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Competition for Connecticut: Sales Tax on Wine & Liquor

Rhode Island has joined Massachusetts in removing the sales tax on wine and liquor; that means even more competition for Connecticut consumers.

Just as the holiday party season starts, Rhode Island has eliminated the sales tax on retail wine and spirits.

Lawmakers in the Ocean State took the step to help their liquor stores by making prices more competitive with those in neighboring Massachusetts. The move has implications for Connecticut as well.

When it comes to wine and liquor, Connecticut has been at an economic disadvantage for several years. Massachusetts has no sales tax on wine and spirits, unlike us. Massachusetts’ excise (built-in) taxes are lower than ours. And there’s no general prohibition in the Bay State against selling alcoholic beverages below the wholesale price, as there is here.

The result is that many Connecticut residents see an economic advantage in crossing the border to the north to buy booze, especially during the holidays.

Now Rhode Island has joined the no-sales-tax crowd – a move that will be noted in the eastern part of our state. (Earlier this year, Rhode Island did increase its excise tax on spirits, making it equal to ours.)

Connecticut law requires that out-of-state liquor brought back here must be reported to the Department of Revenue Services and the proper taxes paid. The number of consumers who actually do that is, to put it as charitably as possible, minimum.

In the past couple of years, small steps have been taken toward making Connecticut a better place for buying booze. Package stores and supermarkets may now sell alcoholic beverages on Sundays, if they choose. That has cut down on some cross-border weekend purchases.

But for many consumers, price remains the biggest factor in shopping for alcohol – and due to our tax structure and minimum-pricing laws, this state remains at a disadvantage.

Behind the higher prices are the large number of little local package stores here. Their owners worry that if minimum pricing rules are removed, they will be undercut by big-box liquor outlets and by grocery stores, both of which could use artificially low prices as loss leaders. That’s not an unreasonable concern, but why should it drive state policy?

With even more competition out-of-state, the legislature, when it reconvenes, should revisit the liquor pricing system here.

Source: Hartford Courant,0,1583440.story