Direct Shipment of Wine to Massachusetts Set to Begin in 2015

Well, the day we thought would never come may have finally arrived: Governor Patrick signed the FY2015 Massachusetts budget and it includes provisions to allow the direct shipment of wine from out of state wineries to Massachusetts residents.

See: Official word from Free the Grapes

If all goes well, shipments are scheduled to be allowed starting as early as January 1st, 2015.

But if you've been a Red Sox fan prior to 2004 you know not to count a victory until it's a done deal. Direct shipment will only be a reality when we're able to successfully order wine from out of state wineries and have it show up at our home or office without incident.

What needs to happen in order for that to actually occur? A few more things.

See: Ship Compliant declares victory in Massachusetts

Permits

First, the state needs to set up the system whereby wineries obtain shipping permits.

One area of concern as this legislation was being discussed is that the permitting costs and application/reporting requirements would be so onerous that small wineries (that is to say: the ones we care about because they're not distributed here) wouldn't go through the hassle of obtaining a permit.

Those fears appear unfounded. The application fee is $300 and the annual fee is $150 which is a little high, but not out of line with other states. Keep in mind that wineries have to pay these fees for each and every state they ship into.

We haven't seen the application yet but the annual reporting requirement (as opposed to monthly) is quite reasonable.

Taxation

I believe the legislation was designed to tax shipments at the current prevailing rates. Right now, that means wineries would need to remit excise tax but not sales tax since wine sold at retail is currently excluded from sales tax. That means that no sales tax needs to be collected on shipments.

This is favorable for wineries and wine enthusiasts on two fronts.

First, the current excise tax on table wine is $0.55 per gallon. That's about $0.10 per 750ml bottle which is peanuts. If things stay this way, Massachusetts will go from being one of the least friendly states for receiving wine to one of the most friendly.

Second, some states effectively charge an import tax on wine. If Massachusetts followed New Hampshire's model, wine shipments direct to consumers would be taxed (whereas wine purchases from the state stores are not taxed). We'll keep an eye on this aspect of the issue as things firm up.

See also: Massachusetts' on again/off again alcohol tax

FedEx/UPS Fleet Licensing

Perhaps the biggest remaining question is FedEx/UPS fleet licensure. Currently, some small out of state wineries that aren't distributed here already have permits to ship. But in practice they can't because FedEx/UPS won't accept shipments here. They won't accept shipments here because they have to get a $200 permit for every truck that transports alcohol.

A Boston Globe editorial picked up on this issue and notes that legislators are considering addressing this issue concurrent with the passage of the direct shipping. Worst case, FedEx and UPS would have to pay the per-truck fees which would mean higher shipping costs. It would seem that they'd be incented to get the permits one way or another since the potential market for shipments is likely going to be much more compelling for them now.

HB 3154 is the one to watch.

Retailer Shipments

The biggest remaining limitation is the lack of inclusion in out of state retailers in the direct shipping provisions. As wine enthusiasts we'll still be barred from gaining access to imported wines since the laws only allow bonded wineries to ship direct.

Hopefully this can be considered in future legislation since it would seem discriminatory that Massachusetts retailers and wineries from any state can ship to Massachusetts residents yet out of state retailers cannot. Strange, right?

See: Hidden loophole bans consumer access to thousands of wines

Other Remaining Issues

Other questions remain. What about craft beer and spirits? Will we see improved access to these products which are as regionally specific and artisinal as wine?

What about Massachusetts retailers who are still barred from shipping out of state? And are they really permitted to ship in-state? Or is that just something that's been allowed for a while without it being officially on the books so as to prevent a commerce clause violation?

What about Massachusetts wine collectors who are still barred from shipping to out of state auction houses?

Hopefully these issues can be reviewed with fresh eyes in light of this winery direct shipment progress.

Conclusion

For Massachusetts wine enthusiasts this is a day to celebrate. These changes should allow us to purchase wines from out of state wineries large and small that we have interest in for exploration or recurring sales.

It should also mean that when we're travelling and visiting a tasting room it shouldn't be an issue shipping wine home.

And when someone wants to send a bottle of wine as a thank you from a special winery that shouldn't be an issue either.

This is great progress.

But issues remain and I hope they can be considered in the coming years. For now let's take a moment to acknowledge the hard work of those that made this possible. And look forward to making a closer connection with the wineries across the country we want to get to know better.

Soon, we'll move on to complaining about the high costs of shipping. :)

I'd love it if you Subscribed to the Wellesley Wine Press for future updates.

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Massachusetts Missing out on an Estimated $3M Annually by Barring Direct Shipment of Wine

Over on Fermentation Tom Wark estimates that Massachusetts residents are currently missing out on $3 million in tax revenue annually by barring the direct shipment of wine:

States not currently allow wine to be shipped into their state can now fairly easily see the kind of tax revenue they are leaving on the table. For example, Massachusetts, which has a population roughly equal to Washington State can expect, based on information in this report to see $50,000,000 worth of wine shipped to that state, resulting in over $3,000,000 in tax revenue—were its legislators to change the law to allow direct shipping from wineries. 

This estimate comes from data presented in Ship Compliant's Direct-to-Consumer Shipping Report.

A few things that strike me as important to understand and discuss on this subject...

Massachusetts doesn't currently have a sales tax on alcohol. There is an excise tax however, which is paid by the distributors as wine comes into the state, based on volume.

Some amount of revenue would be raised if Massachusetts allowed direct shipments and collected this excise tax along with licensing fees for out of state wineries and retailers. But these amounts would be nowhere near $3M annually.

The key would be in collecting, effectively, an import tax on wine. Sound crazy? It's not. New Hampshire has no sales tax on wine sold in its state stores yet they aggressively collect an 8% tax on wine shipped to consumers from out of state.

New Hampshire is a bit of a different situation of course, given that the state runs much of the liquor business itself. But we can look to other states for examples here as well.

New Jersey recently opened up to shipment from out of state wineries. But the licensing fees and requirements were so high it was only viable the largest wineries. This will surely dampen the positive revenue effect more reasonable policies would have enabled.

Virginia seems a better state to emulate. When they decided to allow the direct shipment of wine they took a long hard look at the situation, decided to allow both winery and retailer direct shipments, thought about the impact to in-state businesses and decided it was in the collective best interest of the state to allow shipments. Set the taxes high and let it fly!

Current laws favor the interest of a few in-state entities over the collective revenue picture of the state. Don't like it? Write your state representative.

But an interesting central question, I think, is this:

Would you support a 6.25% import tax on wine shipped from out of state wineries and retailers if it was what was required to enable the direct shipment of wine to Massachusetts addresses?

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MA State Representative Proposes Legislation to Reinstate Tax on Alcohol

Just when you thought the Massachusetts alcohol sales tax issue was resolved...

Massachusetts State Representative Kay Khan (D-Newton) has introduced legislation which would not only reinstate the sales tax on alcoholic beverages sold at retail - it would also increase the excise tax.

Here's a story from Kyle Cheney, State House News Services

And commentary from Garrett Quinn on Boston.com

Kahn's saying a discussion about reinstating the tax is "what people want to hear" is ironic since a majority of voters said they didn't want sales tax on alcohol just two months ago.

What's new here is how the increases are positioned.  Previously the sales tax on alcohol was said to be earmarked for behavioral health services.  In this proposal it's a classic sin tax increase aimed at increasing state revenue.

I have a couple of ideas for things the state legislature could do in the interest of their constituents instead:

1. Take up the issue of direct shipment of wine that was proposed in the last sessions as H4497.  It's pro-consumer legislation that enables shipments that a federal court decided should be legal in January 2010.  It's January 2011 now and shipments still aren't occurring - a total disconnect between the intent of the law and what is occurring in practice.
2. Propose legislation to allow Massachusetts retailers to ship out of state.  Currently, Massachusetts is the only state in the union I'm aware of that prohibits export of wine.  If state retailers were allowed to ship wine out of state, it would increase the amount of wine flowing through the state's 3-tier system and more excise tax would be collected as wine trades hands between Massachusetts distributors and retailers.  It would also enable state retailers to drive a higher volume of wine which could lead to more jobs in wine e-commerce in the state.

I'm fine with an examination of whether the excise tax rates need to be increased.  I suggested an excise tax increase when the question of whether to repeal the sales tax was being debated.

But the notion of disregarding the results of the Question 1 in November of 2010 which specifically asked the question of whether alcohol should be exempt from sales tax sold at retail is insulting.  Let's keep that off the table in newly proposed legislation.

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Bonus Content: Three Guest Posts Published Elsewhere

Just a heads-up on three pieces I wrote for other publications recently:

1. How will the MA Alcohol Tax Repeal Affect Sales Long-term?
   This piece is a call to Massachusetts wholesalers and distributors to look at their assortment of wines and the fully loaded cost of the wines they sell to compete favorably nationally.  I shouldn't be able to find French and Italian wines in California for 25% less than in Massachusetts.
2. 2008 Liberte Cabernet Sauvignon Review on Jason's Wine Blog
   If you like shopping for wine at Trader Joe's, Jason's Wine Blog is a must-read.  I shared my thoughts on the a $9.99 Paso Robles Cab I tried recently - check out the action in the comments.
3. How Taste Tribes are Actually Formed
   A few months back there was some talk online about "badges" being a new/better way to rate wines than the 100 point scale.  Out of that, a discussion around "taste tribes" formed.  I shared my thoughts on this subject in a new multi-contributor online publication called Smart Tastes.

Reminder: After today prices go up for tickets to the 2011 Boston Wine Expo.  Here's a link to a prior post with a couple angles for discount tickets.

Have a great weekend!

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Boston Tea Party Re-Enacted to Celebrate MA Tax Repeal: But Will Retailers See a Difference in 2011?

Thanks to a tip from Jon Chesto I learned that a group of wine retailers and enthusiasts gathered yesterday on the Boston side of the Fort Point Channel yesterday to re-enact the Boston Tea Party.  But instead of tossing tea into the harbor they poured water from empty wine bottles to commemorate the alcohol tax repeal Massachusetts voters passed as part of Question 1 back in November.  Starting January 1st, 2011, alcohol will be exempt from sales tax as it was from prohibition to 2008.

There was also a group present showing their support for maintaining the tax as it was said to fund a variety of behavioral health services.  I won't rehash that argument here.  I'd rather focus today on how what impact this change will have on wine consumers in 2011.

In talking to wine retailers over the past few months I've noticed a few trends:

• They're surprised the tax was repealed.
• They're glad the tax was repealed.
• They saw a huge boost in sales during the 2010 Massachusetts tax free weekend.
• They're cautiously optimistic about whether the tax repeal will have a sustained positive effect on their business in 2011.

People sometimes find it hard to believe that others were making purchase decisions based on the tax.  And in most low-dollar transactions I'd agree that was the case.  But I think there's two scenarios where the sales tax does have an impact on purchase decisions, and they're both situations where the dollar volume is large and therefore worth paying attention to.

The first is where you're buying a large quantity of wine for an event like a wedding.  Say you're buying 8 cases of $15/bottle wine for a wedding.  The 6.25% tax previous in effect amounted to $90.  That's significant, and would be enough to make it worth your while to take a trip up to tax-free New Hampshire.  Never mind for a moment that it's illegal to import alcohol into Massachusetts -and- illegal to carry more than 15 bottles of wine in your car without a special permit - more on that here.

The second is more relevant to your typical Massachusetts wine enthusiast and that's in terms of a series of high dollar purchases.  When you spend several thousands of dollars on a wine a year, it pays to think about the fully loaded cost of wine.  When I say full loaded I mean thinking about quantity discounts, shipping, and tax.

When the sales tax first went into place in 2008, it diminished the positive effect of case discounts.  If you only got 10% off a straight case, most of that discount came right back as the 6.25% sales tax was applied.  With the sales tax gone the effect of a case discount will be more compelling psychologically because I know when I see a $29.99 sticker on a bottle I'm eyeing I'd be able to knock that down to $23.99 out the door with a 20% discount.  I like that.

Massachusetts will become the only state in the union that taxes goods in general but excludes wine from sales tax.  Prior to the tax going into effect, I don't think as many people realized how unique the situation was.  I know I didn't.  When I was out in California it always seemed like prices were really low.  And they were, but the roughly 9% sure ate into the savings.

I think retailers can really work this to their advantage now, especially when it comes to more expensive wines.  At the higher end, consumers tend to do more price shopping - especially online - because shipping costs can be absorbed if the savings are high enough.  Wine retailers can't legally ship wine to Masschusetts but that doesn't mean they can't ship wine to neighboring states.  Consumers know this, and they also know that most retailers don't charge sales tax when shipping to most neighboring states.  Just like with Amazon.com shopping online can be a beautiful thing in that respect.  It's a gray legal area but when you're buying wine that costs $50 plus dollars a bottle it can make a big difference especially combined with being able to search nationwide for the best prices.

But we've got some excellent wine retailers in the Boston area.  Combine that with a legal tax-free advantage  and free in-store pickup.  Add to that the ability to try wines before you buy, establish relationships with knowledge retailers (especially at higher price points), and the ability to easily return corked bottles and the incentive to patronize local retailers is as strong as it's ever been.

Shipping restrictions continue to limit consumer access to limited production wines (more on that in this brief history of MA wine shipping laws) but for wines that do make it into the state the question becomes whether retailers will be able to put wine on the shelves at compelling prices?  Their prices are dictated by distributors - will they enable MA retailers to compete favorable when compared nationally?

We shall see, but I'm more optimistic than I've been in a long time about buying wine in Massachusetts.

Pro Tip for New Year's Eve consumption:  Drink 1 full glass of water for every 5 ounce glass of wine you consume to avoid a hangover.

Hope you have a safe night and here's to a great 2011 for you and yours.  Cheers!

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Massachusetts Voters Repeal Alcohol Sales Tax: What Happens Next?

Interactive map available on Boston.com

The initial returns didn't look promising, but on a night expected to be filled with tight races, one actually ended up being close.  By a 52%-48% margin, voters said "yes" to Massachusetts Question 1 which would repeal the sales tax on alcoholic beverages (full story from WBUR).  If enacted, this means that sales tax on beer, wine, and spirits will return to it's pre-2009 rate of 0% from its current rate of 6.25%.

I watched the returns closely all night and found them fascinating.  Looking at the map above, larger cities generally voted in favor of keeping the tax while smaller towns voted to repeal it.  Meanwhile, the eastern part of the state wanted to repeal the tax while the western part of the state wanted it maintained.  I'm still thinking about what exactly those trends imply in terms of public opinion but at the same time I'm looking forward to the future.

A few questions come to mind:

1. When will the alcohol tax repeal take effect?
   When the tax went into effect last year it took one month from when Governor Patrick signed the bill into law and the tax started being collected.  Something tells me this will be like credit card charges: Applied almost instantly when it's a purchase but seemingly takes forever when it's a refund.
   You can bet retailers and consumers will be anxious to see this take effect, especially since we're entering the busiest time of the year.  I look forward to putting a sales-tax-free bottle of wine on our holiday table.
   Update: According to @CurtNickisch from WBUR the sales tax is set to be removed January 1st, 2011.
2. Will the excise tax be increased?
   I suggested in this piece that if the intent of the alcohol sales tax was to discourage excessive consumption, the right thing to do is to increase the excise tax.  Whether that was indeed the intent is unclear, but we'll see if an excise tax increase comes along with the alcohol tax being repealed.
3. Might the state legislature ignore the result and decide not to repeal the alcohol sales tax?
   I guess that's possible one way or another.  It wasn't like they asked our opinion when they put the tax in place last year.  We shall see, but I hope it's not like when courts decided earlier this year that wineries should be able to ship wine directly to Massachusetts consumer only to have the state legislature utterly fail to take the common sense action of passing a direct shipping model bill.
4. If I live in another state, can I buy wine from Massachusetts tax-free online and have it shipped to my state?
   MA retailers can't legally ship out of the state so if you find a MA retailer who ships out of state they're probably doing so illegally.  That being the case I find it unlikely that they'd remit taxes to your state.  It's also illegal to import or export wine into the state so you can't technically come here and buy wine to take home.  Nobody has ever been formally cited for this act that I'm aware of, but just so you know. 
5. What's going to happen to the behavioral health services the sales tax funded?
   I don't know.  During the campaign, there was disagreement on whether the alcohol sales tax exclusively funded these programs or whether the sales tax went into the general fund.  I never gained full clarity on how exactly these programs were funded prior to (and after) the alcohol sales tax was in place.  My guess would be it will revert back to its prior state of funding which I assume came from the general fund.
   Another thought: Since we have mandatory health insurance in Massachusetts might it make sense to include behavioral health services in the health insurance mandates?

Thanks to everyone who voted yes on this question.  And thanks to everyone who engaged in an enlightened discussion about the issues even if you came to a different conclusion than I did.  It was a complicated question and to be honest I'm surprised it passed.  The "no" vote enjoyed the equivalent of an incumbent's advantage because when people are confused by a question (and it was a confusing issue especially as stated on the ballot) the default response is to say "I'm not convinced: No."

Let's hope this is the beginning of a series of wine enthusiast-friendly changes in Massachusetts.  Pair this with freeing up some shipping laws and creating more competition at the distributor level and we could be on to something.  Let's hope!  Here's to buying some sales-tax-free wine in the near future.

Stay tuned for answers to these questions.  I'd love it if you subscribed so we can continue the conversation.

Learning how to help an alcoholic can be quite useful, especially when you have friends or loved ones who drink alcohol excessively.

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WBUR Massachusetts Alcohol Tax Interview

Last Thursday, Curt Nickisch from WBUR (a Boston National Public Radio station) came over to do an audio interview about Question 1 of the upcoming election which would repeal the 6.25% sales tax on alcohol in Massachusetts.  We had some minor audio difficulties so I hope my part of the 4 minute piece doesn’t get edited out of the story as a result, but I wanted to share some thoughts on the issue before listening to the to the story on the radio myself.

What’s strange about this issue for me is that I’m not really trying to sway anyone’s opinion or urge anyone to vote either way.  I consider myself independent and moderate politically.  I’m not even really that politically-minded come to think of it.  I am, however, disappointed with the lack of useful information provided to date on this issue by traditional media outlets.  So far, the collective coverage I’ve found was long on opinion and short on information which is the exact opposite of what I’m looking for.  What I’m looking for is some information that I could use to make an informed decision.

For example, the most common reason supporters give for keeping the sales tax on alcohol is that the revenue raised goes to programs that help residents with behavioral health problems.  I’ve heard conflicting statements on this important point as to whether the money goes exclusively to this cause.  It’s entirely possible that the state has no means for separately collecting and disbursing funds in this manner and the claim is a total fabrication.  I honestly don’t know whether it’s true or not.  What I would like is someone with more familiarity with the state’s finances to do some research and fact check the claims I’ve heard and then share that information.

On the other side of the argument, retailers say their business is suffering.  Yet we hear the tax has raised more revenue than anticipated.  That alcohol sales are brisk.  How about some data from the Massachusetts Department of Revenue showing sales trends by volume and dollar over the past few years?  Overlay it with location and we’d have something to think about.

But instead we get high level rhetoric boiled down to a useless opinion built on a shaky foundation.  Maybe this is the way politics always work, and maybe that’s why I usually focus my attention elsewhere.

For my part, I compared current Massachusetts excise taxes to other states and found they were on the average-to-low side.   The Twitter account representing those in favor of maintaining the tax chose to share that data out of context with no attribution.  I didn’t appreciate that because I shared my (admittedly simple) research in the context of an overall story on the issue that doesn’t come through in isolation.  Why didn’t they do their own research?  What if my interpretation was incorrect?

I fear this vote is coming down to an either/or decision:  Support behavioral disorder programs -or- support package store owners.  If that’s the case, those in favor of repealing the tax are in trouble.  But how did the discussion come down to that?

What the discussion should be about is determining the appropriate level and means of taxation (excise vs. sales) in the context of our state’s overall budget.  I think knocking down the general sales tax rate from 6.25% to 3% (Question 3) is a pipe dream.  Others disagree.  Why don't I favor reducing the state sales tax to 3%?  Because the state sales tax rate was at 5% and things seemed to be working just find at those levels for a number of years.  Just as with alcohol sales tax it seems to me that something should need to change (other than the economy being in the tank) to justify changing taxation levels.  The state needs to spend less when times are tight just like the rest of us.

So where does that leave us?  My thoughts are on other things that conspire against Massachusetts wine consumers.  Things like stifling interstate shipping laws, a general lack of consumer-friendly competition annoyingly held in place by the three-tier system and other antiquated Massachusetts laws.

Stay tuned for more on that in the future.

In the mean time, here’s a link to the story on WBUR.

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Massachusetts Alcohol Tax Repeal: Why Deciding How to Vote is Harder than You'd Think

On November 2nd, 2010 Massachusetts voters will have a chance to decide whether to repeal the sales tax on alcohol which was introduced in 2009.  Alcohol went from being exempt from sales tax to being taxed at 6.25% as part of a general sales tax increase from 5% to 6.25%.  A "Yes" vote on Question 1 would repeal the alcohol sales tax, a "No" vote would keep it as is.

Alcohol has always been taxed in Massachusetts -- as an excise tax when alcohol trades hands from distributors to retailers and restaurants. I assumed that Massachusetts must have a sky high excise tax rate.  Not so.  As I did some research on this topic I found some data that surprised me: 
Head on over to BevSites to read why deciding how to vote on this question is harder than you'd think...

Incumbent Governor Deval Patrick (D) is in favor of maintaining the sales tax, challengers Charlie Baker (R) and Tim Cahill (I) are in favor of repealing it.

Update (November 3rd, 2010): "Yes" voters narrowly approved of this question meaning the alcohol sales tax should be repealed.  More here.

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Tax Free 25% Off at Upper Falls in Newton, MA

In Massachusetts we sometimes do this silly thing where we encourage people to delay buying stuff until a special weekend where no taxes are collected.  In 2010 it's the weekend of August 14th and 15th and the tax relief applies on most items less than $2,500.  Last year we didn't have such a holiday and since the 6.25% tax on wine is new within the last year this is the first time tax relief will apply to alcohol.  More here from the Providence Journal and official word from the MA Citizen Information Service.

Concurrent with this Upper Falls Liquors in Newton, MA is offering 25% off 6 or more non-sale bottles of wine.

Check 'em out:
Upper Falls Liquors
150 Needham Street
Newton, MA 02462
617-969-9200
Facebook
Twitter

Further Reading:
This coming November we'll have a choice as voters whether to repeal the alcohol tax at the point of purchase.

I don't have a lot of specifics at this point, but I'm hearing whispers of sales at other Massachusetts wine retailers as well.

Question of the Day: What wines at Upper Falls do you recommend? Any other sales you're hearing about?

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Massachusetts Voters to Decide Whether to Repeal Alcohol Tax

Photo by philip

I read today on the Massachusetts Alcoholic Beverages Licensing Blog that those in favor of repealing the Massachusetts sales tax on alcohol were successful in getting their initiative on this November's ballot.  This is potentially good news for those who buy wine in the state, but get ready for the political maneuvering to begin.

It was just over a year ago that Governor Patrick signed into law the increase from 0% at the point of sale to 6.25%. Already subject to excise taxes, alcohol is now double-taxed much to the delight of state revenue collectors and much to the chagrin of wine enthusiasts and wine retailers (especially those near New Hampshire where there is no tax on wine at the point of sale).

I'm in favor of repealing the tax on alcohol at the point of sale.  Here's why:

Once in place, sin taxes have a way of escalating irrationally any time more tax revenue is needed.  The right thing to do is determine what an appropriate tax level is for alcohol and stick to it.  Has the appropriate taxation level for alcohol changed suddenly?  Or has the state's need for tax revenue changed suddenly due to the economy?  I would argue it's the latter.

If the logic is that funds are needed for state-sponsored rehab programs then increase the excise tax.  Why?  Because if you want to discourage excessive alcohol consumption you do it by taxing alcohol based on the volume (as the excise tax does) not by dollar value (as the sales tax does).  Anything else is just an arbitrary unbalanced way to squeeze more tax revenue out of Massachusetts residents who purchase alcohol.

Question of the Day: What do you think of the alcohol tax?

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Chance of a Tax Rollback on Massachusetts Alcohol Sales?

Photo by philip

Update (July, 2010): The question of an alcohol tax repeal made it on the November, 2010 ballot.  Read more here.

This article on PatriotLedger.com caught my eye recently.  It talks about two potential ways in which the 6.25% sales tax on alcohol that went into effect last year might be eliminated.  The first way is that the state legislature might decide on their own to remove the tax, and the second is through a ballot initiative.

An interesting twist is the idea that the tax at the point of sale might be removed but replaced with a similar increase into the excise rate (that was the sole source of taxation prior to the tax being increased from 0% to 6.25%):

"Sen. Michael Morrissey of Quincy, for one, would like to see the alcohol tax completely repealed. But Morrissey, co-chairman of the Legislature’s consumer protection committee, says lawmakers may propose a compromise that drops the sales tax but raises the excise tax to collect a similar amount."

I'd be in favor of this for a number of reasons.

First, the excise tax on alcohol has been long standing.  If it's decided that alcohol should continue to be taxed at a higher rate, the excise rate should simply be raised.

Things like alcohol and gasoline have so many taxes built into the price seen in front of you when making a purchase.  If taxes aren't applied until after the transaction, it's difficult to determine the overall cost.  Imagine pumping $15 worth of gas and having to calculate that it's going to be $27.34 in your head.  That would illuminate the super-high tax rates on these products, but it's not practical so the tax is bundled in to the per gallon gas as you pump.

Which makes the 6.25% tax at the point of sale on alcohol seem all the more ridiculous.  Taxes already make up roughly one-third of a $10 bottle of wine before you get hit with another 6.25% at the register.

Once the tax showed up last year, I think a lot of us had a feeling it would be 10x as hard to get removed as it was to get introduced because sin taxes are so easy to apply.  I'm referring to the thinking described in this comment on the Patriot Ledger piece:

"Given the huge damage to our society caused by alcohol, beer, wine, and spirits these products should be taxed at an even higher rate."

What's faulty with this logic is that it doesn't determine what the appropriate rate of taxation is.  It should just be indefinitely higher than whatever it currently is, and probably applied to soda and candy.  And anything else we can think of.

Like I've said before, I realize we all have responsibilities as citizens to pay for taxes and I appreciate things like quality publication education and that has a cost.  What I'm not in favor of is certain categories being taxed at an inordinately high rate, least of all ones that I care enough to write a blog about.

Check back later this week as I'll discuss another aspect on this issue- the idea of whether tax increases like this that target alcohol sales by dollar (rather than by volume) are suppressing alcohol sales and therefore causing the tax increase to fall short of its intended revenue goals.

I'd love it if you subscribed to updates via E-mail.

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MA Governor Approves Massive Alcohol Tax Increase

Well, it looks like Massachusetts Governor Deval Patrick has signed into law a tax increase on alcohol purchases. Previously exempt from sales tax at the point of purchase, the tax burden on alcohol at the register will now be 6.25%.

So much for Massachusetts being friendly to small businesses. I can hear the automobile engines starting up now for a trip to nearby New Hampshire where there is no tax on wine. The tax goes into effect August 1, 2009 so stock up now. Trying to put a positive spin on it, let's look at it this way: July is tax-free booze month!

Why is it that something sensible like selling wine in grocery stores gets voted down, yet introducing double taxation on wine passes with ease?

I realize that we all have a responsibility as citizens of this commonwealth pay our fair share. But this tax so disproportionately increases the tax rate on alcohol that it seems absurd to me. Why not just increase the excise tax that is already in place on wine? I also realize it is cliche and crumudgeonly to crow on about taxes, so this is the last I'll speak of it.

Underage drinking should never be tolerated, because it could eventually lead to teen alcoholism and a host of other problems.

Further Reading:

• MA Retailers Lead the Charge Against Alcohol Tax Increases
• MA Senate Votes to Increase Alcohol Taxes
• MA Retailers Wheel and Deal Leading up to Tax Hike
• Last Call for Alcohol: Taxes Go Up Tomorrow
  

Question of the Day: Is this increase substantial enough to make you consider shopping for wine out of state?

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MA Retailers Lead the Charge Against Alcohol Sales Tax Increases

Photo by James Trosh

As discussed on this site earlier, the Massachusetts Senate voted in favor of increasing taxes on wine at the point of sale from 0% to 6.25%. On the House side however, their proposed increase on sales tax (from 5% to 6.25%) did *not* include alcohol. This means that there's still hope to avoid this tax increase on alcohol.

Today, June 4th, 2009, those in opposition of additional increases in taxes on alcohol sales in Massachusetts will descend upon the State House to have their voices heard. The event is planned for noon. More information is available on the Massachusetts Package Stores Association web site.

According to the Association, a $9.99 bottle of wine already includes $2.90 of taxes built into the purchase. If this increase goes through, that bottle will now cost $10.62 of which $3.55 would go to taxes.

The Boston Globe recently showed their support for alcohol tax increase saying "IT NEVER made any sense that drinkers at Massachusetts restaurants pay a 5 percent tax on their beer and wine while someone buying a six-pack or a fine Pinot Noir at a package store does not." However, they seemed to realize their logic was faulty after a shrewd commenter "dotDude" pointed out that "With this logic, you could argue that it makes no sense that we pay 5 percent tax on our food in restaurants, while someone buying the same food in a grocery store does not!"

I particularly enjoyed the follow-on comment from "victimnation" saying "Bullseye !!! You sent this editorial into the dunk tank..." A tip of my cap to dotDude and victimnation.

The real issue here, in my mind, is that increasing taxes so disproportionately on alcohol is a sure way to penalize small business owners at the worst possible time. Further, the increases won't raise the revenue its backers are predicting because more people will cross over the border into neighboring states where taxes are lower.

Craig Drollet, Managing Partner at Bin Ends Wine in Braintree, MA offers this perspective:

"This decision and other similar issues call in to question whether 'Massachusetts is good for small business'. Adding 6.25% to every transaction and backwards shipping laws will eventually force us and others like us to look to friendlier states to operate our business. The timing could not be worse, many shops are already struggling to keep up and now we are encouraging shoppers to cross the borders to shop. We continue to put these people into office and then we run across the borders to shop when they do exactly what we knew they would do. It really does not make sense."

If you can't make it down to the State House to show your support, you can always contact your legislators. Don't know who your legislators are? A list can be found here.

I'll be discussing other legislative issues related to wine sales in Massachusetts in upcoming entries. Consider subscribing to The Wellesley Wine Press so you won't miss an update.

Further Reading:

• So that heroin addicts can have a bed to sleep in?
• Wine tax increases also considered at the federal level from $0.21 to $0.70
• Visit Axe Taxes Not Jobs to find out more about how to have your voice heard
  

Question of the Day: What do you think of all of these tax increases? Our responsibility as tax payers? Or disproportionately raising "sin" taxes at the worst possible time?

Read more...

MA State Senate Votes to Raise Tax on Wine from 0% to 6.25%

Photo by philip

Just when you thought MA couldn't get any worse as a place to buy wine due to restrictive direct shipment laws...

The MA state senate voted to raise the state sales tax rate from 5% to 6.25%. That in itself is news *but* the real news here (especially for wine lovers) is that wine, which was previously tax exempt at the point of purchase, will go from being taxed at a rate of 0% to 6.25%! In other words, that $20 bottle will now cost $21.25. It would also be much more affordable in states that don't have such heavy taxation on alcohol, and allow more competition in wine sales.

Our friends from other states will note that they pay as much as 8 or 9% tax on wine, so what are we crying about? Well, historically alcohol has been taxed at the distributor level in MA, not at the consumer level. This increase will effectively introduce a double taxation on wine sales and likely makes MA one of the most expensive states in the union to buy wine.

Read more from Boston.com

Further Reading:

• Recent Progress in Massachusetts Wine Shipment Laws Threatened
• Which Grocery Stores in MA Sell Wine?
• MA Package Stores Association voice their opinion on Beacon Hill
• MA ABCC to Retailers: No Shipping Wine Out of State
  

Read more...