Tax Hike Has Beer and Spirits Sellers Poring Over Bottles

‘Tis the season to be counting bottles--at least for the owners and operators of stores that sell alcoholic beverages.

Starting today), retailers will add up every bottle of bourbon, brandy, beer and burgundy on shelves and in storage to determine the additional tax burden generated by a Jan. 1 federal excise tax increase. Distributors of alcoholic beverages must also conduct inventories to determine their additional tax payments.

The one-time “floor tax” will generate an estimated $300 million in additional tax revenue for Uncle Sam. Alcoholic beverage manufacturers will incorporate the tax increase into the price of beverages shipped to retailers and distributors after Jan. 1.

Although retailers will pay the added tax, most plan to pass it through to consumers. Some stores are urging consumers to purchase their spirits before year-end to avoid the tax hike.

The federal excise tax increase will be marked.

The tax on a 750-millimeter bottle of red table wine will jump to 21 cents from 3 cents. The tax on a six-pack of beer will increase to 33 cents from 16 cents. And the tax on an 80-proof, 750-millimeter bottle of gin will rise to $2.14 from $1.98.

Only the 67-cent tax on champagnes and sparkling wines will not jump.

Although federal regulators have exempted many small shops from the inventory, the bottle count will be a time-consuming and costly affair for larger stores and chains such as San Diego-based Liquor Barn, with 63 stores in California.

“I’m going to guess that we’ve probably got 50,000 bottles at each store . . . so we’ve got an estimated 3 million bottles to count,” said Liquor Barn Executive Vice President Lew Silverberg.

Liquor Barn hopes to use results from the federally mandated count for another tax-related inventory scheduled to be completed Jan. 31. But the excise tax inventory is decidedly more complicated than a traditional year-end count, Silverberg said, because retailers who are passing the tax increase along to consumers must retag merchandise with the new, higher prices.

That takes time, because--unlike an inventory--”we have to physically touch each bottle,” Silverberg said. “The customer wants to know when he looks at the shelf what the price is, so every item has to be repriced.”

Also, the bottle count is complicated because federal Bureau of Alcohol, Tobacco and Firearms tax schedules vary by beverage type, alcoholic content and bottle size. Consequently, beer, wine and spirits are each taxed on a different schedule.

Another complication: Store owners must use conversion tables to determine their tax burden because wine and distilled spirits are packaged in metric-sized bottles, and the federal government still computes taxes by the gallon.

The count “is a lot of work,” Silverberg said. “There’s no way to minimize it, even with all of the modern electronic equipment . . . because that’s not going to (generate) sufficient data for this kind of (tax) return.”

Liquor Barn will spend an estimated eight to 10 hours on the tax inventory at each store. The chain’s employees, as well as inventory firms, will complete the counts after stores close for the day.

The year-end timing of the bottle count could cause problems for retailers. The holiday season is the “time when retailers either make or break it,” said John Burcham, executive director of the Bethesda, Md.-based National Liquor Stores Assn. A count that begins the day after Christmas “doesn’t give retailers time to collect their wits (and) study the instructions,” Burcham said.

Similarly, Southern California grocers with extensive alcoholic beverage stocks must find time during their busiest season to count bottles and compute the additional tax bite.

The excise tax inventory is “one of a number of things going on in the retail food industry that have to be completed,” said Steve Koff, president of the Southern California Grocers Assn. Grocers will also program cash registers for a state sales-tax increase as well as changes in various county sales taxes.

Burcham said retailers who wait until the last minute to review the complicated inventory regulations will be “horrified.”

The Bureau of Alcohol, Tobacco and Firearms is allowing retailers to count their inventory and figure the additional tax during a “window” that begins today and ends Jan. 10. However, retailers must “justify” that total by incorporating deliveries from distributors and over-the-counter sales that occur before Dec. 31.

That scheme was designed to discourage retailers from attempting to beat the tax by ordering massive deliveries from retailers just hours before year-end, Silverberg said.

And, the bureau won’t simply take a retailer’s word that a count is accurate.

“We will have inspectors checking to make sure that people have paid the tax,” said spokeswoman Kris Meldrum.