Archive for Thursday, December 6, 1990

NEW TAXES TO RAISE LIQUOR, TOBACCO PRICES

December 6, 1990

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If you regularly buy liquor, wine, beer or tobacco products, get ready to dig deeper into your pockets.

On Jan. 1, new federal taxes will go into effect that will raise prices considerably.

For example, local liquor retailers estimate the price of a six pack of beer will be 50 cents higher; wine prices are expected to increase by $2 a bottle; and a fifth of 80 proof liquor is likely to cost $1 more.

The taxes, part of the federal deficit reduction package approved by Congress, also will raise the price of cigarettes by at least 4 cents a pack.

Several local liquor store owners say they expect sales to drop after Jan. 1 as a result of the new taxes. But they say customers may decide to stock up before then as a hedge against the price increases.

THE TAXES are part of the Omnibus Budget Reconciliation Act of 1990, and will be implemented in two parts, both of which go into effect Jan. 1. Together, the taxes are expected to generate $14.6 billion for the U.S. treasury during the next five years.

One part is an increase in the federal excise tax on most alcohol and tobacco products; the other is a one-time "floor stocks tax" that will paid by manufacturers, wholesalers and retailers by June 30 on their Jan. 1 inventories.

The "floor stocks tax" applies to every retailer and wholesaler of distilled spirits, wine, beer and cigarettes, including owners of restaurants, bars, convenience stores, grocery stores, hotels, motels and service stations, according to information from the federal Bureau of Alcohol Tobacco and Firearms.

The ATF, which will collect the floor stocks tax, plans to send out a an information package by Dec. 15 to retailers and wholesalers.

FRANK DICHIARA, an inspector in the Kansas City, Mo., ATF office, said the floor stocks tax will be levied on products wherever they are in the chain between the manufacturer and the retailer.

John Webb, of Webb's Fine Wine, 800 W. 23rd, explained further.

"The tax has to be paid on everything in the system," Webb said. "So everybody takes inventory Jan. 1 at the manufacturers', wholesalers' and retailers' levels. That brings everything in the system under the tax. It's a one-time adjustment."

The rates for the ``floor stocks tax" are listed by the ATF as follows: distilled spirits, $1 per proof gallon (a measure equalling a U.S. gallon containing 50 percent alcohol); wine, 90 cents per gallon; beer, $9 per barrel (31 gallons); cigarettes measuring 100-120 mm in length, $2 per 1,000 or about 4 cents per pack; larger cigarettes, which weigh three pounds per thousand, $4.20 per 1,000.

ALSO ON Jan. 1, the federal excise tax, which is collected from consumers as products are sold, will increase. The excise tax will continue until Congress decides to lower or raise it again, Dichiara said.

Ken Rivlin, a member of U.S. Rep. Jim Slattery's Washington, D.C., staff, said the excise tax is collected like a sales tax.

He said the excise tax on cigarettes will increase by 4 cents on Jan. 1 and by another 4 cents in 1983.

The excise tax on liquor will be raised by $1 per proof gallon, Rivlin said. The tax on beer will go from about 16 cents to 32 cents per six pack, he said. The tax on table wine, will increase from 3 cents to 21 cents per 750 mililiter bottle, he said.

Local liquor store owners said they probably will pass the floor stocks tax on to customers. Those higher prices, combined with the excise taxes, are expected to hurt sales, they said.

DAN BLOMGREN, manager of Johnson Retail Liquor, 15th and Kasold, predicted his customers would be in for a rude awakening after Jan. 1.

"They're going to see this, and it's going to be a shock," he said. "It's going to take people awhile to get used to the high prices. I assume a lot of people will just stop drinking. A lot of people stopped smoking when the prices went up."

There are exemptions to the floor stocks tax. A wholesaler or retailer will not owe any floor stocks tax if his inventory doesn't total more than 500 gallons of alcoholic beverages and not more than 30,000 cigarettes.

For that reason, Blomgren said he will increase his inventories to the 500-gallon threshhold.

"IT'S BETTER for me to buy it now," he said. "I want my inventories as stocked as possible (up to the 500 gallon threshhold)."

Diana Myers, co-owner of Myers Retail Liquors, 23rd and Alabama, also said she would attempt to raise her stock to the 500-gallon threshhold. And she also predicted a dry winter for sales.

"You're talking about some big increases," she said. "It sounds unbelievable."

Shelley Patterson, owner of Patterson Liquor and Party Annex, 846 Ill., said some retailers don't want to buy up to the threshhold limit.

"You're coming on a slow period after the holidays and they don't want to tie up their money with inventories," she said.

She said the consumer will see "a considerable increase" in the price.

"The wise thing to do is for the consumer to come buy up before the first of the year," she said.

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