Oklahoma’s new alcohol laws take effect in October, but how drinks will be taxed is still up in the air.
State Sen. Stephanie Bice, R-Oklahoma City, has filed legislation that would eliminate a 13.5 percent tax on full strength beer, wine and drinks with spirits purchased at restaurants and bars, and replace it with a 6.5 percent alcohol tax at the distribution level.
The Oklahoma Restaurant Association has been concerned that when the low-point beer is taken out of circulation in October, people who are used to drinking low-point beer will experience sticker shock and stop frequenting eateries or bars. Low-point beer at restaurants or bars doesn’t have an excise tax.
President and CEO Jim Hopper said the association requested SB 1394.
“That’s a huge tax increase on beer drinkers,” he said. “We want to be able to remedy that.”
Hopper adds that taxation at the wholesale level will be simplified. Fleming writes that instead of taxing the 2,000 mixed beverage licensee, the Oklahoma Tax Commission would only have to visit the seven distributors.
But retailers, such as convenience stores, are against the measure. A spokesperson for Tulsa-based QuikTrip told the Journal Record that his company will be adamantly against the bill. He describes it as a tax that his industry has never seen before.
“If the wholesaler is taxed at 6.5 percent, they're going to want to get their cost back. So they'll ask the retailer for more money, then convenience stores and grocery stores … are planning on fighting this because it will increase their costs because they're going to pay more for the alcohol. And so they'll end up having to pass on those cost increases to consumers,” Fleming told KGOU.
Twenty-four alcohol-related bills have been filed in the legislature to iron out the details of the voter-approved state question. One, also filed by Sen. Bice, would allow places in college towns to sell beer that can be carried around on football game days.
“Right now they can sell low-point beer but that will be gone in October. And so this would change the mix beverage licensee regulations so those eateries and bars can sell high-point beer that is taken into the public,” Fleming said.
Jacob McCleland: It's the Business Intelligence Report, a weekly conversation abong business news in Oklahoma. I'm Jacob McCleland, with Journal Record reporter Molly Fleming. Molly thank you so much. Happy Valentine's Day.
Molly Fleming: Hey Happy Valentine's Day to you and thanks for having me.
McCleland: Molly we're eight months away from Oklahoma's new liquor laws going into effect. This was a result of the voter-approved state question from 2016 that will allow full-strength refrigerated beer and wine in grocery and convenience stores among other changes. There's still a lot of uncertainty here, right, because we don't know how much liquor is going to be taxed. There's a bill in the legislature that will that will deal with this. Can you kind of run us through this legislation?
Fleming: Yes so when someone buys a cocktail or a high-point beer at a restaurant or a bar right now there's a 13.5 percent tax added to the cost. The bill that's being proposed by state senator Stephanie Bice, it's Senate Bill 1394, would eliminate the 13.5 percent tax but the bill would then add a 6.5 percent tax to alcohol sold at the wholesale level.
McCleland: So in other words if this bill passes it's going to be the wholesalers who are taxed. What are the advantages of this?
Fleming: So the bill is supported by the Oklahoma Restaurant Association. They like it because people will be able to pay less for drinks at restaurants. They have long argued that people who drink low-point beer and don't have to pay that 13.5 percent tax will be so outraged when they have to pay the tax rate in October that they'll stay home to drink because, they, you know, low-point beer won't be highly available and so they will have to buy regular craft beer or high-point beer and they're going to see a new rate on the beer that they like.
McCleland: So the restaurants like this idea. The retailers, though, aren't sold on it. Why are convenience stores and other retailers against this idea?
Fleming: Well in the new system, which starts in October, alcohol will go from the manufacturer to the wholesaler to the retailer. And this is supposed to help reduce costs because there's not as many entities touching the alcohol from the time it leaves the plant to the consumer. But if the wholesaler is taxed at 6.5 percent, they're going to want to get their cost back. So they'll ask the retailer for more money, then convenience stores and grocery stores - grocers - are planning on fighting this because it will increase their costs because they're going to pay more for the alcohol. And so they'll end up having to pass on those cost increases to consumers.
McCleland: Now I know that the session just started, but has this bill gone anywhere yet?
Fleming: No and I have a feeling there's going to be a lot of discussion happening right now. You know, a lot of behind the scenes give and take. It was referred to the Senate Appropriations Committee and the committee met yesterday, but the bill was not on the agenda. But I mean, Jacob, this is going to be an interesting battle to see how the the final shape of this bill. The oppositions to this are two big groups, you know retailers and restaurants. And when you look at the convenience store side, we have some pretty big national players in Oklahoma with Quik-Trip and Love's Travel Stops and Country Stores. So I'm looking forward to seeing the final language of this.
McCleland: So this is just one bill that will iron out the alcohol law changes. Are there other bills filed related to to alcohol this session?
Fleming: Yes there are nine bills filed from the House side and 15 filed in the Senate related to alcohol. But all of these bills have been expected since the beginning and state Sen. Stephanie Bice, who spearheaded all these changes, allowed two years before they went into place to iron out details including taxation.
McCleland: So that's quite a stack of bills that are going to be worked through. Besides the tax bill, is there anything in particular that stands out to you?
Fleming: Senator Bice has filed a bill that would allow places in college towns to continue to sell beer that can be carried around on football game days. Right now they can sell low-point beer but that will be gone in October. And so this would change the mix beverage licensee regulations so those eateries and bars can sell high point beer that is taken into the public.
McCleland: Molly Fleming is a reporter for The Journal newspaper. Cheers, Molly thank you for joining us.
Fleming: Hey no problem, thank you.
McCleland: KGOU and the Journal Record collaborate each week on The Business Intelligence Report. You can find this conversation at kgou.org. You can also follow us on social media or on Facebook and Twitter @journalrecord and @kgounews.
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