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Package stores may ask voters to shield alcohol from sales tax

By Jenn Abelson
Globe Staff / July 30, 2009

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Just days before the Commonwealth is set to start taxing alcohol sales, the Massachusetts Package Stores Association yesterday said it is planning to file a ballot initiative to make liquor exempt from sales tax.

State lawmakers voted last month to increase the Massachusetts sales tax to 6.25 percent from 5 percent and eliminate the longtime exemption for alcohol sold in liquor stores. The new rate goes into effect Saturday. Officials have estimated that taxing liquor will raise nearly $80 million for the cash-strapped state government.

But the Massachusetts Package Stores Association predicts significantly lower revenue - about $50 million - and says that taxing alcohol in package stores will cause sales to plunge and cost the state hundreds of jobs.

That’s because consumers will shop elsewhere, such as in tax-free New Hampshire, the group says.

“My members are anticipating a drop-off in sales, especially stores near the border,’’ said Frank Anzalotti, executive director of the association, which represents the majority of the roughly 2,300 liquor stores in the state.

“We are definitely taking the initial step by August 5th to file a ballot initiative,’’ he said. “We need to do some polling and focus groups to move forward even further.’’

The group said that after it conducts those efforts, its board of directors will decide whether to proceed with a ballot initiative, which would include collecting signatures.

The goal would be a new law that would continue to exempt alcohol sales in package stores from the state sales tax. The association would not attempt to deal with the increase in the sales tax to 6.25 percent.

If the association proceeds with a campaign, the ballot question would probably be put before voters in November 2010.

Members of the well-financed alcohol industry protested the tax increase when it was proposed in June and collected more than 50,000 signatures from consumers in less than a week, Anzalotti said at the time.

The package store group has not proposed its own legislation in at least 15 years. In its last involvement in a ballot initiative, the group opposed an unsuccessful 2006 effort by supermarkets to expand the number of wine licenses for food stores.

Jon Hurst, president of the Retailers Association of Massachusetts, said it is costly to run a ballot campaign and that liquor stores would need support from suppliers and others to mount an effective effort.

Hurst said the retailers association would wait to see the effects of the tax increase before pushing forward with any repeal effort.

Republican Charles D. Baker, who officially entered the governor’s race this week, has said he would try to lower the state sales tax if he is elected.

Hurst is pressing lawmakers to approve a tax-holiday weekend like those that have been held in August for the past several years. State officials, however, have been hesitant to approve one because of the fiscal crisis.

In the meantime, State Representative John Quinn is promoting a bill that would allow merchants to advertise that they will pay or absorb the sales tax on purchases.

Current law prohibits retailers from making such claims. Vendors think this type of advertising will increase retail sales, which will in turn increase sales tax revenue, said Quinn, a New Bedford Democrat.

“Consumers enjoy sticking it to the government once in awhile,’’ Quinn said. “And the state should not care who pays the sales tax, as long as it’s paid.’’

Jenn Abelson can be reached at abelson@globe.com.

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