Bar owners fight drink tax in court, legislature

Though the Allegheny County drink tax went into effect as scheduled on Jan. 1, restaurant… Though the Allegheny County drink tax went into effect as scheduled on Jan. 1, restaurant and bar owners still aren’t quite ready to pay the extra 10 percent per poured drink – in more ways than one.

One issue bars and restaurants dealt with starting at 6 a.m. on New Year’s Day – the county began to enforce the tax in the morning instead of midnight as originally planned – was how to implement the system quickly amid the busy holiday season.

“We’ve been running around the clock since around Dec. 21,” Mark Gillie said.

Gillie is the Pittsburgh manager of MICROS Systems Inc., which develops and runs the cash register systems for more than 260 restaurants in Pittsburgh.

As of Friday, Gillie said about 25 percent of his customers had completely updated their systems.

But if the systems aren’t operational and the tax is, what happens to the restaurants?

“Some [clients] are working really hard to collect the tax up front; some have not had the ability to do that and are not collecting the tax,” Gillie said. “But they are paying the tax so it’s going to be a loss to them. They don’t have a choice, they are going to submit the tax.”

Restaurateurs, led by Friends Against Counterproductive Taxation, which has been fighting the tax since its inception, tried to protest the tax further at the end of December, asking Common Pleas Judge Terrence O’Brien to postpone the tax for four to six weeks.

FACT’s attorney claimed the tax was unconstitutional because state Act 44, which authorized the drink tax and $2 a day car rental tax, could not impose laws.

FACT also contended that the tax was discriminatory because six-packs sold in restaurants were subject to the tax and six-packs bought in distributors weren’t.

Judge O’Brien quickly refused to halt the drink tax, explaining that it was the county that imposed the tax, and Act 44 only allowed it to do so.

Allegheny County Chief Executive Dan Onorato issued a statement supporting the decision.

“Judge O’Brien’s decision allows us to hold the line on property taxes here in Allegheny County for the fourth consecutive year,” Onorato said. “Since I took office, we have lowered property taxes, and the adoption of a base-year assessment system has brought stability back to the County’s real estate market, put an end to back-door tax increases, and put Allegheny County on equal footing with neighboring counties.”

Another problem arose because the $727.5 million budget proposed by Onorato originally included a tax on only poured alcoholic beverages, not beer six packs. This measure was added on Dec. 21.

Gillie also attributed the delay to the short notice of the drink tax.

“We felt like we were given about 11 days official notice as to what the actual tax was,” he said.

“We worked with the county tax office to determine how the tax needed to be set up and that really was the big part of our delay. Plus, we were in the middle of the Christmas holiday and New Year’s holiday.”

Another recent claim in objection to the drink tax is that its revenue may be more than the $30 million Onorato originally projected to be used to help the Port Authority, and that the full 10 percent drink tax – the maximum the state required – is unnecessary.

However, Onorato’s office says that no one can know the exact amount of revenue the tax will bring in until next year’s budget.

“The first inkling that we may get [as to total revenue] will be at the end of February when the tax payments from January come in,” Kevin Evanto, spokesman for Onorato, said.

“Even then I don’t know that you’ll be able to extrapolate the amount that will come in for the entire year. The county executive presents his budget in October of every year, and by this October we’ll have an idea of how much money is coming in from the drink tax, and if any adjustments need to be made, he’ll make them then.”

Evanto attributed this partly to changes in spending habits and said the estimates were based off of the already existing drink tax in Philadelphia, taking into account Philadelphia’s size in comparison to Pittsburgh’s.

“We looked at a number of liquor licenses in Philadelphia and the revenue they bring in and, understanding that Philadelphia is larger than us, we basically proportionally downsized our revenue expectation,” Evanto said.

Evanto said that despite protests by restaurateurs, the maximum percentage for the drink tax allowed by the state was necessary.

“The 10 percent drink tax and the $2 rental car fee combined should bring in the $30 million we need for the Port Authority,” he said. “Based on numbers we ran, it was determined we would need [the] full 10 percent.”

However, restaurateurs may be seeing a cut that will help ease the tax’s strain.

State Senators Sean Logan, D-Monroeville, and John Rafferty, R-Montgomery, are proposing to raise the current 10-percent tax cut for any wholesale establishment with a Pennsylvania liquor license that buys its wares from the Pennsylvania Liquor Control Board.

The cut was raised from 7 percent to 10 percent in 2005 – the same time the state allowed beer distributors to be open on Sundays.

Logan was behind this measure too, and his chief of staff Ken Varhola says now all they want to do is replace 10 percent with 16 percent.

“The tourism industry in Pennsylvania is huge,” Varhola said. “The PLCB is selling a lot, and they’re bringing in a revenue. I don’t have the exact number off the top of my head but it’s in the billions, and we’re trying to help those licensed establishments [who buy from the PLCB].”

Varhola also said that the discount used to be 16.67 percent. Also, he said he believes the increase, which will most likely be a part of the state budget in 2009, will cost the PLCB less than $20 million.

While Varhola said that the Allegheny County drink tax and Logan’s bill are different issues, he did add, “it would probably help if the local restaurant saved a few bucks because they were getting a bigger discount at the PLCB.”

However, sales from the PLCB don’t include beer sales, and bars will see no cuts to drinks sold on tap or in six-packs.