Legislature to businesses: No sidestepping those liquor taxes

The Legislature has passed a bill that would allow the Department of Revenue to discipline businesses that don't pay their liquor taxes under Washington's new liquor privatization initiative.

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The state's highest-grossing liquor store, at 7th Avenue and Bell Street in downtown Seattle.

The Legislature has passed a bill that would allow the Department of Revenue to discipline businesses that don't pay their liquor taxes under Washington's new liquor privatization initiative.

The Washington Legislature unanimously passed a bill March 1 that would allow the state to discipline businesses who don't pay their liquor taxes under Washington's new privatization of liquor sales. The bill would give the Department of Revenue the authority to request the Liquor Control Board suspend or discontinue a business' spirit license if it had been negligent or delinquent in paying spirit taxes. Gov. Chris Gregoire is expected to sign the bill into law March 15. 

Rep. Ross Hunter, D-Bellevue, and Rep. Gary Alexander, R-Olympia, sponsored the bill — HB 2758, which was requested by the Department of Revenue to act in accordance with Initiative 1183. 

The initiative, which voters passed last November and which will take effect June 1, changed how Washington will distribute spirits, shifting sales from state controlled liquor stores to the private sector.

But one aspect of I-1183 was left out: how the department would control private retailers if they failed to pay their spirit taxes. 

“Under the new system [I-1183] we’ll have thousands of retailers out there selling liquor and some of them may not comply with the law,” said Mike Gowrylow, spokesman for the Department of Revenue.

If the bill is signed into law, businesses will be deemed “delinquent in reporting or remitting spirit taxes” 30 days after their liquor taxes are due. At that point they will receive a warning notice from the Department of Revenue, giving them seven days to rectify the situation before their spirit license is suspended. 

Rick Garza, Deputy Director of the Liquor Control Board, said that the board supports the legislation and has worked with the department on this issue.

Garza agreed that with around $200 million in spirit taxes and about 14,000 retailers expected in Washington state under I-1183, there’s bound to be some businesses that don’t pay these taxes. The proposed law is intended to hold them accountable.

Currently, the Liquor Control Board administers spirit distributor, retailer, distillery, importer licenses, and — until I-1183 takes effect — is also responsible for collecting the spirits tax by adding a tariff to alcohol prices.

After I-1183 takes effect, the Department of Revenue will be responsible for collecting the tax, comprised of both the Spirit Sales Tax and the Spirits Liter Tax, in addition to other taxes such as retail sales tax and business and occupation taxes.

There are two types of spirit taxes, which have always been in place for state-owned liquor stores and will now apply to private retailers.

The Spirit Sales Tax corresponds to the selling price of spirits in their original package. Under this tax, the general public pays a 20.5 percent tax on the alcohol’s original price. Retailers whose customers consume alcohol on-premise, such as bars and restaurants, only pay 13.7 percent in taxes on their purchases from “off-premises licensees,” which will soon include grocery stores and warehouse clubs, such as Costco.

The other spirit tax, the Spirit Liter Tax, is based on the volume of spirits sold in their original package. Currently, members of the general public pay $3.77 per liter in Spirit Liter Taxes; bars and restaurants pay $2.44 per liter. 

Both would continue to flow into the General Fund. 

In addition to giving the department more authority over businesses themselves, House bill 2758 requires that out-of-state distillers report spirit sales to Washington businesses on a monthly basis. Furthermore, the distillers will not be allowed to distribute spirits to Washington businesses unless the Liquor Control Board has licensed the purchaser.

Once the governor takes action, an emergency clause in the bill will make this action immediate.


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