Photo Caption (above): Sun Ya Seafood Restaurant and lounge in the Chinatown/ID. Photo credit: Amelia Greim.
If you’ve purchased spirits in the past month or so, you’ve probably felt a hit from unexpected prices and taxes. Those extra fees come from the move to privatize liquor sales in our state for the first time in 78 years. But the added cost to consumers is nothing compared to what small business owners are now facing.
“It’s terrible,” says Andy Chan, owner of Sun Ya Seafood Restaurant and bar in Seattle’s International District. “I’m paying 30 percent more—at least—when buying alcohol.”
Small business owners once got a break when buying spirits from the state. Now they must pay the same 30 percent tax rate as the average consumer. In addition, prices are set higher from the distributor, forcing business owners to cope with a much higher bar bill.
When voters chose in favor of Initiative 1183 last November it seemed to be a win for everyone involved. Prices were expected to go down for the consumer and the state was expected to actually increase its revenue. The Office of Financial Management estimated that I-1183 would increase the amount made from liquor sales by more than $200 million over the next six years. The tax structure outlined in I-1183 gave the state a generous cut of alcohol sales.
Before June 1, the state set the price on spirits with a uniform 52 percent markup. One change promised with the passage of I-1183 is that retailers would set prices lower and offer promotional discounts to lure in customers. But right now, customers feel they are being “double-taxed” when buying their favorite bottle or drink of alcohol. That’s because the drink is taxed once, 10 percent at distribution, and another 20.5 percent when alcohol is sold from a retailer. Most retailers set prices the same as the state’s before the change. Since consumers are now paying an additional tax on that price, alcoholic beverages end up costing a lot more.
To cope with the higher costs, Chan says he has had to raise drink prices at his bar twice since June 1. He says that in addition to being costly, the change to privatized liquor sales has been inconvenient and time-consuming. He spends time shopping around at several different distributors to keep the same stuff in stock.
The bar manager at Sun Ya, a woman who goes simply by Junko, says she thinks Costco lured voters in by promising low prices and convenience when buying alcohol. But she thinks those promises fall short when it comes to the small business. Junko may be right in blaming Costco for changes in liquor sales. The wholesale giant spent a record-breaking $22 million towards the initiative to deregulate liquor sales in our state.
Tam Nguyen, owner of Long Provincial Restaurant in downtown Seattle and the Tamarind Tree in the International District, agrees the wholesale giant may be to blame for financial strain caused by the new laws. He says, “The voters got fooled by Costco.” Fortunately for Nguyen, he anticipated alcohol costs would go up after the passage of I-1183. He spent several months prior to June 1 stocking up. Since he has enough alcohol to serve his restaurants for some time, he has yet to raise prices at his bar.
Local bars may be scrambling to cover the rising costs of booze, but for now it seems that they won’t have to worry too much about keeping their long-time patrons. Sun Ya’s customers seem to be standing by their favorite bar. Steve Kawaguchi visits Sun Ya about once a week or so, and says that even though the bar has had to raise prices to cover costs, he hasn’t really noticed. “I just sign the bill and take off,” he says.
Before June 1, the state may have held a monopoly on liquor sales, but at least it kept things simple. Every store carried the same stock. Prices were reliable. It was hard to complain about the only option available. Given some time, the theory is that more distributors will find their way into the market and prices are expected to drop. A recent Seattle Times article reported that big-box liquor stores like BevMo and Liquor Depot are shopping around the Seattle area for locations. With more competition on the way, smaller businesses should find economic relief.