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Mixed beverage sales tax could boost bar tabs

By ALLISON MILES
Jan. 11, 2014 at midnight
Updated Jan. 11, 2014 at 7:12 p.m.

Roxy Hill, event coordinator at Two Step, pours a set of rainbow shots, a unique drink served at the nightclub. A new law went into effect on Jan. 1 that will charge sales tax on mixed drinks at bars and restaurants, which can be paid by the customer or the business. "It sounds good for the restaurants but not for the nightclubs,"  president and CEO of Two Step, Bryant Price, said  of the law.

For more iNFORMATION

about House Bill 3572, which ushered in the new mixed beverage sales tax, visit the Texas Legislature online.

Long Island iced teas, vodka tonics and other alcoholic equivalents pack a punch already, but soon they could bring a bigger hit to the wallet, too.

A mixed beverage sales tax that entered into law Jan. 1 means consumers throughout the Lone Star State might shell out more for that bar tab.

The new law gives those with a mixed beverage license the option of passing the state sales tax - 8.25 percent in most cities - to the consumer, said Michael Klein, president of the Texas Bar and Nightclub Alliance.

Previously, the sales tax only applied to establishments that sold beer and wine, while those which also offered mixed drinks paid a 14 percent beverage tax to the Texas Alcoholic Beverage Commission.

Now, those with mixed beverage licenses pay a 6.7 percent tax to the commission but also contend with the sales tax.

Still, Klein said he doesn't expect consumers to see an across-the-board increase.

A restaurant that serves mixed drinks, for instance, might pass that cost on to the customer because in a relaxed atmosphere it's easy for a server to step back and make change. In a bar setting, where many business owners prefer to deal in round dollar amounts - $3 or $4, for instance - it's harder.

"I'd be surprised to see beer, vodka or soda being sold for $3.24," he said, factoring in an increase. "Employees would have to have pennies, nickels and dimes. Imagine trying to make change out of a register."

Bars could up prices by a dollar, Klein added, but in such a competitive industry, customers would just go elsewhere.

Bryant Price, who owns Two Step in Victoria, described the change as one that benefits restaurants but hurts bars and nightclubs.

"If I don't change anything, I've got to eat that tax," said Price, who said he has no immediate plans to raise drink prices. "I'll see about a 2 percent decrease in revenue."

That decrease could hurt at a time when beer and some liquor costs are also on the rise.

Restaurants, he added, typically have computer systems that allow them to ring up sales taxes differently depending on the items - which would help in this situation - while bars don't.

Price said he plans to keep an eye on both the issue and his night club's receipts down the road to determine potential price changes.

"I'll have to see how it impacts our revenue stream," he said. "We'll have to see."

At La Tejanita, sales taxes on drinks such as margaritas and the like have begun making their way onto receipts, said Jesse Olvera, who manages the restaurant. He said customers have taken notice, and many have questioned the numbers.

"Some people have complained about it," he said, adding that servers then try to explain the new taxes. "They're a little aggravated."

As for his feelings regarding the change, Olvera said, that remained unclear.

"I'm not sure," he said. "I don't know."

Yoakum residents Dennis and Lisa Ramsey said they don't often visit bars - sometimes in hotels while on vacation - but said they had no problem with the new tax.

When they do go out, Dennis Ramsey said, he already tips more than what the sales tax would cost him. Thus, there wouldn't be much difference.

"The money has to come from somewhere," he said of the state. "I don't see a problem."

If it keeps Texans from paying a state income tax, Dennis Ramsey added, that's another benefit.

Goliad pastor Anthony Franklin likened mixed drinks to cigarettes, which are already taxed.

"It's a pleasure," said Franklin, who said he doesn't drink. "A tax on that is better than a tax on something that's necessary."

Meanwhile, while Goliad resident Melinda Spence said she thought a tax might deter some people from indulging on drinks, she said there were negative aspects as well.

"We sure don't want more taxes," she said.

Spence's daughter, Kacey Spence, said she worries the move might hurt the servers who rely on tips as a large part of their income.

Customers might be used to simply handing over a $5 bill for a drink and allowing the server or bartender to keep the change, she said. If that customer is unaware of a new tax, or if he doesn't want to pay more, the server might lose out.

"I see more bad than good," said Kacey Spence, who once worked in a bar.

Klein encouraged any restaurant, bar or nightclub owner with questions regarding the law to make sure their accountant or bookkeeper is informed on the latest changes and then meet with them. Otherwise, he said, there could be consequences.

"Making a mistake now in sales tax - you're holding that money in trust for the state," Klein said. "If it's not paid, it's a crime."

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