Mass. alcohol tax cut hurt bottom line at N.H. state-owned liquor stores
Revenue from state-owned liquor stores has trailed expectations the last couple of years, in part because Massachusetts eliminated its 6.25 percent sales tax on alcohol in 2011, according to the New Hampshire Liquor Commission’s chief financial officer.
“We hoped it wouldn’t have a huge impact, but I think what we saw was that continued increase in gasoline prices coupled with the overall economic conditions really worked together to create a perfect storm for our business,” George Tsiopras said yesterday during a presentation to the House Finance Committee division that deals with the commission’s budget.
Net profits from liquor and wine sales rose 1 percent in fiscal 2012, to $126.3 million. But the state budget passed in 2011 had estimated 5 percent growth for the year.
Tsiopras said yesterday net profits are on track to increase roughly 2 percent in fiscal 2013, which ends June 30. That’s also below initial estimates.
More than 50 percent of sales at New Hampshire liquor stores are made to out-of-state residents, Tsiopras said. But with gas prices on the rise, the economy still shaky and Massachusetts stores now selling alcohol for less thanks to the elimination of the sales tax, cross-border competition is heating up.
In response, he said, the commission is engaging in “aggressive pricing and marketing efforts,” including reducing its profit margins on some products to attract customers across the state line.
That’s why, he said, sales volume is rising faster than profits – sales were up 3.5 percent in fiscal 2012, to a record $553.5 million, compared with a 1 percent rise in net profits.
“We’re having to work much harder to get the sales today than we ever have,” he said.
Still, Tsiopras said the commission is comfortable predicting roughly 3 percent revenue growth in each of the next two years, fiscal 2014 and 2015, the biennium that begins July 1.
The liquor commission is a semi-autonomous state agency, and isn’t part of the state’s general fund. Profits from wine and liquor sales help finance the state government’s operations.
Gov. Maggie Hassan’s proposed budget for the next biennium counts on $268.2 million in profits over two years to help support general-fund spending.
Hassan has proposed changing the commission from a three-member board to an agency headed by a single commissioner. Her proposed capital budget also includes money for new retail stores in Epping, Salem and Warner, and renovations to the two stores along Interstate 95 in Hampton.
The two liquor stores along Interstate 93 in Hooksett also could be upgraded soon – the Department of Transportation last year said three companies were in the running to redevelop the rest areas at Exit 11 into full-service facilities, including expanded liquor stores. That bidding process is under way.
“We’ve received some very interesting proposals that we hope will make our rest areas a destination,” Tsiopras said.
(Ben Leubsdorf can be reached at 369-3307 or
firstname.lastname@example.org or on Twitter @BenLeubsdorf.)