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If Alcohol Is Legal It Should Be Taxed

  • Oct 8, 2015 | Gail Cole

 Bethel, Alaska. Will it one day sell and tax alcohol?

More than 100 communities in Alaska ban or limit the sale or possession of alcohol in an effort to prevent the crime, suicide, and misery generated by alcohol abuse. Others ban by default, as there is no place to purchase alcohol in remote villages. According to one study, “A few bottles of alcohol in the wrong hands in these isolated communities can spell disaster.”

Banning alcohol is one thing. Enforcing the ban is another. As the United States as a whole discovered during prohibition, when a drink is wanted, a drink will be found. Bootlegging is a profitably activity in Alaska, where a bottle of booze purchased for $10 in Anchorage or Juneau can sell for $50 or more in remote, dry areas. Home brewed alternatives are also widely consumed. Many say that the war on alcohol is not only not working — it is making things worse.

So perhaps it is not surprising that in 2009, a small majority of residents of the Town of Bethel voted to turn their damp community into a wet one. During its more than 30 years as a damp community, sales of alcohol were prohibited and residents could import only 10.5 ounces of alcohol per month.

Now a wet community, there are no limits on alcohol imports or, in theory, alcohol sales. Yet in this town of about 6,300 souls, there is still no place to purchase alcohol (though it can be ordered and shipped there). As a result, bootlegging is still rampant. In fact, Bethel has been called “a bootlegger’s dream.”

A proposal was therefore put forth in March to open a liquor store in Bethel, the first in the Yukon-Kuskokwim Delta since the ban took effect more than 40 years ago. And on October 6, the people of Bethel voted in favor of “allowing alcohol sales for the first time in four decades.” A majority preferred a liquor store over a bar and rejected alcohol sales at restaurants.

Bethel community members also voted in favor of increasing the city sales tax on alcohol and marijuana in the event they are ever legally sold (Alaskans voted to legalize recreational pot in November 2014). The binding tax propositions are as follows:

  • The sales tax rate for alcohol should be 12% (the general sales tax rate is 6%)
  • The sales tax rate for marijuana (if and when it is sold in Bethel) should be 15%

Although a private business would like to open a liquor store, there is also talk of a city-owned-and-run liquor store. Kotzebue, in northwest Alaska, has owned and operated a liquor store since 2010. Kotzebue city officials say that it “clears $1 million a year from its package store, money that has gone toward community events, a teen center, the small boat harbor and other improvements.” The alcohol revenue (which includes alcohol tax and liquor store tax) has been eyed as a means to reduce the Kotzebue local 6% sales tax, but as yet that hasn’t happened.

For now, the people of Bethel and surrounding communities have to sit tight and wait, ordering their alcohol from afar when they want it. The question of alcohol sales in Bethel is far from settled.

photo credit: 20110815-20110815-DSC_4880 via photopin (license)

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.