Just in time for holiday parties, Rhode Islanders are getting a rare tax break: that 7 percent sales tax on liquor and wine goes away on Dec. 1.
Sorry, beer drinkers, there’s no change on the cost of your drink of choice.
The repeal, championed by state Rep. Jan P. Malik, a Warren Democrat, is intended to keep Rhode Island package stores competitive with Massachusetts and Connecticut, particularly those along state borders. Massachusetts charges no tax while Connecticut gets 6.5 percent.
Brian A. Goldman, a lobbyist for the Rhode Island Alcoholic Beverage Wholesale Dealers Association, has been quoted as saying the change is a plus. Customers, he says, have a psychological aversion to paying the sales tax, he has suggested.
Still, some Rhode Island retailers are looking at this Sunday’s shift with only cautious optimism.
And Massachusetts dealers told The Breeze they’re not worried about lost business.
Dave Hebert, manager of Hill Liquors on Cumberland Hill Road in Woonsocket, said that Massachusetts stores still have a price advantage because beer is not subject to a sales tax. The neighboring state’s stores, he pointed out, also have a lower excise tax.
“It’s going to help a little bit because the gap is not going to be as big,” he said.
Along with repealing the tax, Rhode Island offset some of the lost revenue by increasing the excise tax on beer, wine and liquor back on July 1. That’s a few extra pennies, proponents have said, compared to the $1.40 tax on a $20 bottle.
Hebert said that since Rhode Island raised its excise tax in July, competition has been even more of a drain on business.
Rhode Island collected $24.3 million in liquor sales tax in 2012. The tax repeal, with the excise tax increase, is expected to cost the state $1.2 million during the fiscal year that began July 1, assuming no increase in sales volume.
Despite the increased excise tax, Hebert is still hopeful the change will help with holiday sales.
“It’s better than nothing,” he said.
Countering Hebert’s worries, Thomas Saccoccia, of Sak’s Centredale Liquors and Wine Cellar in North Providence, said he expects the new law to benefit all Rhode Island liquor store owners, not just the ones near the Massachusetts border.
With the 7 percent tax gone, said Saccoccia, “people won’t feel like they have to travel out of state” to get a better deal. They’ll have the luxury to “shop local” without feeling like their wallet is taking a beating for doing it.
Fred Sheerer of Thrifty Discount Liquors in nearby Blackstone said he would not know if the change would affect his sales until he could see what kind of prices his Rhode Island competitors would be able to offer.
“We’ll just have to wait and see,” Sheerer said. “There’s no way to know if it’s going to hurt the business.”
Asked if he gets many customers from Rhode Island, Sheerer replied “quite a bit.” Sandra O’Connor, president of the Seekonk Liquors that owns three Chris Gasbarro’s Fine Wine & Spirits locations in Massachusetts, said she is not worried about the repeal of the liquor tax from a business standpoint.
Sure, she admitted, initially the company’s stores in North Attleboro, Seekonk and Swansea may see some customers staying in Rhode Island to take advantage of the new deal.
But they will be back, she said, once they realize the lack of a sales tax will not be able to make up for competitive pricing.
Large format stores in Massachusetts can buy products at a more discounted rate than smaller Rhode Island liquor stores can, she explained, meaning there can be a price difference of maybe $4 on one particular bottle, even after any sales tax is repealed.
And with Rhode Island law prohibiting liquor store chains in the state, O’Connor said, it’s a clear advantage that Massachusetts stores can hold onto.
“I believe that the customer will experiment, but when they go to buy malt liquor, they’re still going to go across the border for the pricing,” she said. “It’s just a different animal for Rhode Island to tackle that.”
While she does not expect the tax repeal to affect her business, O’Connor said she is concerned the decision will impact her personally, as someone who lives in Providence.
“As a Rhode Island resident, I’m trying to figure out what they’re going to do to make up this tax,” she said. “I’m concerned in that respect that it wasn’t a wise decision.”
Especially since it may not make the money that state officials expect, she said, when some Massachusetts stores prove to be better-run businesses than their Rhode Island competitors.
Chris Gasbarro’s does “a tremendous amount of advertising,” and it is clean, bright and female- and family-friendly, she said, with the North Attleboro location even sharing a plaza with Toys R Us.
“We’re already doing what moves us to a different level,” she said. “It’s a complete package.”
Feeling more hopeful, perhaps, is Sangita Patel, co-owner of Borderline Liquors on Newport Avenue in Pawtucket, near the South Attleboro line, She told The Breeze she expects a significant boost in business once the new law goes into effect.
“Definitely it’s going to help,” said Patel.
Customers who now travel just over the line to pick up large cases of wine and alcohol can now stay in their home state without losing any money, said Patel, and that’s good for local liquor store owners.
Now, instead of having to offer a nip of liquor at 93 cents, to allow the convenience of paying $1 total, the store can market five nips for $5 and keep the 35 cents that once went to the state, said Patel.
Patel said it’s “hard to tell” before the law is in place exactly what kind of benefit the changes will bring, as it will all depend on unpredictable habits of customers. She said she’ll have a pretty good idea after a couple weeks.
I only buy here in at Cumberland’s two main Liquor Stores in and emergency as their prices, in almost all instances, especially the store at Chapel 4-Corners, are quite a bit higher then what one would pay at Yankee Spirits in South Attleboro.
I am a big believer in doing business locally, and as the Breeze promotes: “Keeping the Green in the Valley”!
But, again, with some of the price differences one sees, that are rather substantial, and one is looking to buy in volume (especially wines) the savings are substantial at Yankee.!
Source: The Valley Breeze