Iowa’s Excise Tax on Wine is among the Highest in the U.S.

I am a big fan of CellarTracker, an online program that allows me to manage my wine inventory. One nifty feature of CellarTracker is its ability to compare the price I paid for a bottle of wine with the average price paid for by the rest of the buyers of that particular bottle of wine. I noticed that the prices I paid for wine here in Iowa were consistently higher than what the other users paid. The difference started at $2.00 per bottle and generally increased to 10% as bottle prices increased. At the $30 level things became much more random. So, it came as no surprise when I came across a blog posting on wine-searcher.com that created a graphic showing the taxes paid on each gallon of wine sold. Iowa ranks right up there as having the 4th highest tax rate for wine:

(c) copyright Tax Foundation

http://taxfoundation.org//blog/map-wine-excise-tax-rates-state-2014

Obviously, I don’t buy wine by the gallon, so all of the increase in cost cannot be attributed to taxes, but a good share of it is.

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3 thoughts on “Iowa’s Excise Tax on Wine is among the Highest in the U.S.

  1. If you want an even bigger laugh, look up the same graphic for distilled spirits. Iowa would again rank right up there in the top 3. The state tax on a single case of Cedar Ridge Bourbon is $52.80, or $44.37 per gallon. Wine tax is cheap by comparison.

    • The Tax Foundation has a map for the spirits taxes for 2014 and if you go just by that map Iowa fares rather poorly, as you say. What has me puzzled is the classification of Iowa’s “tax.” The Alcoholic Beverages Division dodges the question somewhat by referring to the tax as a wholesale “markup” of 50%. That markup, taken together with the excise tax easily doubles the cost of any bottle. That system brings significant revenues to the State, which is of course a major justification for the practice. Another ostensible practice, and the only one that is likely to pass constitutional muster (engaging in the wholesaling of liquor is probably not, by itself, a valid reason for Iowa’s system), is the goal of keeping distributors from locking competing products out of bars through tying arrangements. So, the jury sitting in my head is still out as to whether Iowa has the system right.

  2. Most in the industry agree that is an antiquated system and the reason for its continued implementation is the vast amount of cash it drops into the states coffers. Now, the state could make even more money if they chose to privatize distribution but continue to levy the tax in the same fashion as the wine tax. Meaning producers/distributors sell direct and then pay the tax at the end of the month, cutting out the ABD warehouse completely. They would argue that this would lead to tax evasion, but they could easily pay for a flock of auditors with the roughly $100 million a year they would save by shutting down the warehouse and fleet of semis. An appointed government agency running a warehouse and a fleet of trucks is horribly inefficient, which you can read all about in the ABDs yearly public filings. The actual net profit after operating costs is quite low, considering they don’t actually have to pay for any of the items in their possession. As for the arbitrary 50% markup, this is what really drives the cost of liquor up in our state. It unfairly punishes higher price brands, and contributes to the domination of the bottom shelf swill. State tax on a $5 bottle = $2.50, so a $7.50 sale price to a retailer. State tax on a $20 bottle = $10, which makes it now $30 to a retailer. People wonder why our shelves are completely devoid of super-premium whiskies, this exponential tax rate is the reason. Why would a store ever order a super rare Scotch if the state is going to mark it up $300 per bottle? They won’t because they know the consumers we have for these bottles are smart enough to cross state lines and purchase these items without the obscene markup. The Binny’s stores in Chicago have made it their business strategy to bring in the finest whiskey selection in the Midwest, and I would wager that quite a few of their customers are Iowans, traveling to get what our state won’t allow. Rant over.

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