New Law on Alcohol Sales

In case you missed it, July 1st brought a new law to Maryland that changes the landscape for alcohol sales in the State. And just like any new law there are winners, losers and possibly unintended consequences.

The winners are the wine sellers. We do make wine in the State, in fact there are quite a few. A listing can be found here. For this segment of the alcohol market, the boon is the ability to ship wines interstate. It’s called direct shipping, the kind of thing you would see with Internet purchases. So wineries can now move product to a vastly broader market.

For other alcohol sales, the law is a bit of a loser. The taxes have been raised from our base sales tax rate of 6% up to 9%. Retailers naturally complained and are worried that customers will take a short drive to Delaware to get their liquor supplies. The incentive, for the State, is the projected $85 million in new funding expected from the bump up. The anti-tax position is that the money doesn’t just magically appear, it comes from the citizens who purchase alcoholic beverages.

The unintended consequences may come in at least two areas. First, liquor smuggling isn’t unknown now in some areas of the US. It is at least partially driven by price differentials, although the taxes on smuggled products like cigarettes are much higher than the percentage increase we have. However, it’s still a temptation for a business when there’s nearly a dime on a dollar to be made.

The real risk might be with the wine. Underage drinkers, like most in their generation, are computer and Internet savvy. How difficult will it be to have a case of Maryland wine delivered for that prom party? For wineries, this will be a real issue once the inevitable lawsuit for selling to minors comes down. For now, it’s all speculation. Unforeseen consequences are just that, unforeseen.