Alcoholic Beverage Tax

Alcoholic Beverage Tax

Alcoholic beverage taxes are shared among many governments.  The alcoholic beverage tax is a selective sales tax that is designed to raise revenue from sales of objects that society considers “sins.” Taxes on alcoholic beverages, which are collected by the state but shared with local governments, contributed $111 million in 2013, slightly less than 1 percent of all tax revenue. Tax revenue has grown about 4.5 percent per year and was just $29 per person in 2013.

alcohol-taxes

Advantages of an alcoholic beverage tax are:

  • It can be avoided by not purchasing the taxed items;
  • As a “sin tax,” it sends a message that society does not approve of use of these products; and
  • Tax revenue is steady since demand for alcoholic beverages does not change much regardless of the economy.

Disadvantages are:

  • The tax cannot generate high revenue amounts;
  • The tax affects low income taxpayers the most since it takes a larger share of their income to purchase the same quantity of taxable beverages; and
  • The tax can be avoided legally and illegally through tribal sales and interstate shipments.

Alcoholic beverage taxes have been charged since prohibition was repealed in 1933 for low-alcohol beverages and 1959 for other alcoholic beverages. Rates were last raised in 1987.

There are several different beverage taxes in Oklahoma
. “3.2 beer” is taxed at 11.25 per 31-gallon barrel, or about 20 cents per six pack. Higher alcohol beer, wine, and liquor are taxed at rates between one-half and two cents per ounce. These taxes are paid by wholesalers to the Oklahoma Alcoholic Beverage Laws Enforcement Commission and included in the retail price of the beverage. In addition to the wholesale tax there is a 13.5 percent tax on mixed drinks served at bars and restaurants.

The various alcoholic beverage taxes are divided differently among different governments. The state general revenue fund gets all of the low-alcohol beer tax and the mixed drink tax and approximately two-thirds of the other beverage taxes. The rest of the taxes are distributed to counties and cities based on their share of the state’s population.

See OK Policy’s issue brief on alcoholic beverages taxes (2011).

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