Liquor retailers brace for crowds avoiding tax rise

December 30, 1990|By Joel McCord

From Ocean City to Deep Creek Lake, the signs scream their message in bright red letters. "NOTICE," they warn. "Effective Jan. 1, 1991, a new federal excise tax on all spirits, beer, wine and liquor."

They urge customers to buy now and avoid the higher prices. But until a few days ago, area retailers were saying they hadn't noticed any great rush to their shelves.

In midweek, Mike Hyatt, general manager of Wells Liquors in the 6300 block of York Road, was saying his customers weren't aware of the impending price increases, despite the signs hanging inside and outside his store.

"It's all been buried by Iraq and the economy and Gorbachev," he groused, referring to domestic and international crises.

But by week's end, the cash registers at the checkout lines were ringing wildly. Cashiers were calling on the store intercom systems for two and three more cases of beer or wine.

"It happened all of a sudden," said Mr. Hyatt, who has posted "before" and "after" prices on some of his stock to encourage shoppers to buy. "Like a whole bunch of people called each other and said, 'Let's go to Wells.' "

Business just began picking up at the end of the week, said Hillard Donner, owner of Mills Wine and Spirits in Annapolis.

"I think it's hit everybody all of a sudden," he explained. "Christmas is over, and now they're thinking about it."

Congress voted last fall to increase the federal excise tax on beer, wine, liquor and cigarettes as part of its budget-balancing act. Meanwhile, brewers and distillers are planning price increases of their own to catch up on a rise in shipping rates spurred by higher-cost gasoline.

The combined effect of the tax increases and rise in prices could boost the cost of some cases of beer by about $1.30 and a 1.75-liter bottle ofsome brands of Scotch as much as $3.

While some retailers say their customers are rushing to beat the higher prices, others say the effect on business has been negligible.

"It's been a little above average," Ella Scannello, supervisor of the Highway Liquor Fair on Ritchie Highway in Glen Burnie, said last night. "I think they're going to kind of flow with it."

Ray Ewing, owner of Budget Liquors in the 7000 block of Eastern Avenue, was doubtful about an increase in business.

"It's after Christmas," he said. "People don't have any money left. And they don't realize the impact this is going to have."

It is difficult to ascertain exact costs because of the way the federal law applies to distilled spirits and the manufacturers' price increases about to take effect. But the tax increase alone will add about 16 cents to the cost of a six-pack of beer and 18 cents to a bottle of wine.

The tax on liquor varies, depending on proof and volume, according to Connie Benson of the Baltimore office of the U.S. Bureau of Alcohol, Tobacco and Firearms.

The tax on a 1.75-liter bottle of 80-proof gin will go up about 37 cents, for example, and the tax on a 750-milliliter bottle of 90-proof whiskey will increase about 17 cents.

The matter is further complicated because almost all liquor is bottled in metric measure, but Congress taxes by the gallon, the way producers measure their output.

Figuring out the new prices isn't all that tough, according to John Jandasek, manager of Broadway Wine in Fells Point.

"We have a chart for that. It's the physical work we'll have to perform to put the new prices on all the bottles, on New Year's Day, when everybody has a hangover," he said.

Normally, distillers, brewers and vintners pay the federal excise taxes on their products and pass it along to customers. But under the new tax law, wholesalers and retailers must inventory their entire stock, change the prices and determine how much they owe the government in a one-time-only "floor tax" to make up the difference between the old and new taxes.

Some retailers favor getting rid of as much stock as possible between now and the new year to avoid paying taxes. Others see an opportunity to hoard liquor and guard against manufacturers' price increases.

Smaller operators are buying normally, said a sales manager for Churchill Distributors who asked not to be named. But the larger stores that do a heavy volume and have the storage space are taking advantage of the lower prices, even if they have to pay the tax on the inventory, he added.

Moreover, the tax isn't due until June 28, so a retailer can use the money until then.

Mr. Hyatt argued, however, that distributors want to get the merchandise out of their warehouses.

"And besides," he said, "I don't want to have to count a lot of bottles."

Mr. Donner said he is stocking up, expecting an increase in business.

"I can't be without merchandise if people are going to buy," he explained. "If you want a case of something and I don't have it, I've lost the sale."

Customers seem split on whether to stock up.

Edna Butcher, buying a bottle of strawberry daiquiris at Wells recently, said she is just buying normally, ready to pay her fair share of the new taxes.

"We've got to make up this deficiency somehow," she said, referring to the federal budget gap. "It's better than raising the income tax."

Meanwhile, Elaine Bell Cook pushed a shopping cart full of wine bottles through the aisles at Wells and stopped to examine a 1.75-liter bottle of Scotch.

"Of course I'm stocking up," she said. "And I've been giving liquor and wine as gifts. When the prices go up, it will be something nice to have."

At least one retailer sees a bright spot in all this. Rob Carr, managing partner at Highway Liquor Fair, warned that the price increases are going to create "sticker shock" among customers and all but halt business during what traditionally is a slow midwinter season.

By March, he predicted, a lot of distributors are "going to be sitting on tons of inventory they're going to have to move, and I think you'll see some price reductions."

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