Capitol Connection: Eliminating the Alcohol Sales Tax

One of the best ways to improve Connecticut’s economy is to encourage residents to buy local. However, this can be a challenge when sales tax exists on products in Connecticut, but not in surrounding states, making shopping and buying more appealing over the state’s borders.

We see this happen frequently when people purchase beer, wine and liquor since there is no alcohol sales tax in nearby Massachusetts, Rhode Island or New Hampshire.

To encourage people to buy local, I recently proposed two bills to eliminate the alcohol sales tax at package stores and supermarkets. This is an important initiative to keep our border area retailers competitive with other states, and provide tax relief to consumers.

My proposals include a bill that would launch a pilot program exempting beer, wine and liquor from the sales tax during a six week period during the holiday season. A second bill I proposed would eliminate the sales tax on beer.

The holiday season trial period will give Connecticut a chance to see the effects of removing the sales tax. I predict that sales in Connecticut will increase, since people will no longer have to travel over the border to avoid a sales tax. Since sales will increase, and the excise tax will remain, the state could possibly take in more tax revenue than we did with the sales tax. At the same time, removing the 6.35 percent retail tax saves consumers roughly $6 million a month.

There is clearly a correlation between sales tax and the amount of in-state alcohol purchases. In Massachusetts, for example, the state saw a sharp drop in sales after they enacted a sales tax on alcohol in 2009. A year later the sales tax was repealed by voters and local sales went back up.

My goal is not to increase the amount of alcohol consumption in Connecticut, but rather to impact where people go to buy their beer, wine and liquor. I want to make it more attractive for people to spend their money locally, and I want to make sure the government is taking no more from the consumer than they have to.

I hope that by taking a step in the right direction with beer, wine and liquor sales taxes we can set an example for future tax relief. We don’t want taxes driving people over the border to make purchases. Connecticut needs people to buy local.