Alcohol tax question

[Pete]

I guess I haven't been paying attention but I noticed last night that I paid $15 for two beers at the Garage and was also charged $3.29 in tax, which equates to 22%.

I looked it up and it appears that you pay 13.5% on alcohol on top of the 8.375% sales tax.

Holy cow!! 21+% sales tax on a beer or drink??

Anyone know how this compares to other states? Seems very high.


Also, when you personally tip do you calculate on price before or after tax (just curious what most people do).

[barrettd]

I tip on the total, after tax.

[bradh]

I tip on the total, after tax.

same

[HangryHippo]

I tip on the total, after tax.

Same.

[barrettd]

Further to that point, I usually round up to the nearest even dollar number, then do 20% on that. Not because I'm generous, but because I'm lousy at math and 20% of an even number is easier to figure out than 15% of anything else.

[sooner88]

I do the same. 20% tip on top of a 22% tax adds up fast.

[OkiePoke]

I do a lot of my tipping on per drink basis. Bottled beer is different than mixed drinks. Also depends on the type of bar I go to.

[Pete]

Doing some research, it looks like most people -- including in the service industry -- base tip before tax.

Not such a huge deal but as mentioned, when tax is 22% that does make a difference in drink tips, especially when you go out as much as i do.

I tend to be a generous tipper so that makes most beers in this town over $10-$12 per and many drinks about $20.

[Bullbear]

This has always been odd to me because clearly you pay the tax everywhere but it depends on where you go how they handle the taxation. most bars it seems have the tax figured into the price of the cocktail or beer so the Tax shock isn't as big, however you go to some places and it posts a price for your cocktail or beer then you get hit with 22% tax on top of that which feels extreme.

[barrettd]

I do a lot of my tipping on per drink basis. Bottled beer is different than mixed drinks. Also depends on the type of bar I go to.

Agree with this. If I'm paying cash at a bar, I tip a dollar each time I get a drink. Usually if I'm just doing happy hour or something and just drinking beer, I generally try to find a happy medium between a buck a beer and 15%. I guess I just don't think too much about it, since I'm out for entertainment. If I wanted to save money, or was that concerned about spending money on taxes when drinking, I'd stay home.

[jerrywall]

Doing some research, it looks like most people -- including in the service industry -- base tip before tax.

Not such a huge deal but as mentioned, when tax is 22% that does make a difference in drink tips, especially when you go out as much as i do.

I tend to be a generous tipper so that makes most beers in this town over $10-$12 per and many drinks about $20.

I'm a lazy tipper. I tend to fall at a dollar a drink. It may make me cheap at some places, and generous at others. But if I was paying by the drink, in cash at a bar, I'd be slipping a dollar in the tip jar each time I got a drink, so I follow that rule. I have good relationships with the folks at my favorite bar (Skinny Slims) so it doesn't appeared to have pissed them off..

[checkthat]

Many restaurants switched to adding on the liquor tax due to a lawsuit several years ago. Prior to the suit, most establishments just included the 13.5% in the price of the drink (ie. $10 drink for the customer = $8.65 to the establishment, $1.35 to the tax man.) The lawsuit alleged, unfortunately correctly, that adding sales tax on top of the price that already included liquor tax amounted to double taxation. Essentially, you are paying the sales tax on that $1.35 of liquor tax in the above example. To avoid this predicament, most places just started treating liquor tax as a separate line item on the bill. Of course, not many places lowered their prices to reflect that tax was no longer included. Here is an article about the suit from back then:

http://www.newson6.com/story/1529430...ver-liquor-tax

As for tipping, we usually base it on the post tax amount.

[foodiefan]

. . .2014 story on same issue.

http://newsok.com/article/5076924

interesting line from the article: The state Legislature amended the liquor tax law on advertised price last year at the urging of the Oklahoma Restaurant Association to prevent future lawsuits. “The way they explained it to me was this was a big deal ... out there in the restaurant industry,” state Rep. Earl Sears, R-Bartlesville, said.

The Legislature last year also created a new law banning any future class-action lawsuits over liquor tax claims.

[JarrodH]

To take this a step further, Look at if from the financial standpoint of the establishment. If we charge $10.00 for a drink with inclusive taxes including sales tax, that means the bar makes $7.80 or so per drink. Now take the 20% liquor cost out and an additional 5% loss out and now the bar is down to $5.85 profit in the drink before paying for anything else such as garnishes, lost glassware, bar tools, etc. This isn't even taking into account the cost to operate the establishment or pay the staff.

What I'm getting at is everyone thinks establishments do so well, especially on alcohol but we have to operate on about a 50% gross margin after liquor cost and taxes. This is why so many establishments are failing because without volume, the numbers just don't add up.

[foodiefan]

. . . I would like to believe it's about clarity. . .and making sure all establishments apply the law in an equal manner.

[Pete]

Does anyone know how Oklahoma's 13.5% liquor tax compares to other states?

[JarrodH]

http://www.taxadmin.org/assets/docs/...tes/liquor.pdf

This is a basic breakdown. Many states do not tax liquor by the drink outside of sales tax. When that is taken into consideration, we are extremely high on the by the drink percentage.

[Pete]

^

Thanks. Looks like we are way, way above average.

In fact, exactly double both the consumer and excise taxes of Texas.

Where does this money go? Into the general state fund?

[sooner88]

The first time I noticed it was buying a bottle of wine. A $50 bottle turns into $75 with tax and tip.. After an already 100%+ markup on the bottle, it's hard to justify.

[JarrodH]

"The Oklahoma Tax Commission distributes 97 percent of the resulting revenue.
One-third of that is allocated to Oklahoma counties based on their size and population and two-thirds goes to the State General Revenue Fund.
The remaining 3 percent goes to the Oklahoma Tax Commission Fund. In 2008, the state collected $87 million in alcohol tax revenue."

Per the Oklahoma Policy Institute

[JarrodH]

We are also extremely high on excise tax for local beer being produced, especially compared to our neighboring states. Our local brewers pay nearly DOUBLE in taxes compared to say New Mexico or Texas and nearly 5x as much as major craft brewing states such as Colorado. Its a direct correlation of why our breweries struggle to get regional distribution in comparison.

Oklahoma $0.40 Per Gallon
New Mexico $0.21 Per Gallon
Texas $0.19 Per Gallon
Colorado $0.08 Per Gallon
Kansas $0.18 Per Gallon
Missouri $0.06 Per Gallon
Arkansas $0.23 Per Gallon

[MagzOK]

I generally won't buy suds or alcohol drinks out anymore because I'm too cheap. I'm also too cheap to buy an iced tea or soda for $2.95 or higher. Highway robbery. I had this revelation at a restaurant one time when I was paying our family bill and realized that a round of soda's to go with our burgers cost me 15 bucks for my family of 5. Oh well I did it to myself with having three kiddos! Hahaha, but still it's the principle. It costs an establishment cents on the dollar for a soda and many charge 2-3 bucks per. Then you get into the alcohol. Juniors, for example, has you pay on two tabs if you order alcohol -- you have a food tab and then an alcohol tab. Cheers!

[IanMcDermid]

Being a bar: It's a vastly different market in the retail industry. As a team we discuss sales objectives and goals in gross figures because it can be difficult to grasp or deflating to morale for one to think that nearly a quarter of their earning just gets hacked off and sent to OTC, but as owners and upper management we always speak in terms of net after tax when discussing COGS, labor, overhead, etc...it's like that 22 cents on the dollar doesn't even exist, because, it doesn't lol. It not being collected on a tax line in addition to a price creates a two way mirror that only the book keepers see both sides of. I am sad to say that at times of high sales volume, my liquor+sales tax bill liability exceeds the cost of the bartenders labor to pour it. So it lives at the top of column to be deducted before costs are even factored. Outside of the pie chart if you will.

I certainly don't consider any establishment that charges tax after the advertised price a bar or tavern. And it's why you will usually enjoy the best prices in a bar. What you see is what you pay.

ps I also tip on the retail. But I tip heavy. And I bartended for many years and never, ever scoffed at a steady buck a drink. Keep in mind though $1 per $12 scotch cash as you go feels better psychologically than $4 on a $48 tab(or $58 if it's tax exclusive).

[Pete]

Where was the powerful OK Restaurant Association when these ridiculous taxes were being passed?

[Uptowner]

Good question. But liquor by the drink wasn't a reality in Oklahoma until the early eighties. I'm thinking the good ole boys set a number that sounded borderline extortion and ran with it. Was there an ORA back then? And even if there was who would argue with the authority about to allow liquor by the drink into restaurants. Beyond that. We all know how Okies love their status quo. We only just legalized tattoos and we still smoke in bars, where are we on that 10 commandments thing?

All (some) cynicism aside. What kind of Godzilla vs The state of Oklahoma scenario would result in the states decision to lower the liquor by the drink tax rate? As some have already stated, restaurants already charge tax on top of the retail and pass on on to the consumer. So why should the restaurants or the association care at that point?