Costco brand Whiskey?

You’re all probably aware that big changes with liquor have taken place in this state in the last year. Chances are you were approached to sign an initiative petition at Costco or at a chain grocery store. With the passage of Initiative 1183 (I-1183), in November of 2011, Washington State was “kicked out of the liquor business.” Not unusual for corporate-backed initiatives, I-1183 racked in millions from corporate businesses that wanted the ability to sell liquor in this state. While the state will no longer have a monopoly on the sale of liquor, they will still generate monies since the liquor tax will remain.

Here’s how the whole thing came about...

Initiative 1183 was filed in May of 2011 and easily received enough signatures to be include on the November ballot. The initiative found, “that the state government monopoly on liquor distribution and liquor stores in Washington and the state government regulations that arbitrarily restrict the wholesale distribution and pricing of wine are outdated, inefficient, and costly to local taxpayers, consumers, distributors, and retailers.” The way the initiative sought to solve this was by opening up the market to businesses. By doing this, the initiative claimed that the state would generate more money and incur less costs relating to running state-managed liquor stores.

Costco was at the forefront on Initiative 1183. Its headquarters is located in Issaquah, WA, but has warehouses around the world. Its employees helped collect signatures inside their warehouses and the company donated over $22 million in favor of its passage. Costco’s donation was record setting. Obviously, Costco would generate a substantial amount of money in sales if they were granted the ablility to sell liquor in their warehouses. The PDC reports that pro-Initiative 1183 monies totaled over $20 million, while the opposition raised over $12 million.

There has been a growing trend in Washington over the last few years regarding liquor distribution reform. Washington was 1 of 18 states that still had state controlled liquor systems. In 2010, two other liquor initiatives made it to the ballot. Initiative 1100 and Initiative 1105 both abolished the state-run liquor stores, and Initiative 1105 also attempted to change the taxing structure of liquor. Costco played a large part in raising money for I-1100 as well; however, both I-1100 and I-1105 were voted down.

The Office of Financial Management (OFM) released an initiative cost breakdown (as they always do for initiatives).  OFM claimed that it would be hard to calculate the fiscal impact of the initiative because private retailers would set their own prices and be able to charge whatever they wanted. There is expected to be a one-time jump in revenue from the auctioning off of several state-owned liquor stores and distribution centers. Both local and state revenues are expected to increase every year, projecting the trend out until 2017.

Some of this extra revenue is generated through a new fee that would be imposed on liquor distributor licenses. The fee is 10%, “of total liquor revenues from March 1, 2012, to March 1, 2014; the fee decreases to 5 percent thereafter. The initiative imposes a new liquor retailer license fee of 17 percent of total liquor revenues beginning June 1, 2012.”

On November 8, 2011, the voters in Washington State passed Initiative 1183. Beginning June 01, 2012, grocery stores can begin selling liquor. By May 31, 2012, all state liquor stores must close. The state liquor board has an Initiative-1183 transition plan in place, click here to check it out.