Three ways Virginia could raise the price of liquor, per McAuliffe’s budget

Virginia Gov. Terry McAuliffe’s announcement this week that the state would make up some of its budget deficit by increasing the markup on distilled spirits already has those in the hospitality industry gearing up for paying more — and thus charging more — for drinks.

McAuliffe didn’t outline how exactly the Virginia Department of Alcoholic Beverage Control would raise an additional $2.5 million from the liquor markup, but ABC is considering three options, according to a letter sent to stakeholders Wednesday and provided to the Washington Business Journal.

Though some specifics of the proposals are not included, the basics of those options are:

  • Increasing the case-handling fee: ABC currently charges $1 per case for distilled spirits, a fee that was implemented in 1988 and hasn’t been increased since.
  • Increasing the liquor markup on “miniature” liquor bottles, which many people refer to as “airline bottles.” Those bottles currently have a 50 percent markup from ABC as opposed to an average 69 percent markup on other sizes, according to ABC.
  • Across the board markup increase: This would affect all alcoholic beverages offered for sale in ABC stores.

The last time the overall markup was increased was in 2008, when it increase by 4 percent, according to ABC.

Both the case fee and the overall markup will trickle down to most people consuming alcoholic beverages, said Scott Harris, co-owner of Catoctin Creek Distillery in Purcellville. Harris had already fired off a letter decrying the markup increase to the Virginia General Assembly by Wednesday afternoon, he said.

“We already contribute about 55 percent of the retail price of our product to the Virginia ABC,” Harris said. “Add about $2.30 for federal excise tax and you can see how things get sliced pretty thin.”

Virginia has the third-highest excise tax, or markup, on distilled spirits in the country, at $19.19 per gallon, according to the Tax Foundation, which bills itself as a “non-partisan research think tank.”

Of the three proposals, Harris would support the increased markup on miniatures, he said. The case fee would just trickle down to the cost of the bottle, “so it is really just another fee on the product, no matter how it is applied,” he wrote in a response to Virginia ABC.

Whichever increases do go into effect, there’s a good chance drinkers will notice a pricing shift in bars and restaurants, just as they would if the cost of any other product increased, said Pete Pflug, owner of Clarendon bars Clarendon Grill, Spider Kelly’s and Eventide.

“Great. We already pay more than other states,” Pflug quipped. “Tell me, how much is too much?”

The Virginia ABC is accepting comments from stakeholders on the proposed increases until Oct 31. The agency will decide on the method of increase and the implementation date in the next few weeks, according to ABC spokeswoman Kathleen Shaw.

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