PA Senate Uncorks Tax Break In Wine-Shipping Bill

By Andrew Staub | PA Independent

The state Senate on Wednesday approved legislation that would allow consumers to have wine shipped straight to their door from wineries across the world — and they uncorked a tax break to celebrate.

Instead of paying the usual 18 percent liquor tax — colloquially known as the Johnstown Flood Tax because it was originally implemented to help the Cambria County city recover after a 1936 deluge — consumers would pay a $1-per-gallon excise tax on those purchases.

Using a volume-based tax would mean customers would pay about 20 cents in taxes for a 750-milliliter bottle of wine, regardless of whether it cost $10 or $50. The Johnstown Flood Tax, by comparison, would net $1.80 on the cheaper bottle of wine and $9 on the more expensive product.

State Sen. Chuck McIlhinney, R-Bucks, sponsored the amendment swapping the taxes and said last week the $1 excise tax places Pennsylvania just above the nationwide median of 72 cents a gallon. It doesn’t make sense to charge an 18 percent tax on a retail bottle of wine when a consumer will also have to pay sales taxes and shipping and handling, he said.

“I don’t think this program would be useful to the consumers of Pennsylvania if they went online and saw that they had to pay the same amount at the store or possibly more,” he said then.

But it’s the tax component of the bill that has Democratic lawmakers and United Food and Commercial Workers Local 1776 again opposing legislation that would shake up the way Pennsylvanians can buy booze, even though they have supported the concept of direct shipping.

They also have concerns about changes to the Pennsylvania Liquor Control Board’s special liquor order process. The bill reduces the markup on those requests and allows vendors to ship those products directly to licensees instead of going through the PLCB, thus avoiding a board handling fee, said UFCW Local 1776, the union representing state store employees.

Democrats said it could cost the state up to $40 million in revenue, though the Appropriations Committee fiscal note placed the revenue losses at about $6.6 million.

“You can do direct shipment without giving away all this money,” said Wendell Young IV, president of UFCW Local 1776.

The bill almost passed 31-18 in a near party-line vote. Just one Democrat crossed party lines to join Republicans in supporting the legislation.

Under current law, consumers can order wine not sold by the PLCB from licensed direct shippers, but must pick up the product in the state store. Smaller wineries can ship directly to homes, but choices are limited.

With McIlhinney’s changes, the direct-shipping bill will allow wineries across the United States and in other countries to send wine directly to Pennsylvania consumers, as long as they get a direct shippers license. They could send up to 36 cases of up to nine liters per case every year to a resident 21 and older.

McIlhinney said Wednesday that lawmakers had to clear up the direct shipping issue before they could move ahead with discussions about privatizing the state-owned monopoly on wine and spirit sales.

Given that, the bill’s passage only inflamed the ideological budget battle that’s dominated Harrisburg this week, with state Sen. Vincent Hughes, D-Philadelphia, accusing Republicans of having misplaced priorities by focusing on alcohol policy instead of education funding.

There’s also a $1.2 billion structural deficit to fill.

State Sen. Jim Brewster, D-Allegheny, said he was “very fearful” the changes would reduce revenue. Democrats instead tried to advance a sweeping plant to modernize the about 600 state stores, a proposal they said would bring in enough revenue to absorb losses felt through direct shipping and build upon an already profitable asset.

Brewster’s amendment including lifting restrictions on the number of shops that can be open on Sunday, allowing variable pricing and pushing for liquor stores inside of supermarkets.

That modernization proposal also included a direct wine shipping component that left the Johnstown Flood Tax in place. Republicans blocked a vote with a procedural move, leaving Democrats fuming after the direct shipping bill went back to the state House for reconsideration.

“While it may have been well-intended in terms of service and convenience,” Brewster said, “we believe it would have reduced the amount of revenue, which right now is a not a good time to do that.”