Massachusetts Alcohol Sales Tax: What's The Deal?

Alcohol is already heavily taxed in Massachusetts, with liquor vendors paying a state excise tax of $4.05 per gallon, plus federal excise taxes. However, there have been recent pushes for higher alcohol taxes in the state, including a proposed sales tax on alcohol sold in supermarkets and package stores, as well as a proposal to double the existing excise tax. These proposals aim to address the cost of alcohol-related issues and reduce alcohol consumption, particularly among minors. While some support these measures, others argue that they unfairly burden local businesses and consumers.

Alcohol excise tax

In Massachusetts, liquor vendors are responsible for paying a state excise tax of $4.05 per gallon, plus Federal excise taxes, for all liquor sold. The Federal alcohol excise tax is collected from the brewer/distiller by the Alcohol and Tobacco Tax and Trade Bureau and is usually passed on to the consumer in the beverage's price.

The state excise tax is adjusted depending on the percentage of alcohol in the product. For instance, for alcohol under 15% the tax is $1.10/gallon, and for alcohol over 50% it is $4.05/proof gallon.

In addition to the state and federal excise taxes, alcoholic beverages are also subject to sales tax in Massachusetts. However, there have been some recent developments regarding the sales tax on alcoholic beverages in the state.

In 2009, Massachusetts implemented an increase in the general sales tax from 5% to 6.25%, which was added on top of the existing excise tax on alcohol. This change was met with opposition from the alcohol industry, and voters rejected the new tax in a ballot question. As a result, the sales tax on alcoholic beverages sold at package and liquor stores for off-premises consumption was repealed in 2011.

Despite this, there have been recent proposals to introduce a new tax on alcohol sales in Boston, ranging from 1% to 2% on all alcohol sales in various establishments. These proposals aim to address the opioid-related addiction crisis and generate funding for treatment programs. However, they have faced resistance from retailers and local businesses, who argue that it would negatively impact their industry.

Furthermore, there have been legislative efforts to double the existing excise tax on alcohol in Massachusetts to discourage drinking and fund state spending on alcohol-related issues. While these proposals have support from public health experts and some legislators, they have also encountered opposition from industry groups and consumers concerned about the financial burden.

Overall, the alcohol excise tax in Massachusetts is a complex issue involving state and federal taxes, as well as legislative proposals for potential changes to address public health and financial concerns.

Alcohol sales tax

There have been several proposals to introduce a new sales tax on alcohol in Massachusetts in recent years, including a 2021 bill to double the excise tax, and a 2023 proposal for a 1-2% tax on all alcohol sales. These proposals have faced opposition from retailers and drinkers, who argue that alcohol is already heavily taxed. However, public health experts and some legislators support higher alcohol taxes as a way to reduce drinking and fund state spending on alcohol-related issues.

The current excise tax in Massachusetts is $4.05 per gallon for liquor, with additional taxes for alcohol under 15% ($1.10/gallon) and over 50% ($4.05/proof gallon). There is also a 0.57% tax on private club sales. These taxes are the responsibility of liquor vendors, who usually pass the cost on to the consumer. Some tax discounts are available to small brewers.

Massachusetts also has direct-to-consumer (DTC) alcohol tax requirements, which can be complicated. Licensed alcohol shippers are required to register for sales tax in most states, and sales and use tax can be applied at the state, county, city, or special district levels. There are also "markup" taxes in some states, where the retail value of the alcohol is multiplied by a percentage rate, and "gallonage" excise taxes, which are usually factored into the price of the item.

Alcohol tax legislation

However, there are excise taxes on alcohol in Massachusetts. Liquor vendors are responsible for paying a state excise tax of $4.05 per gallon, plus additional taxes based on alcohol content and private club sales. Out-of-state wineries selling directly to consumers in Massachusetts must also pay excise taxes. These taxes are typically passed on to consumers through higher beverage prices.

There have been recent proposals to introduce a new tax on alcohol sales in Boston, ranging from 1% to 2%, to address the opioid-related addiction crisis. This proposal includes all alcohol sales in establishments like restaurants, bars, and supermarkets. However, it has faced resistance from retailers and local businesses, who argue that it would negatively impact their industry and make it challenging to compete with out-of-state retailers.

Massachusetts also has specific regulations for direct-to-consumer (DTC) alcohol shipments, with licensed alcohol shippers required to register for sales tax. "Markup" taxes, where the retail value is multiplied by a percentage rate, and "gallonage"-based excise taxes may apply to DTC shipments.

Additionally, Chapter 180 corporations, associations, or organizations in Massachusetts must pay a yearly excise tax of 0.57% on gross receipts from alcoholic beverage sales. This includes fraternal organizations.

Alcohol tax opposition

In Massachusetts, liquor vendors are responsible for paying a state excise tax of $4.05 per gallon, plus Federal excise taxes, for all liquor sold. In addition, there are additional taxes based on alcohol content: for alcohol under 15%, the tax is $1.10/gallon, and for alcohol over 50%, the tax is $4.05/proof gallon. There is also a 0.57% tax on private club sales. These taxes are ultimately passed on to the consumer in the beverage's price.

While Massachusetts has not implemented a sales tax on alcohol, there have been proposals to do so. In Boston, for example, city councilors Bill Linehan and Frank Baker proposed a tax of 1-2% on all alcohol sales, including beer and wine, in various establishments such as restaurants, bars, and supermarkets. The stated objective of this proposed tax was to generate revenue for substance abuse prevention and treatment programs. However, this proposal faced opposition from retailers, particularly the Massachusetts Package Stores Association, which argued that it unfairly targeted their industry while leaving alcohol sales in restaurants, taverns, and bars untaxed. They also pointed out that alcohol is already taxed, and an additional sales tax would amount to "a tax on a tax."

The opposition to the proposed sales tax on alcohol in Boston highlights several key concerns. Firstly, the potential for an uneven playing field, with certain alcohol retailers being taxed while others are exempt. This could create a competitive disadvantage for supermarkets and package stores compared to restaurants and bars. Secondly, the financial burden on both retailers and consumers, with the additional tax potentially impacting the cost of alcohol and affecting businesses and individuals alike. Lastly, the recognition that alcohol is already subject to excise taxes, which are meant to be passed on to consumers, indicating that an additional sales tax may be viewed as excessive or punitive.

It is worth noting that Massachusetts already has a comprehensive system of alcoholic beverage excise taxes, with various forms and requirements for different types of businesses in the industry. These taxes are administered by the Massachusetts Department of Revenue (DOR) and must be filed and paid via MassTaxConnect. The DOR requires all wine growers, farmer-brewers, and wholesalers of alcoholic beverages licensed in Massachusetts to submit specific forms (AB-1, AB-1F, and AB 4-5) by the 20th day of each month for the previous month's purchases and sales. Additionally, suppliers or importers shipping alcoholic beverages into Massachusetts must file Form AB-10 by the same deadline. Out-of-state wineries selling directly to Massachusetts consumers must file Form AB-DS, with electronic payment requirements for those exceeding certain payment thresholds.

The existing excise tax structure in Massachusetts already contributes to the overall taxation of alcohol in the state. Any additional sales tax on alcohol, as proposed in Boston, would need to carefully consider the potential impact on businesses, consumers, and the competitiveness of the industry. Opponents of the sales tax proposal argue that it could disproportionately affect certain retailers and consumers, especially when combined with the existing excise taxes.

Alcohol tax supporters

Proponents of alcohol tax increases, such as David Jernigan, a professor of health law, policy, and management, cite the high number of alcohol-related deaths and adverse health outcomes in Massachusetts. With alcohol accounting for 1 in 20 deaths in the state, Jernigan and other researchers recommend policies to limit alcohol availability, reduce alcohol advertising, and increase alcohol prices through raised taxes. This aligns with the 2017 World Health Organization finding that increasing alcohol prices by raising taxes is one of the most effective and cost-effective ways to reduce alcohol-related harm.

Furthermore, some supporters of alcohol tax increases may view it as a way to promote equity and social responsibility. By increasing taxes on alcohol, which is often associated with social issues such as addiction, domestic violence, and public health problems, the additional revenue can be directed towards addressing these societal challenges. This approach aims to hold alcohol vendors and consumers accountable for the broader impacts of alcohol consumption while ensuring sufficient funding for prevention and treatment programs.

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