The upcoming Washington State elections on November 2, 2010 will determine a key element with respect to restrictions on alcoholic beverage sales. At the polls, constituents will be asked to vote on two state initiatives that could change the state’s alcohol regulatory system, a system that has scantly changed since Prohibition. The two state initiatives contingent upon the upcoming state election are Washington State Initiative 1100 and Washington State Initiative 1105. Both initiatives aim to privatize alcoholic beverage sales, which have been in the control of Washington’s Liquor Control Board since January 1994, as well as close the state-run liquor stores, but each has a vastly different legislative construction. Nationwide, there are 32 states that allow for private liquor sales; proponents of the Initiatives state such conditions will allow for greater competition and choice for alcoholic beverage consumers and establishments that sell liquor.
Washington State Initiative 1100
I-1100 strives to change a multitude of regulations with respect to wine, beer, and spirits as well as currently state-run liquor stores. The Initiative additionally would repeal laws that prohibit volume discounting and centralized warehousing, laws that currently require retailers to pay cash during delivery, and laws that limit cross-ownership amid the producer, distributor, and retailer tiers. I-1100 additionally serves to provide hard liquor licenses to all alcohol retailers (including grocery and convenience stores), which, according to the Liquor Control Board, could possibly increase the number of licensed retailers dramatically. The Initiative, of which $1.2 million is funded by Costco, places the power of retail sales in the hands of the private sector, and would allow for large grocers the ability to sell virtually any type of liquor or spirits. (See Initiatives 1100 & 1105: Where Should We Sell Liquor?)
How will this impact taxes on alcoholic beverages? I-1100 would additionally keep the State of Washington’s current tax of 10% on spirits and other alcoholic beverages but would eliminate the Liquor Control Board’s 51.9% markup on bottles.
Washington State Initiative 1105
In response to the nearly 400,000 voter signatures supporting I-1100, Washington Beer and Wine Wholesalers created I-1105. I-1105, like I-1100, would also provide hard liquor licenses to all alcohol retailers. In contrast to I-1100, however, I-1105 would retain many of the state regulations and maintain the three-tier distribution model but would still privatize the state’s alcoholic beverage retail sales. In essence, I-1105 seeks to preserve the placement of distributors in the system of alcoholic beverage distribution. The State of Washington would retain the ability to set price controls for both retailers and distributors of wine, spirits, and beer. I-1105 would allow for a significantly greater amount of state regulatory power than that proposed by I-1100.
What about taxes? I-1105 would eliminate the State of Washington’s current 10% tax as well as the 51.9% markup on bottles. The Initiative requires the state legislature to develop a new tax on liquor sales, but would initially eliminate all state taxes on alcoholic beverages. I-1105 is also funded by two major liquor distributors: Young’s Market Company of Los Angeles and The Odom Corporation, a Bellevue-centralized beverage distributor that functions in collaboration with Southern Wine and Spirits, the largest liquor distributor of the United States.
A Comparative Context
Regardless of which Initiative maintains the greatest amount of support amongst constituents, it has been estimated that the Initiatives would allow more than 3,000 stores within the state of Washington to sell alcoholic beverages, which is a significant expansion from the current status of 300 state-controlled stores presently in operation. State polls, however, indicate that I-1100 is the more popular of the two state initiatives. (See Voters Brace for Liquor Battle.) Additionally, several commentators have suggested that if the State of Washington implements measures of I-1100, essentially providing a winning streak for Costco, the movement with respect to the three-tier alcoholic beverage system could spread. (See Booze Initiatives Aren’t Just About State Liquor Stores.)
(Sources: The Battle of Washington State; Initiatives 1100 & 1105: Where Should We Sell Liquor?;Voters Brace for Liquor Battle;Expensive Battle Brewing Over Washington Liquor Sales;Washington State Initiatives Aim to Change Liquor Market Landscape; and Booze Initiatives Aren’t Just About State Liquor Stores.)
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DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.