Get ready.

Expect this to be the norm.

See how much your money won’t buy anymore.

The tax man cometh.

What am I talking about? As expected, with the shortfall in revenue across the United States it is not surprising that many States are enacting new tax legislation to fill the gaps. And again as expected, beer and alcohol are easy targets. So it should come as no surprise that Massachusetts has enacted (as of August 1) a jump to its sales tax rate from 5% to 6.25%.

Until now, beer and wine was exempted from the sales tax.

Oh… wait, I didn’t mean it wasn’t taxed!

It was already subject to Federal, State and Local taxes and fees to the tune of approximately 1/3 of its value. So  what does this mean moving forward?

For a $9.99 bottle of wine, $3.55 or 35.5% will go to pay taxes.

Will this stop people from having a glass of wine? Likely not. People will still buy wine – Prohibition couldn’t even stop that!

But it will mean that to get a bottle that is worth drinking the price paid will be more, which likely means one of two things:

1. People will drink just as much, but now the quality of the wine they drink will be much less. So.. let’s do the math. If a bottle of wine for $10 will have a tax of approximately $3.55 (counting excise and sales tax), then the value of the contents is really only $6.45 in the sales channel. Assuming you have a grower, producer (winery), a wholesaler, and a retailer in the chain, how much profit do you think a bottle at that price level has to the sales chain? Not much.
2. People will drink less but pay more. This will be a drain on the wine and hospitality industries at large – from the producers, the wholesalers, retailers, restaurants, etc. The likely effect will be less business, which will mean less taxes collected (OK.. anyone see the irony in this?)

What will happen? (Here’s my prognostication:)

• Massachusetts liquor stores will have some big sales between now and August 1! (Well ..  some good news!)
• Consumers of alcohol in northern Massachusetts will head to New Hampshire after August 1
• Massachusetts retailers will see a drop in business and will be trying to find ways to lesson the negative effect of the tax
• The State of Massachusetts will use the proceeds to fund various programs – not just abuse programs, which means the tax will never go away
• I’ll make more wine (I only pay taxes on the grapes or must… not on the finished product

All I can hope for is that the citizens of the great State of Massachusetts  have a Boston Wine Party .. and when they throw it over the side …I’ll be there to collect as much as I can!