Alcohol tax pushes prices up

Juneau residents who buy merlot by the bottle or Rainier by the can are seeing the effects of new state alcohol taxes at the cash register.

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In many cases, price increases are higher than the new taxes. In some instances, the price is the same.

The new alcohol taxes took effect Oct. 1. Jack Manning, owner of Duck Creek Market in Juneau, said about half the stores in Juneau had raised their prices by late last week, while the other half hadn't started or weren't done yet. He was repricing his stock Friday morning.

"Some stores are totally done," he said. "We have about a third of the store done and will do more today."

Manning said his store tried to stock up a little before prices increased but doesn't have much space. While the price of beer is fairly consistent, consumers will notice the biggest increases on hard liquor, he said. The proof, or the amount of alcohol in a beverage, can make a difference, he said.

"Something with a really high proof will have a higher price than something with a lower proof that's the same size," he said. "We do what we think is as close as the tax is going to be ... If the tax takes it to $30.02, you're not going to sell it for $30.02, you're going to sell it for $29.99."

Alcohol wholesalers and manufacturers are responsible for paying the state tax and are charged by the gallon. According to the new law, the tax for a gallon of beer increased from 35 cents to $1.07, while the tax on a gallon of wine increased from 85 cents to $2.50. Taxes on hard liquor with more than 21 percent alcohol increased from $5.60 to $12.80.

Debate in the state Legislature last spring centered on the cost per drink. The tax on 12 ounces of beer went up 7 cents, while the tax on a 5-ounce glass of wine and 1 ounce of hard liquor increased 6 cents, according to the state Department of Revenue. The tax on a six-pack of beer increased 40 cents and the tax on a bottle of wine 33 cents. The tax on a 750 milliliter bottle of hard liquor increased $1.44.

For local bars and liquor stores, the reality is a bit different. Bars don't usually charge customers in denominations smaller than a quarter. And mixed drinks usually have more than an ounce of hard liquor, said Jack Tripp, owner of the Viking Bar downtown.

"The companies didn't just raise it by the tax itself, they took a profit on it," he said. "It's not like every case went up 'x' cents. We carry 100 different liquors. Some liquors didn't go up a dime, not a penny. Other companies raised it 20, 25 percent."

The Viking finished its new price list Thursday. The price of mixed drinks, which generally ranged from $3.50 to $4.50 before the new tax, is now $3.75 to $5. A beer now costs $3.25 to $4.25 compared to $3 to $4 before, Tripp said.

"On paper, it's an across-the-board increase," he said. "When it makes it into the private sector, that's not the way it goes up. It varies a lot, from a zero to a 24 percent increase at the wholesale level."

On one side note, the tax on many domestically produced microbrews didn't increase. Alaska Brewing in Juneau qualifies for an exemption for small, local brewing companies and isn't raising its prices, marketing director Cindy Burchfield said.

At the Sandbar on Industrial Boulevard, owner Gail Niemi purchased an extra $3,000 to $4,000 worth of alcohol to prepare for the tax increase. The Sandbar raised its prices earlier this year when news of the new tax came out, and doesn't plan raise them again this fall, she said.

"We raised prices in the spring because we hadn't raised them in three years," she said, surrounded by stacked cases of Coors Light, Miller Lite and Rainier. "Everyone realizes it's not our choice, but customers are close to being priced out of existence."

While most local retailers said people haven't complained much and knew the tax increase was coming, other customers are less sanguine. Jim Hahl of Sitka called the state after noticing the price of Burnett's Vodka in his local liquor store increased from $8.99 to $11.99 last week. The tax increase was half the price hike, he said.

"They've universally raised the prices $3," he said. "Larger bottles are $6. They've doubled the prices and they're blaming the politicians."

Johanna Bales, a revenue auditor with the state Department of Revenue, said her office has received a few calls about the price increases. While the department can give people information about what the actual tax increases are, a retailer who increases his or her prices isn't breaking the law, she said.

Suppliers have other costs related to the tax that people might not be aware of, although it probably doesn't justify the entire price increase in some cases, Bales added.

"They're required to be bonded with us for the amount of taxes they owe," she said. "As the taxes increase, the bond costs go up."

The state has taken in between $12 million and $13 million from alcohol taxes in the past, a number it expects will grow to $31 million with the increase, Bales said.

"Even though the tax has tripled, we don't expect to see all that," she said. "We expect some people will be cutting back. That's why the forecast is for $31 million."

Joanna Markell can be reached at joannam@juneauempire.com.