BOOZE BILL: New law restructures tax on alcohol

News Reporter

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Richard Jay, bartender, makes a bloody mary Jan. 28 at Taproom Pub & Grub. Taxes on mixed alcoholic beverages will increase at San Marcos bars and restaurants to 8.25 percent.

San Marcos bar and restaurant owners are in the process of adjusting to a law that went into effect Jan. 1 which is changing the way businesses and customers pay taxes on alcohol in Texas.

House Bill 3572 was passed during the 83rd Regular Legislative Session to reduce the tax restaurants pay on liquor from 14 percent to 6.7 percent. The bill enacts an automatic 8.25 percent sales tax on customers who purchase mixed drinks. The new law shifts the tax burden from the owners of the establishment to the consumer, said Carolyn Beck, director of communications and governmental relations at the Texas Alcoholic Beverage Commission.

Before the new bill was passed, customers of restaurants that were licensed to sell only beer and wine paid an 8.25 percent sales tax. Customers did not previously have to pay the tax at establishments licensed to sell mixed drinks.

Beck said HB 3572 helps reduce the taxes restaurants and bars are paying to the state.  Restaurant and bar owners may choose to add the new 8.25 percent sales tax on top of existing drink prices or lower their current prices and include the tax so customers do not see a significant increase, Beck said.

Local bar openers have taken different approaches to accommodating the tax.

David Alexander, general manager of Taproom Pub & Grub, said the establishment has decided to add the new tax on top of the existing drink prices. There have not been any negative comments from customers so far,
Alexander said.

“I guess everyone’s used to being taxed on something, especially when it comes to what they call the ‘sin tax,’ which is on alcohol and cigarettes,” Alexander said.

Sean Patrick’s Irish Pub and Texas Grub has added the sales tax on top of current drink prices as well, said owner
Brian Harper.

Harper said some of his customers say they are used to paying sales taxes, and most already thought they were paying it on mixed beverages.

Palmer’s Restaurant Bar and Courtyard will be dropping the base price of its drinks and including the sales tax so customers do not see an increase, said owner Monte Sheffield.

The tax changes will have “very little effect” on business, but will be more transparent for customers, Sheffield said.

“If I was getting $5.75 for a drink (before the restructuring of the tax), I’m probably gonna bring my drink down to about five and a quarter to still make it the same,” Sheffield said.

Wendy Saari, vice president of marketing and communications for the Texas Restaurant Association, said the 14 percent tax restaurants previously paid to the state was “hidden” or built into the price of the drinks.

“We really supported the bill to make the tax that it paid on liquor more transparent to consumers,” Saari said.

Officials from the Texas Restaurant Association worked closely with lawmakers to ensure the bill was fair and worked properly, Saari said.  

“Obviously it’s a tough economic climate and a competitive market, so many restaurateurs probably will pass on the 8.25 (percent) to their consumers so your $4 beer will be $4.10, or whatever,” Saari said.

Saari said the new tax will likely give establishments increased revenue to help handle rising food and labor costs, and may keep them from increasing menu prices.