RI Fiscal 2014 Budget Eliminates Sales Tax on Alcohol

As a result of the Fiscal Year 2014 state budget approved by the General Assembly this week, there will be no sales tax imposed on alcohol purchases beginning December 1 this year.

Elimination of the sales tax on spirits and wine will remain in place through June 30, 2015, and was included in the budget in an attempt to help liquor stores which have been losing business to shops in Massachusetts, which eliminated sales tax on alcohol two years ago.

“This is a win for the consumer as well as those liquor stores which have lost a lot of business to their competitors in Massachusetts,” said Rep. Jan P. Malik (D-Dist. 67, Barrington, Warren), who has for the past two years worked to eliminate the sales tax on liquor in Rhode Island as a way to “level the playing field for Rhode Island’s small businesses.”

 “Yet more than just benefiting stores along the Massachusetts border, this will be an incredible shot in the arm for stores in communities along the Connecticut border, which should see an influx of customers from that state, where the 6.35 percent sales tax still applies to alcohol,” said Representative Malik, who is a member of the House Committee on Finance that included the sales tax plan in the budget.

Eliminating the wine and spirits sales tax from Dec. 1, 2013, to June 20, 2015, is coupled with an increase in the excise tax for beer, wine and spirits from July 1, 2013, through March 31, 2015. It is anticipated those changes could result in a revenue loss of about $1.2 million for the new fiscal year, barring an increase in sales volume in Rhode Island.

The excise tax on beer will rise from $3 to $3.30 per barrel (a few pennies on a six-pack of beer), from 60 cents to $1.40 per gallon for wine (about an extra 6 cents on a 750-millileter bottle), and from $3.75 to $5.40 per gallon of spirits.

Under the new budget plan, sales tax will still be charged on the purchase of beer.

The June 30, 2015, cutoff date, said Representative Malik, gives the state a chance to study the impact of the sales tax elimination over the course of nearly two budget cycles. “That should give us enough statistical information to decide if this is a positive action, which I believe it is, or something that needs re-thinking,” he said.