The change in tax policy, which does not apply to beer, was put into the 2013 budget in part by Barrington and Warren Rep. Jan Malik, who owns Malik Liquors in Warren. He and other proponents hope the measure will convince shoppers to stay in Rhode Island instead of heading over the border to Massachusetts, where alcohol is already tax-free. He also hopes it will help merchants along the Connecticut border; alcohol is taxed in that state.
“It’s finally going to give us the ability to be competitive,” Rep. Malik said this week. “The question is, how much have we been losing all along?”
Rep. Malik has long been an opponent of a sales tax in Rhode Island, and has twice submitted legislation to repeal it. While that has not gained much traction yet, the alcohol issue has. About a year ago he started testing the waters and asking other store owners about repealing the tax.
“I ended up talking to 1776, McGreen’s, Haxtons,” he said. “When you’re in a profession and you see things happening, you’d better react to it. That’s what occurred here.”
There was plenty of support for it within the industry. Still, convincing legislative leaders to do away with the tax wasn’t easy. Rhode Island generated $24.3 million in liquor taxes during 2012 — about half of that from beer, with the other half split between wine and liquor. Key to getting the measure put into the budget was raising the excise tax on alcohol, which is paid for by distributors. While the excise tax costs pennies on the gallon, Rep. Malik reasoned, eliminating the sales tax can save several dollars on an average purchase.
In the end, estimates are that the change in tax policy will cost the state about $1.2 million this coming fiscal year.
Beer was left out of the equation for a simple reason, he said: Massachusetts has a deposit law, so customers are already charge a 30 cents per six pack deposit. Without that deposit in Rhode Island, he said, “it’s a wash. We’re competitive with beer, but not with wine and liquor.”
The change in tax policy is expected to run for at least 15 months. After that, Rep. Malik said, the state will study whether it impacted Rhode Island sales, and how.
“It’s all about shopping in Rhode Island, and bringing people in,” he said. “We’re going to look at it and see what happens.”