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Published on November 15th, 2012 | by Len Lazarick

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Alcohol industry blames flat sales in Md. on 9% tax

A vodka bottle filled with changeBy Sam Smith
Sam@MarylandReporter.com

Representatives from the alcohol industry told the Maryland Board of Revenue Estimates Wednesday that the state’s year-old 9% sales tax on alcoholic beverages has produced stagnant growth in liquor sales in the past year, while growth in neighboring Virginia and Delaware was above the national average.

Banking and real estate panelists also speaking at the board’s economic advisory forum said state and federal regulations will hinder potential private sector growth as the federal fiscal cliff approaches. The board is composed of the state treasurer, comptroller and secretary of budget and management.

David Ozgo, chief economist for the Distilled Spirits Council of the United States, said the sale of distilled spirits in Maryland has grown just two-tenths of a percent in the past year, well below the national average of 3.1%.

Decreasing sales at package stores

The owner of the Fish Tales restaurant in Ocean City told the board that he has also seen a decline in the alcohol ordered by his customers, but Ozgo said the problem is concentrated in the decreasing sales in package stores.

“Distilled spirits growth in Maryland has been anemic so far in 2012,” Ozgo said. “Nationwide, off-premise sales are up 3.3 percentage points. But here in Maryland, we are actually off slightly.
There is very, very strong evidence that poor performance of Maryland package stores is a direct result of the Maryland decision to increase the alcohol sales tax to 9% in 2011.”

The liquor sale decline in Maryland can be directly associated with the sale increases in neighboring states, Ozgo said. Virginia’s off-premise sales are up 5% in 2012, while Delaware has seen a staggering 8.8% rise.

“So it is pretty clear to me that what is going is a lot of Virginia residents who come into Maryland in search of low prices are staying home,” Ozgo said. “In Maryland, consumers are voting with their feet and making purchases in Delaware.”

New regulations make it harder to give  loans to small business

The CEO of Easton Bank and Trust, Mike Menzies, said the new standardized approach in how the banks count assets along with state regulation policies have a distinct impact on the loans they can lend to small businesses.

“State code mandates and code enforcement policies have become an extraordinary burden and, in some cases, blocking the formation of small business,” Menzies said.

David Hillman, the CEO of Southern Management Corp., the largest privately owned residential property management company in the mid-Atlantic region, said that the regulations have made it harder to get larger-sized loans for construction projects.

“Because of regulation, where we used to be able to borrow 70, 80 or 90% of the cost of a new project construction, now, we are able to borrow only 50 or 60%,” said Hillman.

Regulations require more human resources

Menzies said that regulations associated with the federal Credit Card Card Act, the Fair and Accurate Credit Transactions Act and Dodd-Frank Act have have placed large burdens on  banks, forcing them to devote more human resources toward regulatory compliance than is necessary.

“I would say that seven years ago, I would spend 20 to 25% of my time as CEO of a small company dealing with regulatory issues,” said Menzies. “I spend no less than 50 or 60 percent of my time today dealing with regulatory issues. It’s unbelievable.”

Michael Gordy, senior vice president of lending at the State Employees Credit Union agreed.

Comptroller Peter Franchot said at the end of meeting the state will need to look for ways to provide a spark for the private sector as sequestion cuts in federal spending threaten the security of roughly 100,000 federal jobs as well as other industries in Maryland that feast off federal contracting.

More people buy online, pay less in sales tax

Pat Donoho, president of the Maryland Retailers Association, told the board that since Maryland ranks first in the nation in online shopping, the state is losing millions of dollars in potential sales tax revenue.

Although consumers are supposed to file and pay taxes on items purchased on the Internet, many consumers are unaware of the rule and the enforcement has not been strict.

“[Online stores] should charge and remit the sales tax,” Donoho said, repeating a stand consistently taken by Maryland’s brick-and-mortar stores.

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  • abby_adams

    I’d like to say “told you so” but it wouldn’t work with the one party crowd in Annapolis. Hike the sales tax? People go out of state or online. Hike the alcohol tax? People go out of state to buy. Add more regs to private businesses large & small increases costs & hampers employment. I hate to ponder what’s next on the raising revenue list in Annapolis? I’m sure we will find out all too soon. The next legislative session is right around the corner.

    • liberti

      The answer of the tax gurus in Annapolis will be to try to get a federal tax imposed so that people cannot avoid the burdensome taxes by crossing state borders. And with the close relationship of the present Gov to the dem centers of power, that idea has gone beyond the proverbial gleam in the eye. Oppressive cigarette taxes have had the same effect. Just cross the VA border and you can get cigarettes for $2 less a pack. And that tax hits seniors and the less wealthy which the Annapolis crew are always bleating they are trying to “help”. MD is in crisis mode. More and more are fleeing this oppressive-tax state. So the PROGs will be forced to tax the very air we breathe for those unfortunate enough to live here.

    • bohicarico

      They’ll tax the rain. Oh, wait, too late =)

  • Wise Guy

    The industry has to be crazy to think anyone would believe that baloney. Who would travel 2 hours from Baltimore to go to DE to buy booze? Seriously? You would spend more in gas than you would save on the tax. Maybe people are just choosing to spend their money on other things like food, housing, etc.

    • Parrotisla

      They are talking about people who live by the border, those people drive to other states.

    • Common sense

      And you have to understand than for many people, it is not that big a deal to go out of state to make purchase. If you live in southern MD, and are a smoker, you can cross the Potomac river, buy two cartons of cigarettes (per person in the vehicle) and bring them back to MD. Seeing as the state of MD has $20 a carton in taxes, and VA has $3 for the same item, you save $34 on two cartons. While there, you can pick up your alcohol, and save the tax on that too.

      Add several people riding together, and it becomes a very profitable trip

    • abby_adams

      While your premise might be true for a six pack, I know people who have driven out of state to buy large amts of booze & shop in DE for big ticket items. They make a day trip out of it while flipping the bird at O’Malley’s tax & overspend legislature. Remember the booze tax was sold as helping disabled adults & kids, yet they didn’t get the full benefit of the tax & get even less, if any now. Ditto for the other taxes & fee increases enacted. The $$ never go to the areas that the politicians promise.

  • Cindy Walsh

    In today’s economy can people gamble and drink. I think it is an either or.

  • xantrani

    libtards LOVE to lie. the reason taxes increased is because those IDIOTS in Annapolis believe that increasing the tax rate will result in more taxes so THEY can continue to SPEND at record rates. what they FAIL to realize is people like me will LEAVE the state to avoid paying the tax. and their revenues will actually DROP. they lack the most basic concepts of Eco101.

    • bohicarico

      They know what they’re doing. They want to further compartmentalize the state in to several easily controlled group-think camps. The protected bureaucrats, judges, lawyers, politicians in one camp. Millionaire ambulance chasers and real estate developers in another. Labor unions and all their parasitic hangers-on are third camp. The last camp is comprised of all the welfare recipients.

      Your departure further strengthens the iron grip of one party rule.

  • Jan Greenhawk

    Clearly the answer is to raise the alcohol tax so they can run ads on television telling people to buy alcohol in Maryland. Oh, wait, they can’t do that. Maybe we could station guards at the border of our state and make sure no alcohol is brought in from those other states. Hey, let’s just open another casino!

  • http://twitter.com/lagloriacubano david wagner

    No worries… always buy in DELAWARE!

  • Parrotisla

    So let me get this straight, We’re suppose to pay the sales tax on internet purchases to the state ourselves? Ha Ha Ha Ha, that’s a good one. How exactly do you enforce a law like that? Yeah Ill get on that, not!

  • Oldbot

    Unstated assumption: More alchohol sales is a good thing. Urp!

    • Jake Brodsky

      Be careful what you wish for. People will do many things to achieve the highs or relaxation they crave. If they can’t afford alcohol, what will they turn to?

  • Leslie Boyd

    I seem to recall an event in the 1700’s which started because of unfair taxation on, what was it? Oh yes. Tea.

  • Bobby B

    I can’t wait t move to West Virginia. I’m 26 years old, college educated and this article just goes to show what we’re dealing with in this state. The answer to their overspending on God knows what? Raise taxes. It’s BS and it’s made me question my status as a registered Democrat. I’ll go to West Virginia where I have freedom, little traffic, lower taxes and no gang banging hoodlums running around.

    • James Bush

      No thanks I won’t live in West Virginia as long as it remains a rude state who keeps voting based on skin color. I’m going to Texas no Party affilation in order to vote against O’Malley when he runs for President. I’ll be making sure my potential fellow neighbors who vote in high numbers vote against O’Malley

      • Bobby B

        LOL. Ahhh so you’re moving to Texas, a bastion of embracing minorities and voting for them. Are you kidding? Get off your soap box Al Sharpton.

        People are a hell of a lot nicer in West Virginia. You want to see rude…ah well we live in Maryland have you been in a coma your whole life?

        • James Bush

          Yes West Virginia is rude especially the One Horse town of Charles Town. Yes they use skin color as the reason to not vote for someone. West Virginia is laughable it is late repealing old laws. Yes Texas votes for minorities.

  • Jake Brodsky

    One of the things the more tax/less tax arguments miss is that this isn’t about taxing the public; it’s about revenue from those taxes. If you tax something too much, businesses will suffer and your total revenue will drop. If you tax something too little, you’ll have heavy use of services from your government and you’ll end up with minimal infrastructure to support business growth.

    Clearly the increase in alcohol taxes has brought additional burden on the industry. The open question is whether our state government will actually get any more tax money in the long term. Somehow, I doubt it will.

  • Brian

    the state elects a moronic governor and a liberal legislature; what do you expect?

  • James Bush

    I take my money and spend it in PA

  • Mike Smith

    just drove a few extra minutes into DE to buy a case of wine. Sorry MD. I’m tired of being taxed to death in this state.

  • Fuster Cluck

    welcome to MD. we tax everything that moves here, and things that don’t move.

    Horrible state to live in. getting worse. Liberals tax everything. then tax it more. and raise fees.

    MD is also a state that is anti- small business. If you’re self employed or want to start a small biz, pick any state other than Maryland.

    tax increases benefits government workers and pretty much hurt everyone else.

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