Liquor in grocery stores part II

To read our first post on Initiative 1183, click here.

Even after June 1, 2012, the state will still collect revenue from the sale of each bottle of liquor through a liquor tax. This liquor tax is considered one of the state’s excise taxes. (Read past posts about other excise taxes for fuel and tobacco here.) The state law pertaining to the collection of liquor tax can be found in RCW 82.08.150. In 2011, The Washington State Liquor Control Board (WSLCB) reported that liquor taxes accounted for more than $425 million in revenue that went to the state and local governments for services. The WSLCB produces a report that shows how each county distributes your liquor dollars, click hereto check out how your county benefits. Thurston County received $2,193,132 from liquor tax last year alone.

So starting June 1^st, you’ll be able to walk into Costco and pickup your favorite bottle of spirits right? Maybe not. Like most initiatives in this state, implementation of them becomes extremely complicated. The Washington State Supreme Court heard arguments last week that, if ruled in favor of, would make Initiative 1183 unconstitutional. You can view the hearing here.

The group bringing up the lawsuit is the Washington Association for Substance Abuse and Violence Prevention, a Washington non-profit corporation. The claim of illegality is that Initiative 1183 dealt with more than one subject. Washington’s Constitution states in Article II, Sec. 19 that, “no bill shall embrace more than one subject, and that shall be expressed in the title.” The Association for Substance Abuse and Violence Prevention claims that, “I-1183 exploited the initiative process to serve the special interests of large retailers such as Costco, its biggest financial supporter. Upholding I-1183 would compromise the integrity of future initiatives and eviscerate the salutary purpose of Article II, [sect.] 19.”

The plaintiff also believes that Costco and the backers of I-1183 purposely misled the voters by disguising new taxes as fees, thus distracting citizens who would perhaps not have voted for the initiative if it were a “tax.” The state insists that there are taxes involved with I-1183, but no new taxes.

The hope is that the court will rule on the lawsuit by June 1, 2012—the same day Costco (and others) will begin selling liquor. Stay tuned to TVW and the State Supreme Court for the final ruling.

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.