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Alcohol tax hike goes into effect

New laws that go into effect today spell good news for local wineries but leave liquor stores and bars worried about losing business.

The laws, passed earlier this year by the Maryland General Assembly, will raise the state's liquor tax by 50 percent and legalize direct shipping of wine.

Under the new tax law, alcohol purchases will be taxed 9 percent. Previously, they were taxed 6 percent, the same as the sales tax for other products.

The increase is projected to generate nearly $85 million more for the state government in 2012.

However, local merchants worry they will lose customers as the tax gap between Maryland and Delaware grows.

"Some tell me they'll re-evaluate whether it's smart to continue buying here since Delaware has no sales tax," said Greg Birney, owner of Cherry Hill Liquors in Elkton. "We're already at a 9 percent disadvantage."

Maryland's tax will remain lower than that of Pennsylvania, which charges a 6 percent sales tax on top of the so-called 18 percent Johnstown Flood Tax, which was originally intended as a temporary tax to help victims of the 1936 flood.

Robert Murray, owner of State Line Liquors in Elkton, said 40 percent of his customer base is from Delaware. Murray expects the tax hike could cost him 10 to 20 percent of his business, though he is attempting to mitigate it by offering some discounts.

Jeff Wesley, general manager of Wesley's Restaurant & Cocktails in Elkton, said he expects his liquor store, attached to the restaurant, to take a hit from the tax.

"Without a doubt, the man coming over the (state) line will just go back to Delaware," Wesley said.

He also said he will likely have to raise drink prices at his bar. For instance, he said, prior to the tax increase, he charged $3 for a beer, including the 6 percent tax. With the additional tax, the price would be $3.09. Since that is a nonstandard price, he will probably round it up to $3.25, he said.

Some other bars plan to absorb the extra cost, at least initially. Kathy McCarthy, manager of AJ Jokers bar in Elkton, said she will keep prices the same as long as she can - though a price increase may come later.

"I don't think it would have an effect on business because we have loyal customers," McCarthy said.

The second law taking effect today makes Maryland the 38th state to legalize direct shipping of wine. Both in-state and out-of-state wineries can mail bottles of wine to Maryland customers if they purchase a $200 permit.

Gift Ideas To Gift Your Friend The Best Liquor | Whisky LA

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