State rule killing small Wash. private liquor stores
MONROE, Wash. (AP) - Bonnie Roulstone's business thrived when the state controlled the liquor business, and is fighting to survive now that it's out.
She's watched sales at her Clearview Spirits and Wine store plummet as competitors proliferate and new rules wrought by the voter-ordered privatization of the booze industry take root.
"It's very questionable if I can keep going," she said of the three-year-old store that operated under contract with the state before the change. "I would have had to (close) if I didn't have other resources."
She expected the cash register to ring less often when the state stopped selling hard liquor last June, just not this much less.
"There's more competition. That's what this was all about. I understand," she said. "Coming out of the gate I knew I would lose 30 percent of my walk-in customers who can go get their liquor at the grocery store. I planned for that."
What she, owners of other contract stores like her and buyers of state-owned stores through auction didn't expect is a requirement that they charge a 17 percent fee on sales to bars and restaurants.
That rule cost her significant business as restaurateurs switched to buy from distributors who are not required by the law to impose the fee. Now she's joined an alliance of small and large retailers, including Costco, to get lawmakers to erase the fee.
"I feel I can compete with anyone if I have a level playing field," she said. "Right now the field is not level."
She felt confident enough in the months after Initiative 1183 passed in November 2011 to set about opening a second store in Monroe. It is larger and she stocks a greater number and variety of craft distilled spirits, handcrafted beers and wines.
She knows it is a risky venture but she's looking for privatization to pay dividends in much the way a state-run system did before.
"I hope that the niche we're going after will be successful," she said. "I think it's going to come down to a few specialty stores and a lot of big-box retailers. I hope that we will be in the business."
Voters overwhelmingly booted the state out of the liquor business when they passed Initiative 1183.
At that time, there were 329 stores in Washington -- 167 state-owned and 162 contract -- where you could buy a pint of vodka, fifth of bourbon or unique distilled spirit. And no matter which one you shopped at, the prices were the same.
Today, nine months after the law took effect, there are 1,428 places with licenses to sell spirits, a four-fold increase. Snohomish County had 25 stores before the initiative and, as of last week, 157 licenses to sell hard liquor had been issued, according to the state Liquor Control Board.
Yet while customers celebrate more places to shop, they are unhappy prices are mostly higher than when the government ran the industry.
"The consumer got shafted," said state Sen. Mike Hewitt, R-Walla Walla, who is in the middle of talks about changes in the law. "It is very unlikely the prices will ever come back down to where they were."
Backers of the initiative said it's too soon to draw such conclusions because there is more that can be done to increase competition and lower prices.
"We have to see the market fully develop," said Julia Clark, government affairs director for the Washington Restaurant Association. "It's starting to work. Anecdotally I do hear prices are falling for some of our members."
Opponents of Initiative 1183, however, are in a bit of an I-told-you-so mood.
"The promise of convenience has been borne out," said John Guadnola, executive director of the Association of Washington Spirits and Wine Distributors. "The promise of lower prices has turned out be completely false."
Not every liquor retailer is cashing in on privatization.
Twenty-nine stores have closed since June 1, according to the state. This includes 14 former contract stores and 15 stores auctioned off by the state. The tally includes stores in Everett, Edmonds and Mukilteo.
Those closures are providing fodder for a debate in Olympia on whether to do away with the 17 percent fee imposed on sales from retailer to restaurant.
Right now, in the battle for the business of restaurants, distributors have an advantage. Under the law, distributors pay a 10 percent fee on liquor sales to retailers, like Roulstone, as well as restaurants. Retailers must charge a 17 percent fee on top of the distributor's fee. As a result restaurants don't shop at the stores to avoid that added cost.
On one side is an alliance of contract store owners, major grocers and the Washington Restaurant Association pushing for eliminating the fee. Costco, which wrote I-1183 and spent millions of dollars getting it passed, is part of it, too.
They contend the state interpreted the law wrong. Eliminating the fee, they say, will help liquor stores compete with distributors and possibly offer lower prices for some types of booze.
"That 17 percent fee was never contemplated in the initiative," Clark said. "We're not able to realize that competition envisioned in Initiative 1183 because restaurants are constrained to buying from primarily two large distributors that control 95 percent of the market."
On the other side are suppliers and distributors of spirits that contend the plain language of the initiative requires the fee. Young's Market and Southern Wine and Spirits, the two large distributors referred to by Clark, are in the association led by Guadnola.
In the middle is the Liquor Control Board whose staff gave signals early in the rule-making process that the fee might not be required on all retail-to-retail sales. In the end they did require the fee across-the-board.
Owners like Roulstone said the state pulled the rug out from under them because they counted on sales to restaurants in their planning and ended up losing that business. Several, including Roulstone, sued the state on the issue.
"We are totally noncompetitive now for the restaurant business," Roulstone said.
Agency officials responded publicly last June.
"The board's rulemaking was based on its own interpretation, with advice and counsel of its assigned senior assistant attorney general. It was fully vetted as the soundest legal interpretation," according to a statement issued in June.
"The truth is that the price of liquor is higher because of 10 percent fees at distribution and 17 percent at retail that the plaintiffs themselves drafted and voters approved in 2011. The taxes are the exact same spirits and liter taxes customers have paid for many years," it read.
Bills introduced in the House and Senate deal with the fee in slightly different ways.
House Bill 1161 erases the fee immediately on sales to bars and restaurants by any retailer, regardless of size. Senate Bill 5644 would end the fee only for owners of contract stores and former state stores; major grocers and retailers would continue paying it.
If the fee is eliminated, the state would collect between $4 million and $5 million less in revenue for the 2013-15 budget. That's according to fiscal analyses of the bills.
Costco prefers the House bill but will not oppose the Senate version, said Costco senior vice president Joel Benoliel.
"It is not enough. Politically it's probably what they can get done," Benoliel said. "They certainly ought to get that done."
Guadnola said his members are "absolutely OK" with exemptions for the small stores but questioned the need for getting rid of it for every retailer.
"Costco really needs a level playing field," he said sarcastically.
Neither bill has come up for a vote. Passage won't be easy. Under state law, an initiative can only be changed in the first two years after its passage by a supermajority of the Legislature.
"I think we will end up somewhere between the House and Senate bills," said Rep. Cary Condotta, R-East Wenatchee, whose represented his caucus in hours of meetings on the bills.
Rep. Cindy Ryu, D-Shoreline, who said she does not drink, sponsored the House bill to help create a "totally open market" for consumers.
"They should care about this (debate) because if you are an imbiber you want all the various places to get your poison of choice," she said.
She's watched sales at her Clearview Spirits and Wine store plummet as competitors proliferate and new rules wrought by the voter-ordered privatization of the booze industry take root.
"It's very questionable if I can keep going," she said of the three-year-old store that operated under contract with the state before the change. "I would have had to (close) if I didn't have other resources."
She expected the cash register to ring less often when the state stopped selling hard liquor last June, just not this much less.
"There's more competition. That's what this was all about. I understand," she said. "Coming out of the gate I knew I would lose 30 percent of my walk-in customers who can go get their liquor at the grocery store. I planned for that."
What she, owners of other contract stores like her and buyers of state-owned stores through auction didn't expect is a requirement that they charge a 17 percent fee on sales to bars and restaurants.
That rule cost her significant business as restaurateurs switched to buy from distributors who are not required by the law to impose the fee. Now she's joined an alliance of small and large retailers, including Costco, to get lawmakers to erase the fee.
"I feel I can compete with anyone if I have a level playing field," she said. "Right now the field is not level."
She felt confident enough in the months after Initiative 1183 passed in November 2011 to set about opening a second store in Monroe. It is larger and she stocks a greater number and variety of craft distilled spirits, handcrafted beers and wines.
She knows it is a risky venture but she's looking for privatization to pay dividends in much the way a state-run system did before.
"I hope that the niche we're going after will be successful," she said. "I think it's going to come down to a few specialty stores and a lot of big-box retailers. I hope that we will be in the business."
Voters overwhelmingly booted the state out of the liquor business when they passed Initiative 1183.
At that time, there were 329 stores in Washington -- 167 state-owned and 162 contract -- where you could buy a pint of vodka, fifth of bourbon or unique distilled spirit. And no matter which one you shopped at, the prices were the same.
Today, nine months after the law took effect, there are 1,428 places with licenses to sell spirits, a four-fold increase. Snohomish County had 25 stores before the initiative and, as of last week, 157 licenses to sell hard liquor had been issued, according to the state Liquor Control Board.
Yet while customers celebrate more places to shop, they are unhappy prices are mostly higher than when the government ran the industry.
"The consumer got shafted," said state Sen. Mike Hewitt, R-Walla Walla, who is in the middle of talks about changes in the law. "It is very unlikely the prices will ever come back down to where they were."
Backers of the initiative said it's too soon to draw such conclusions because there is more that can be done to increase competition and lower prices.
"We have to see the market fully develop," said Julia Clark, government affairs director for the Washington Restaurant Association. "It's starting to work. Anecdotally I do hear prices are falling for some of our members."
Opponents of Initiative 1183, however, are in a bit of an I-told-you-so mood.
"The promise of convenience has been borne out," said John Guadnola, executive director of the Association of Washington Spirits and Wine Distributors. "The promise of lower prices has turned out be completely false."
Not every liquor retailer is cashing in on privatization.
Twenty-nine stores have closed since June 1, according to the state. This includes 14 former contract stores and 15 stores auctioned off by the state. The tally includes stores in Everett, Edmonds and Mukilteo.
Those closures are providing fodder for a debate in Olympia on whether to do away with the 17 percent fee imposed on sales from retailer to restaurant.
Right now, in the battle for the business of restaurants, distributors have an advantage. Under the law, distributors pay a 10 percent fee on liquor sales to retailers, like Roulstone, as well as restaurants. Retailers must charge a 17 percent fee on top of the distributor's fee. As a result restaurants don't shop at the stores to avoid that added cost.
On one side is an alliance of contract store owners, major grocers and the Washington Restaurant Association pushing for eliminating the fee. Costco, which wrote I-1183 and spent millions of dollars getting it passed, is part of it, too.
They contend the state interpreted the law wrong. Eliminating the fee, they say, will help liquor stores compete with distributors and possibly offer lower prices for some types of booze.
"That 17 percent fee was never contemplated in the initiative," Clark said. "We're not able to realize that competition envisioned in Initiative 1183 because restaurants are constrained to buying from primarily two large distributors that control 95 percent of the market."
On the other side are suppliers and distributors of spirits that contend the plain language of the initiative requires the fee. Young's Market and Southern Wine and Spirits, the two large distributors referred to by Clark, are in the association led by Guadnola.
In the middle is the Liquor Control Board whose staff gave signals early in the rule-making process that the fee might not be required on all retail-to-retail sales. In the end they did require the fee across-the-board.
Owners like Roulstone said the state pulled the rug out from under them because they counted on sales to restaurants in their planning and ended up losing that business. Several, including Roulstone, sued the state on the issue.
"We are totally noncompetitive now for the restaurant business," Roulstone said.
Agency officials responded publicly last June.
"The board's rulemaking was based on its own interpretation, with advice and counsel of its assigned senior assistant attorney general. It was fully vetted as the soundest legal interpretation," according to a statement issued in June.
"The truth is that the price of liquor is higher because of 10 percent fees at distribution and 17 percent at retail that the plaintiffs themselves drafted and voters approved in 2011. The taxes are the exact same spirits and liter taxes customers have paid for many years," it read.
Bills introduced in the House and Senate deal with the fee in slightly different ways.
House Bill 1161 erases the fee immediately on sales to bars and restaurants by any retailer, regardless of size. Senate Bill 5644 would end the fee only for owners of contract stores and former state stores; major grocers and retailers would continue paying it.
If the fee is eliminated, the state would collect between $4 million and $5 million less in revenue for the 2013-15 budget. That's according to fiscal analyses of the bills.
Costco prefers the House bill but will not oppose the Senate version, said Costco senior vice president Joel Benoliel.
"It is not enough. Politically it's probably what they can get done," Benoliel said. "They certainly ought to get that done."
Guadnola said his members are "absolutely OK" with exemptions for the small stores but questioned the need for getting rid of it for every retailer.
"Costco really needs a level playing field," he said sarcastically.
Neither bill has come up for a vote. Passage won't be easy. Under state law, an initiative can only be changed in the first two years after its passage by a supermajority of the Legislature.
"I think we will end up somewhere between the House and Senate bills," said Rep. Cary Condotta, R-East Wenatchee, whose represented his caucus in hours of meetings on the bills.
Rep. Cindy Ryu, D-Shoreline, who said she does not drink, sponsored the House bill to help create a "totally open market" for consumers.
"They should care about this (debate) because if you are an imbiber you want all the various places to get your poison of choice," she said.
Whoa there... There are still hundreds of state  liquor employee's. First the there is the board members making a couple hundred K a year, then the enforcement agents, tabacco police, retail enforcement, etc. about the only things cut were the stores and store employee's (about 600 total). And olympia "interpreted" the fee's, that was not in the initiative. Total washington state goverment in action AGAIN, or STILL.... give me , give me , give me, or i'll take more and more and tax more and tax more.
Hey gang....it was Olympia that imposed the added fees and taxes because they were upset over losing their controlled cash cow. You want to get mad, vent on your Representative!! There never has been or ever will be a tax or a fee that a Demorat didn't fall in love with.
Pretty much need to do a liquor store run soon.... to Oregon.
I love WA State but the voters messed up on this one.Â
@VoiceofReason the voters didnt mess up, Olympia imposed the tax without voter consent.  I personally give all my business to Idaho now...
@Joy Whitney @VoiceofReason It was in the initiative that the tax would be determined by the state. Give a lion your arm for breakfast, he's going to take your leg for dinner.
LOL, silly sheep. Costco didn't care who they hurt, they just cared about getting money. It's funny how un-educated voters are. Maybe they should pass a law that voters actually have to know something about the issue before they're allowed to vote.
@Common Sense  Government unions don't care who they hurt they just care about union dues.
%s
I too was opposed to creating private store. The state actually did a pretty good job. I hate going to costco and being surrounded by all that booze. With as much inventory they seem to carry, i wonder if they are selling enough to be profitable. personally, I as a long time costco business member hope they loose their ass on the liquor sales.
What I miss is the little "minis", the single servings like you get on planes. I am not much of a drinker to begin with (it took me 15 years to finish a bottle of rum), and while somethings sound like they may be good, I do not want to spend $30+ for a bottle only to find out I can't stand the taste. The minis meant I could experiment & find what I DID like. Sadly, all my "local" liquor retailers now hvae chosen to not be bothered with those.
Good thing I don't drink and haven't bought a bottle of liquor in YEARS.
@Tattooed_Angel2 We are all really curious as to why you haven't bought a bottle of liquor in YEARS since you felt the need to share that with us. Did you wake up in a ditch naked with tattoos?
@ReallyRUSerious I am guessing it has something to do with her almost 14 year old in the house.Â
@VoiceofReason @PrairieDawn You definitely live up to your name. I will do my best to do the same! Long live the Voice of Reason!!
@PrairieDawn I bet it's because she thinks she's better than everyone else.
If one drinks so much that the new taxes/laws affect one's pocketbook then one ought to adjust their habits. I switched from bottled wine to "Franzia" years ago.Â
"The taxes are the exact same spirits and liter taxes customers have paid for many years," If that is true, than why did the price of my bottle go up 22.7%
@S_Hunter Shop out of state and have the bottle shipped in from a different supplier. That's what a friend of my husband's does.Â
@S_HunterÂ
Have you shopped around? Â Prices for me at Costco or Bevmo are nearly identical to what I was paying before the changes. Â Safeway might be similar if they have the item on a sale. Â Don't know where or you are, or what retailers are accessible to you. Â Maybe you're stuck.
@DaleInTacoma Kinda, but I can check Costco. Thanks for the tip!
Just got back from an Oregon trip with a boat load of liquor. Saved a ton of money. Effe Washington state and their unfair taxes.Â
@KOMODrone#07737Â Yeah, I bet you didn't pay any taxes to WA State when you fueled up your tank to drive to OR.
@ReallyRUSerious Sure, but I was going to do that anyway. Might as well pick up a supply of liquor while i'm at it to avoid the liquor taxes
@KOMODrone#07737 @ReallyRUSerious Glad I'm not the only one frustrated with the BS that we all have to abide by.Â
@ReallyRUSerious @KOMODrone#07737 I agree, there's no accountability! They would rather squeeze every penny out of us instead of making the necessary cuts.
@KOMODrone#07737 @ReallyRUSerious Point taken. Yes, the taxes in this state are outrageous. Maybe if there was some accountability instead of people sitting on their a$$es in Olympia enjoying their health insurance, vacations, etc. something would be accmplished.
I feel bad for these small guys who thought that this would be a chance for them to get a viable business.
The big money has taken over putting small business out of business.
What do you suppose will happen with the marijuana market?
@Hopp Yeah, it really sucks when people hope to make a windfall off of people's addictions.....If you want to make some serious cash sell tires, brakes and mufflers. Or, better yet, buy a McDonald's franchise and keep feeding the sheep.
The state should have gotten out of the liquor business through legislative  process years ago.   Bills were submitted that would have been far better than the initiative process.  But the legislature has been controlled by democrats and they are owned by the government employees unions and the legislature is paralyzed by them.Â
The ONLY reason citizens had to resort to the initiative process is because the union care about unions dues and that is all. Don't blame Costco or the initiative. Blame the government employees unions that rule this state.
@Goodwin Of course, can't have a debate stream with out some moron ranting about the unions and how they should only make minimum wage or less.
@Common Sense  @TruthinAdverts Your pathetic attempts to distract and name calling are failures and it do not change the FACT that legislative action to get the state out of the liquor business was blocked by government employees unions.   It's not hidden or covered up. You can look it up or even ask your representative if it is true.
@Goodwin gosh... guess you 'll have to blame someone else now that there aren't any more "government employees" in the liquor biz eh? Maybe you can drop the blame where it really belongs now eh hater? Like yourself.
I hear people blaming the government for our current situation in regards to liquor sales. Did you HONESTLY BELIEVE that COTSCO cared about anything but market manipulation and or dollars?
@brainsurgeon Honestly Costco's selection of liquor is so bad I don't go there. I guess if all you drink is crappy vodka then it's OK. But that's true with all their food. They offer some cheap staple stuff, but the quality is mostly garbage. Potatoes and Onions rot within two weeks. I'm less and less inclined to shop there at all.
@brainsurgeon
Costco wanted to just sell a product that the state of Washington's constitution prevents them from getting in the way of private business from selling. Your ignorance of the problem with the state getting into the of private business is what this is all about. Some of us out there have been fighting this and other over steps of both our state and federal governments for years. These fees are just the states way of punishing the people for making them pay for doing the right thing.
The Clearview store has a great selection. I am very impressed with their selection of single malt scotch.Â
1183 was just the first step, now if we can just get the state to stop treating everyone like they are raging alcoholics who need protection from themselves. Â For such a progressive society we have here in Washington our government sure can act like a puritanical tyrant sometimes. Â Â
@Sparky2112 Sometimes??????
Oh and as for all the "Way to go people who voted for 1183" commentors... Personally I could care less if I have to pay a few bucks more for a bottle of booze. Â If I was buying a bottle once a week that might be an issue (in more ways than one), but since I drink hard liquor about as often as I eat strawberry cheese cake - which ain't often (and I like them both) - this was always about convenience for me. Â I absolutely hated having to go out of my way (wasting gas mind you) to go to a store that only sells one product and was run by an owner who acted like they didn't even want to sell me the product they were selling. Â Voters remorse? Â No blanking way!
Everyone except the big retailers got ripped off on that initiative. Â Wait 2 years and then the legislature can change it maybe and make it fairer for the small shops. I would just wait till after August and then add Cannabis to their products. They'll make a lot more profit off of the cannabis that they ever will off of the alcohol.
@Blindman No they won't. The tax structure they have on pot is so harsh that the underground market will continue to flourish. They're over taxing cannabis too. Washington, the tax state.
WAH WAH frickin' WAH! Asked for it you got it.
The punishment tax and other fees and requirements are just the state's way of getting back at the voters for pushing the state out of the business. We are governed by small people, small morals, small hearts, small minds. If they can hurt the businesses in this state, they will do it, if they can put them out of business, even better.
Can't wait to see the state running the weed business...
"It is very unlikely the prices will ever come back down to where they were."
 Why is that, Mike? You have the power to reduce taxes and bring prices down. Why won't you reduce these ridiculously high taxes that harm businesses and consumers?
Â
@giveitarest They just "TALK" about reducing. Doesn't mean they actually have any intentions of doing so. MOST people in this country buy the political BS anyway.
Amazing what happens when the State deliberately tries to sink free enterprise when it adds taxes upon taxes to private liquor sales.  All one has to do is look at surrounding states, such as Oregon and Idaho, to see how badly the consumer in this state is being messed with by the State.  The other states prove that private liquor sales can be of benefit to the taxpayers of those states.  Unfortunately, this State took on a very vindictive attitude when it comes to liquor sales.  if they couldn't do it, then everyone else was going to suffer too.Â
It's unfortunate that someone like Tim Eyman doesn't take this up as a rally cry to protect the citizens and private businesses in Washington. Â Large vendors, such as Costco, aren't going to complain, because they have the ability to absorb the losses by spreading them across all of their sales. Â Small vendors just don't have that luxury.
So, when the small vendors are driven out of business, don't make the mistake of saying the voters did it. Â It wasn't the voters, it was the spiteful, vindictive, anti-business State that was ultimately responsible.
@sumner son Do you realize that Idaho and Oregon both have a state income tax? While you're complaining about paying taxes on a product you don't have to buy, the residents of both states are complaining about paying income taxes.
Don't forget that the State wasn't generating a profit on the "management" of liquor sales! But now, there are businesses that can, and others that can't.
@RTNavy Then who was and is paying for the employees benefits and wages.  Taxes Right they still have to pay for retirement benefits for the old employees. Right or Wrong I believe that's Y the tax is so dam high now.
It is not worth buying liquor in this state any more it is almost twice as much compared to out of state.
@MikeÂ
I find it much cheaper than it was before the initiative passed. Saving $3 to $5 a bottle myself...
@paperboy @Mike WHERE?? I want to shop there!!!!!!!!!!!!!!!!!
@S_HunterÂ
Safeway, Albersons, QFC, Winco...Â
Guess it depends on what you drink. We just buy half gallons of Canadian whiskey.Â
@Mike it is cheap on the military bases.