Stop the Illegal Alcohol Tax

San Francisco businesses and residents were dealt another blow this week when the Board of Supervisors voted to impose a new fee on every ounce of beer, wine and spirit sold in San Francisco. As businesses continue to struggle during the down economy, the alcohol mitigation fee will directly impact thousands of restaurants, hotels, clubs, wineries, grocery stores and other retail outlets serving San Francisco residents and visitors.

Businesses will not be the only ones to pay the new fee. The measure will impose a $0.076 fee per ounce of alcohol sold – about 3 to 5 cents per drink. Wholesale distributors will pass the fee on to local retail outlets. Because these bars, restaurants and grocery stores tend to price alcoholic beverages to the nearest dollar, retail outlets will in turn pass the fee on to customers. According to the City Controller, the alcohol fee is expected to result in higher retail prices and reduced spending on alcohol and other commodities across the city.

Introduced by Supervisor John Avalos, the new fee is expected to generate $16 million per year to cover the costs of serving uninsured inebriants in emergency rooms, jails, prevention programs and other alcohol-related services funded by taxpayers. While the costs associated with alcohol abuse are significant, the vast majority of people who eat and drink in San Francisco are insured and responsible, and do not utilize these emergency services.

Herein lies one major problem with Supervisor Avalos’ proposed fee. According to state law, mitigation fees can only be charged to the person using the service or to pay for the costs of implementing necessary regulations. The alcohol mitigation fee meets neither of these criteria.

Supporters of the fee argue that the beverage industry should carry more of the financial burden to treat alcohol abuse as the city continues to bleed revenue. They contend that raising money to cover alcohol-related services will free up general funds that can be used for other purposes. But California law mandates that the primary purpose of a fee must be regulatory, not merely revenue generating. The stated intent of this ordinance alone should have been enough to move the Board of Supervisors to reject it.

The Chamber applauds Supervisors Sean Elsbernd, Carmen Chu and Bevan Dufty who voted against the fee. As the owner of a small wine business, Supervisor Michela Alioto-Pier recused herself from the vote. Supervisors Chris Daly, David Campos, David Chiu, Eric Mar, Sophie Maxwell and Ross Mirkarimi joined John Avalos in voting for the illegal tax.

While addressing alcohol abuse – and its costs – is important, taxing beer, wine and spirits will only hurt businesses and residents already impacted by the economic recession. This illegal ordinance also makes the city vulnerable to costly legal challenges that will further deplete city revenue at a time when we need it most. Mayor Gavin Newsom has said he will veto the ordinance. The Chamber gives its strong support for the Mayor to do so to stop this illegal tax on alcohol in our city.