Tax increase hurts retailers in Maryland

The poor performance of stores in Maryland, US, in 2012 is a direct result of last year’s alcohol tax increase, according to the Distilled Spirits Council’s chief economist.

David Ozgo, DISCUS senior VP for strategic and economic analysis, reports that alcohol sales fell far below the national average and well under the rapid growth rate seen in Virginia, Delaware and Washington, DC.

“Alcohol sales in Maryland have been anaemic in 2012 – compared to the rest of the country which has seen a good uptick,” Ozgo said, pointing to last year’s 50% alcohol sales tax increase as the primary culprit. “Last year’s ill-advised alcohol tax increase hurt spirits merchants in Maryland by forcing consumers to trade down to less expensive products or simply cross state lines. In fact, the only people not upset by these lackluster results are spirits retailers in surrounding states ringing up Maryland dollars.”

Ozgo said Maryland’s “off-premise” establishments such as package stores are struggling far more than the state’s restaurants and bars. Nationwide, package store sales are up 3.3% but down slightly in Maryland. “As you know, Virginia has exorbitant prices. As a result, we estimate that Virginia loses between 15 and 20% of its sales each year to surrounding states. Many Maryland package stores act as destination outlets for Virginians. When we look at year to date off-premise depletions in Virginia we find a very strong growth rate of 5.0%. In D.C. off-premise depletions have grown by 2.8%, close to the national average. Delaware has experienced a boom, with off-premise depletions sky-rocketing 8.8%. I suspect that while many Virginian’s are now staying home, Marylander’s are voting with their feet and crossing into Delaware to make purchases.

19 November 2012 - Felicity Murray