Local ABC boards want bigger profit margin
Posted May 7, 2010
Updated May 8, 2010
Raleigh, N.C. — Lawmakers raised the excise tax on liquor last year by 20 percent to help balance the budget, but local liquor boards now complain that the move has dented their bottom lines.
In a March 29 letter to Jon Williams, chairman of the state Alcoholic Beverage Control Commission, the North Carolina Association of ABC Boards asked the state to allow them to raise their mark-ups on liquor sales from 39 percent to 41.5 percent.
"With everything the way it is, times are tough, even for ABC boards that produce and generate a lot of revenue," said Mike Myrick, president of the state association and business manager for the Wayne County ABC Board.
Although the state runs the $700 million-a-year liquor sales system, local boards operate the retail stores.
Myrick said raising the excise tax from 25 to 30 percent of ABC store revenue has squeezed the profits of local boards. Nine of the 167 local boards are in the red, while many others are barely breaking even, he said.
"They're finding it tough to pay their bills, especially the smaller ones," he said.
Records show that ABC boards posted an average profit, after taxes and expenses, of 10 percent last year. Wake County ABC officials said their profits are up 3.5 percent so far this year.
Under the current system, a higher mark-up affects all ABC board statewide, whether or not they are in financial trouble.
"The big boards, my board, we don't need help right now," Myrick said.
The state ABC Commission adjusts liquor prices every three months, and Myrick acknowledged that the higher excise taxes affected profits for only two months after the taxes took effect last September. That has led to lower results for the fiscal year, which ends in June.
He said local boards hope their finances rebound in the 2010-11 fiscal year, which starts in July, but there are no guarantees.
Some opponents said a bigger mark-up isn't necessary for local ABC boards to survive. They blame greedy boards and poor management for financial troubles.
"Seems to me, (you ought to) close it down (and) replace who's on the local ABC commission to make it more efficient," said state Sen. Neal Hunt, R-Wake.
The last time the state raised the mark-up for the local boards was in November 2006, when it went from 38.2 to 39 percent. The last four increases have averaged 1 percentage point.
The state commission could consider the request for another mark-up next month, and if approved, it could take effect as early as August. Myrick said the change could increase the price of a bottle of liquor by 40 to 45 cents.