12/10/09 — Alcohol sales tax hike could affect ABC stores

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Alcohol sales tax hike could affect ABC stores

By Steve Herring
Published in News on December 10, 2009 1:46 PM

The increase in the state alcohol sales excise tax might benefit its bottom line, but it could end up taking a $200,000 bite out of local revenues, said Mike Myrick, Wayne ABC Board business manager.

Wayne County generated $6.6 million last year in ABC sales. Right off the top, the state received $1.238 million in excise tax revenues and total tax revenue of $1.343 million.

"When we (ABC Board) were established in June of 1964, the excise tax was 16 percent," Myrick said. "Eight of it went to the state and eight of it stayed right here in Wayne County. Over the years they have whittled it away. Now it is not 16 percent, it is 30 percent and it all goes to the state. The state gets every bit of that excise tax right off the top.

"If you raise taxes at the front of the (revenue distribution) formula, it squeezes what comes out the end, which is distributions to the local governments."

For the fiscal year ending June 30, Wayne County produced $1,343,146 in alcohol tax revenues for the state.

"Our percentage of profit to sales is 7.43 percent, and for a rural county like Wayne, that is pretty good," Myrick said.

Locally, the county received a total distribution of $322,674. The total included:

* $24,674 for law enforcement. That includes a part-time ABC officer who checks the bars, restaurants and other permitees and answers questions about how to run an ABC outlet.

* $2,000 for alcohol education

* $296,000 for Wayne County, Goldsboro, Mount Olive, Fremont, Rosewood and the Walnut Creek-LaGrange area (where ABC stores are located).

Also located at the main store is a mixed beverage outlet where restaurants and bars pick up their alcoholic beverages.

The increase in the excise tax from 25 to 30 amounts to a 20 percent increase, Myrick said.

"In October, (the tax) was an additional $20,000 that went to the state in the excise tax that we would have had for profit to distribute to the county and cities that we no longer have," he said. "That is just for the month of October, I'd say (the total will be) well over $200,000 for the year.

"When the fiscal year ends (June 30) we pay six months later, so the ones we are going to pay out to the county in December came from last (fiscal) year. We had a good year and we did not have that extra tax."

Myrick said the state has not indicated whether the increase will be permanent. In the past, the state has been known to increase, then decease the tax only to increase it again, he said.

"It (revenue) is an 80-20 split. We would like to see more stay in Wayne County. When the governor wanted to raise the excise tax it goes to the General Fund and we never see it again. Back in 1993, they raised taxes two years in a row and we actually had a decline in sales in the state that took four to five years to turn around."

Myrick said sales were coming out of that nose dive when he started with the system in 1996.

"If you raise taxes so much up front, sales drop off on the front plus the (ABC) boards aren't producing revenue," he said. "The state is getting its share up front and local boards will see a big drop in distribution to local communities because of the drop in sales."

Along with setting the excise tax, the state also sets the price of alcohol.

"We are a controlled retail business," Myrick said. "It is a retail business, and we have no control over the price. We can't set prices and we can't advertise. In a real private retail business those are the two key things you do to make money and bring people into the store."

North Carolina is one of 18 control states. It is the only one where the stores are locally run and operated. There are more than 150 ABC Boards in the state. About 50 are county boards and the remainder are city boards. In some cases a board may have only one store such as in Clinton and Surf City, he said.

"We have some counties that have as many as four boards," Myrick said. "Wayne County decided to have a county system. There has been some talk to look at forced merger, to have the city board folded into county boards and have a more consolidated system."

He noted that Wake County has 16 percent profit margin while Durham County's is 9 percent compared to Hyde County, which was minus 3 percent.

It was struggling stores like the one in Hyde County that prompted a state study that addressed the mergers and that some people say hinted at privatization of the system.

Myrick said he thinks most boards realize they can be more efficient and that they owe it to the public to be so.

"I think that is the best thing it has done for local boards," he said. "I do think the state is looking to have more control over the local operations and in some areas they should. A certain amount is needed, but again these are locally operated systems and it comes down to a question of providing service and generating revenues. The problem is that most of the revenue on the front end is going to the state."

The main Goldsboro ABC store across from Wal-Mart does $2.6 million worth of business annually while the other stores range from $600,000 to $900,000 a year.

He said the Fremont store lost money until opening just three days a week -- Tuesday, Friday and Saturday.

"We are just breaking even, but we are in the black up there," he said. "If it was about profit, we probably would close that store and the other Goldsboro store in the Little River Shopping Center. Then the profit margin would probably go up , but we would not be providing service to residents of Wayne County like we are now."

Myrick said that North Carolina is 45th in the nation in alcohol consumption, but seventh in revenue.

"For a controlled state, that is balance you want," he said.

When states go private, the number of alcohol sales outlets increase on average by fivefold, he said.