POSITION:
The Pennsylvania Tourism & Lodging Association (PTLA) supports the elimination of the 18% Johnstown Flood Tax for licensees, who collectively are the single largest customer of the Pennsylvania Liquor Control Board (PLCB) representing nearly 30% of total PLCB sales in Pennsylvania.
STATUS:
House Bill 1463 was introduced by Representative Scott Boyd (R-Lancaster) on May 22, 2003. This bill repeals the 18% flood tax for licensees and shifts the 6% sales tax from the bottle to the glass. House Bill 1463 was referred to the House Committee on Tourism & Recreation Development.
BACKGROUND:
Last year, the PTLA, in cooperation with the PA Restaurant Assocation, lobbied to increase the wholesale discount on the purchase of wine & spirits in Pennsylvania from its current level of 7% to 18% (the discount was nearly 17% in 1980). Our goal was to reestablish a more reasonable wholesale relationship between the PLCB and licensees. We were also aiming for significant relief for our industry, which has suffered greatly over the past 3 years, and is in urgent need of help. Our effort received a great deal of support in both the House and the Senate, but ultimately our lobbying was not enough to successfully enact legislation to increase the wholesale discount for licensees who are bulk purchasers from the PLCB.
This year, still aiming for significant relief for our industry and building on the strong case we made last year, we have mounted a campaign to eliminate the onerous 18% Johnstown Flood Tax for licensees. Elimination of this outdated tax enacted in 1936 after the Johnstown Flood occurred will provide significant relief to our industry without reducing the PLCB's annual profit.
Pennsylvania hotels, restaurants and other businesses who hold liquor licenses must purchase their wine & spirits from the PLCB. Unlike neighboring states where the free market principle reigns, our businesses are held captive by the prices that the PLCB charges. Furthermore, all products sold in Pennsylvania are subject to five levels of compound taxes and markups that drive up costs, putting licensees at a serious competitive disadvantage with businesses in neighboring states and limiting the choices and prices for our customers and the general public.
For example, a recent 15 case special wine order placed in Pennsylvania, New Jersey, and New York showed the price in Pennsylvania was 88% greater than the price in the other states. This disparity in pricing for essential products is simply unacceptable.
Wine & spirits - raw materials for licensed businesses are automatically marked up 30% by the PLCB. Then a bottle charge is added a $1.25 on a standard sized bottle. Then the 18% Johnstown Flood Tax is applied. Then the PLCB rounds the new total up to the nearest 9. Finally, a mere 7% wholesale discount is applied for licensees, and then the 6% sales tax is added to the bottle. These unreasonable taxes represent an enormous burden for an important Pennsylvania industry that operates on a slim average profit margin even in good economic times.
The elimination of the onerous 18% Johnstown Flood Tax would help bring licensee prices down to a more reasonable level for the purchase of their wine & spirits. The savings would allow licensees to reinvest in their businesses and their employees, generating even more economic activity and additional tax revenue for the Commonwealth.
The elimination of the Johnstown Flood Tax for licensees is long overdue, and enactment of this proposal would help support and protect Pennsylvania's second largest industry.
5/22/03 - Approved by Board of Directors
