The chances of a compromise in the Legislature when it comes to the state’s monopoly on wholesale distribution of wine and spirits seems minimal after the Senate passed a bill Tuesday that would build a new warehouse.
Senate Bill 2844 would use $55 million in bonds to build a new warehouse to replace the Department of Revenue’s existing one in Gluckstadt. The DOR’s Alcohol Beverage Control division would contract with an operator for 10 years to take over the new warehouse’s operations. The contractor would be paid per case of alcoholic beverages sold and the state would pay regular maintenance costs for the warehouse.
The state (or the contractor) would also levy a 25 cent per case shipping fee until a special fund created to pay for warehouse improvements reaches $25 million.
SB 2844 is authored by state Sen. Chris Johnson, R-Hattiesburg, and would take effect after passage. It passed by a 37-15 vote and is headed to the House. The bill was amended with a reverse repealer, a legislative tactic designed to keep a bill alive so it can receive further work.
This approach contrasts with that of House Bill 512, which would get the state out of the liquor and wine distribution business by January 1, 2023. As in the case with beer, wholesalers take over distribution of wine and spirits if HB 512 became law. It would also lower the excise tax on wine and spirits from 27.5 percent to 18 percent.
The tax would also be collected by the Department of Revenue’s Alcoholic Beverage Control in a different fashion. Right now, the 27.5 percent tax is assessed on each bottle sold from the Gluckstadt warehouse, but the lower rate would be assessed on wholesalers on their gross proceeds from each wholesale purchase by a retailer.
HB 512 was authored by state Rep. Trey Lamar, R-Senatobia.
The Senate bill wouldn’t be the first time that lawmakers have voted to provide more money to upgrade the Gluckstadt warehouse. The Legislature voted to spend $4 million in 2019 in warehouse improvements, but the bonds were never authorized. In 2013 and 2014, $1 million was appropriated for repairs and renovation at the warehouse. The last expansion was 2003, when a climate-controlled wine room was added.
The COVID-19 pandemic spotlighted that the 212,000 square foot state-run warehouse (built in 1983) isn’t capable of handling a large surge in sales. The DOR tried to stop shipments in July 2020 for two weeks to catch up with demand, but retailer outcry caused them to scuttle that plan.
Increasing volumes necessitate something being done. In fiscal 2021, total tax collections and profit from the warehouse were up 18.83 percent from the year before, increasing from $129.2 million to $153.5 million. In 2020, tax collections and profit from the warehouse grew by 13.1 percent, improving from $114 million in fiscal 2019 to $129 million.
Mississippi is one of 17 states that are known as control states, where the government acts as the wholesale distributor for at least one of the three tiers of alcoholic beverages — wine, spirits and beer — and possibly acts as the retailer (like in the case of Alabama) as well.
The last state to transition from a control state to a license state was Washington. The DOR, through its ABC division, licenses retailers, collects taxes at both the wholesale and retail levels and manages the Gluckstadt warehouse that contracts with a trucking firm to ship product to retailers statewide.