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Liquor bottles now become taxing issue

Outcome in state lawmakers’ control


Published Sunday, November 7th, 2004

It won't happen overnight, but liquor bottles will get bigger and drinks smaller after voters said "yes" Tuesday to repeal a 30-year-old state law that requires liquor sold by the drink be poured from minibottles.

With about 60 percent of voters approving a constitutional amendment, the issue now goes to the General Assembly in January, where lawmakers will attempt to thrash out how the state will collect taxes if a free-pour system is introduced. If the change becomes law next year, it likely will go into effect July 1, the start of the state's fiscal year, lawmakers said.

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The vote was closer than many people expected because supporters of the minibottle poured millions of dollars into television and radio commercials that claimed the legislature did not have a plan on how to tax free-pour liquor.

Minibottles are taxed at 25 cents per bottle, with about 75 million minibottles sold in the state every year. Last year, the state collected nearly $19 million from the tax from more than 2,500 bars and restaurants with licenses to sell drinks from minibottles, according to the state Department of Revenue.

If the General Assembly fails to reach an agreement, it could be another 12 months before any changes occur, keeping large bottles out of bars in the meantime.

The outcome is likely to come down to a simple choice between requiring bars and restaurants to pay a tax when they buy liquor from wholesalers, or charging consumers an additional sales tax on every drink sold across the bar.

John Kelsey, owner of Rollers Liquors and Triangle Liquors on Hilton Head Island, said he opposed the change because he was concerned that neither tax proposal would raise enough money to offset what could be lost by allowing large bottles. Both of Kelsey's stores sell minibottles to bars and restaurants but not the public.

If legislators decide to keep the tax at the wholesale level as it is now, operators like Kelsey are worried it will make liter bottles too expensive, sending bars to buy liquor at retail liquor stores.

At a retail liquor store, bar owners would pay much less tax on a liter bottle than wholesalers pay on the equivalent amount of liquor in minibottles. Bars will save about $5 in tax on a liter bottle from retailers, who pay $1.42 in tax for a liter bottle of liquor. At a wholesaler, bars pay 25 cents for every minibottle, and a liter is equivalent to about 20 minibottles.

Opponents also have said that tavern customers won't get a fair deal. With a big bottle, bartenders simply eyeball the amount they pour and can pour less than a fair amount, they say. Opponents also fear bars can dupe customers by switching off-brand liquor and brand-name bottles.

"Our only option is to work with the legislature to try and get a fair law," Kelsey said.

Advocates for the law change, primarily lawmakers and the hospitality industry, argue that free-pour will bring the state in line with the rest of the country, make drinks less strong and make them cheaper. Under the proposed change, bars could choose which size bottles they carry.

"Our interest is safety," said Tom Sponseller, president of the Hospitality Association of South Carolina.

South Carolina was the only state in the nation to prohibit drinks poured from bigger bottles, insisting bars use only the 1.7-ounce bottles of liquor seen only on airliners and in hotel mini-bars outside the state.

Many visitors complain drinks in South Carolina are too strong and don't taste the same, and cocktails made with more than one liquor are too expensive, given the restrictions of using minibottles for each brand.

"You're literally buying two or three drinks when you buy a two- or three-liquor drink," Sponseller said.

The minibottles were introduced in 1973 to encourage temperance, but critics say the tiny bottles had the opposite effect. Bartenders poured stiffer, more expensive drinks because the 1.7-ounce minibottles pack a bigger punch than the 1.25-ounce shot typically poured from larger bottles in all other states.

But lawmakers are confident a solution can be found and that the General Assembly will do so within its legislative session next year, said state Sen. Scott Richardson, R-Hilton Head Island. That would give bars time to train staff to use free-pour bottles and refit bars to accommodate the larger bottles if they choose to use them.

"I don't think there's really much to argue over and I feel like the legislature will move on pretty quickly," Richardson said.

While the minibottle is unlikely to disappear from all bars, consumers ultimately will decide how they prefer their drink, he said.

"I have every confidence that the public will figure out very quickly if an establishment serves a reasonable drink or not."

Contact Peter Hull a 706-8137 or .

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