Alcohol consumption equals big business for some local communities

Nathan Baker • Feb 8, 2014 at 9:38 PM

Regardless of one’s moral views on alcohol consumption, the sale of suds and spirits is big business, and some local communities have seen their cups runneth over from the monetary benefits of allowing libations.

In Tennessee, the decision of whether to allow alcohol to be sold is made mostly on the local level, in the cities and counties in which it’s sold.

For the purposes of regulation, state law splits beer, defined as beer, ale or other malt beverages with alcohol contents no more than 5 percent by weight, from other intoxicating beverages, like wines and liquors.

Cities and counties wield extensive powers over beer sales, including the authority to license and regulate where it can be sold, to set business hours when sales are permitted and to create beer-free zones around churches, schools and residential homes.

Liquors and wines, on the other hand, are regulated by the state’s Alcoholic Beverage Commission, but the voters of each county and municipality must first authorize their sale — of both liquor by the drink and in retail package stores — by referendum before dealers can set up shop.

The Tri-Cities passed liquor-by-the-drink referendums in the early 1980s, led by Johnson City, which played host to an extremely close vote and a series of court cases challenging the results.

“Since 1981, Johnson City has been able to establish itself with respect to the dining and hospitality industries,” Chamber of Commerce President Gary Mabrey said. “We’ve been able to bring many first-time restaurants to the area that want to serve liquor by the drink, and with that, we’ve also been able to offer a higher level of entertainment, socializing, dining and conferences.”

The availability of social drinking has tapped into new avenues for capturing residents’ disposable income and has added to their quality of life, Mabrey said.

Although it was established three decades after the citywide vote enabling spirits sales, Holy Taco and Cantina, in the heart of Johnson City’s downtown, still rakes in the benefits today.

Manager Ariana Garrett said the popular late-night dining spot is carried in part by bar sales.

“The bar does very well for us,” Garrett said. “If we have a bad week, it’s usually because the alcohol sales aren’t good enough.”

A good day of bar sales can bring in $2,000, she said, but a spectacular weekend night will generate upward of $5,000.

“I think it’s the atmosphere,” she said. “You could go and buy a bottle at a liquor store and take it home and drink it, but you’re not going to have the people, you’re not going to have the trivia, it’s just not going to be the same experience you could have when you go out.”


Adding to the indirect economic benefits brought by alcohol sales are the direct revenues from taxes and fees paid to local jurisdictions.

“Basically, we receive local revenues from the wholesalers for beer and liquor,” Johnson City Finance Director Janet Jennings said. “We also receive state-shared taxes from the state on revenues that they receive on beer and liquor.”

As far as state-shared taxes as they apply to beer, the state collects $4.29 per barrel from wholesalers/distributors and shares just more than 10 percent of the total collected with the communities per capita. For the fiscal year that ended June 30, Johnson City received $31,223.

“When it comes to mixed drinks, the state collects 15 percent of gross receipts from retailers,” Jennings said. “We get 50 percent of that back in Johnson City. For the fiscal year that ended June 30, 2013, we received $615,922.”

The city also collects local taxes on beer, which seems to be a lucrative practice.

Jennings said the city collects $35.60 per barrel from the wholesaler, based on barrels sold. That law just changed last year. The previous tax was 17 percent, but that was replaced with a charge based on volume (barrels). During the past fiscal year, Johnson City collected $2,202,886.

The city also collects 5 percent of liquor sales from the wholesaler, as an inspection fee.

“We collected $623,007 for the most recent fiscal year,” she said. “As you can see, we rely on these revenues to pay the expenses of providing city services. If lost in total, the equivalent property tax rate to replace them would be 21 cents.”

Jonesborough, although smaller than Johnson City, collects its share of taxes from booze as well, and brought in nearly $300,000 from state shared and local taxes last year, which Finance Director Abbey Miller said equates to the same 21 cents of property taxes.

Counties can also bring in revenue from alcohol sales in unincorporated areas, which bolsters the coffers of most of the region’s governments.

Finance records said Washington County collected $325,870 last fiscal year from the wholesale beer tax, up more than $12,000 from the year before.

This year is set to beat even that, already up $25,000 from the same point last year.

Because of the larger amount of undeveloped land in the county, the tax on retail wine and liquor and mixed drink sales are considerably lower.

Combined, the county received approximately $155,000 last year from wine and distilled spirits.

In neighboring counties and towns that were a bit slower to approve of alcohol sales, revenues are still being realized.

Last year, Carter County collected $210,000 from the wholesale beer tax, down $12,000 from the year before.

In Elizabethton, which didn’t allow liquor by the drink until 2004 and didn’t permit package stores until 2012, a liquor inspection fee brought in $41,514 in fiscal year 2013 and $50,034 this year.

Since the beginning of the 2013 calendar year, the town of Unicoi has generated nearly $29,000 in revenue from alcohol taxes, with the most significant amount of the revenue coming within the past five months.

The sale of on-premises liquor is permitted at only one location within the town’s limits — the Los Jalapenos restaurant. Unicoi Town Recorder Larry Rea said since the beginning of 2013, the town has garnered mixed-drink tax revenue of $2,021.

Rea said the town has also seen $1,761.54 in revenue since the beginning of 2013 in state-shared beer tax revenue. This is through a combination of on-premises sales at the Los Jalapenos restaurant and off-premises sales.

But the bulk of the town’s alcohol tax revenues has been realized since September, when the town’s first retail liquor store opened its doors. In November 2012, a referendum to allow the establishment of retail liquor stores within the town’s limits passed by a majority vote.

Last May, the town’s Board of Mayor and Aldermen voted to approve certificates of compliance to the owners of two package stores — Unicoi Wine & Spirits and Maple Grove Wine & Liquor. Unicoi Wine & Spirits opened in September and Maple Grove Wine & Liquor opened in November.

Since the stores have opened, the town has received $24,964.99 from the wholesale alcohol tax, which is paid by distributors for stocking the stores. Rea said this tax was not included in the town’s 2013-14 fiscal year budget, as town officials were unsure what of the tax revenues that would be generated from the stores. Rea said the town will project wholesale alcohol tax revenues in its 2014-15 budget.

Wine me, dine me

A bill currently plowing its way through the General Assembly could soon mean even more alcohol-related revenue for the state and local jurisdictions.

The wine-in-grocery-stores bill aims to create a new category of alcohol licenses and pave the way for referendums across the state to allow bottled wine to be sold in more than 3,000 supermarkets and convenience stores.

The legislative Fiscal Review Committee said if the bill becomes law, the taxes and fees associated with the expanded sales are projected to generate more than $7 million per year for the state once the first permits are granted in 2016.

For local jurisdictions, those that permit the sales could share $2.2 million next year, $5.8 million in 2015 and more than $6 million in subsequent years.

The proposal, while generally backed by the supermarket industry, has seen opposition from liquor stores, worried that the larger supermarket chains would be able to outcompete them in one of the few products they are allowed by law to sell.

The bill does make room for additional items for sale by package stores related to alcohol consumption, like ice, cups and corkscrews and some that aren’t related, including tobacco products.

The bill was already approved by the state Senate, and is awaiting reconciliation and approval by the House Finance, Ways & Means Committee before heading for a full floor vote and the governor’s signature.

Press Staff Writer Gary Gray, Erwin Bureau Chief Brad Hicks and Elizabethton Bureau Chief John Thompson also contributed to this report.

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