private sales.
“The initiative has created a lot of uncertainty in the new world going forward,” he said. “Some contract liquor stores see it as an opportunity, while others have real trepidation about what it means. It affects a lot of businesses differently.”