Task force gets first look at state’s convoluted liquor regulations

A businessman issued a state permit to sell liquor at one venue, such as a package store or a restaurant, is barred by law from getting permission to sell at another.

That is, unless a restaurant permittee also wants to run a hotel where liquor is served, or a stand in an events coliseum — or a bowling alley.

The members of new state task force charged with analyzing the complexities of Connecticut’s liquor regulations and price controls were given a preview Wednesday of a system that administrators said hasn’t faced a comprehensive overhaul since the repeal of Prohibition in 1933.

“For every rule, there is an exception lodged in there,” Department of Consumer Protection Commissioner William Rubenstein told the Competitive Alcoholic Liquor Pricing Task Force, adding that some of these exceptions are “arcane” regulations that don’t follow a comprehensive strategy.

The department’s Liquor Control Division currently oversees 7,884 permits issued to retailers, distributors and manufacturers. Besides restaurants and bars, package and grocery stores, there are permits for hotels, clubs, other retail establishments, breweries, distributors and farm wineries.

In principle, the holder of one type of permit cannot hold another.

But over the last 40 years in particular, “the legislature has seen fit to chip away at that,” often enacting changes proposed by the industry itself, Rubenstein said. “We have general rules and we have lots of exceptions.”

For example, the state limits package store owners to three package store permits. But another who owned more than three stores prior to 1981 is exempted from that restriction.

The inconsistency also creeps into liquor pricing.

Retailers must sell wine and spirits for the cost set by the wholesaler who supplies them. That cost reflects both the wholesale price charged the retailer, as well as the mark-up.

How are these prices set?

“There’s no real uniformity here,” Rubenstein said, adding that a new law enacted this year also allows retailers to sell one product each month at up to 10 percent less than the cost set by the wholesaler.

Trying to follow the state’s liquor taxing system is no picnic either.

Department of Revenue Services Commissioner Kevin B. Sullivan told the task force that Connecticut has eight different rates for taxing beer or wine — in addition to the 6.35 percent general sales tax that also is applied to these transactions.

Want to buy wine?

The levy is 72 cents per gallon for a non-sparkling wine with less than 21 percent alcohol — unless it’s produced by a small winery, in which case the per-gallon tax is 18 cents.

For sparking wines and other fortified wines with more than 21 percent alcohol, the tax is $1.80 per gallon.

Although these taxes are applied at the distributor level, they generally are built into the price charged the consumer.

More into beer?

The beverage tax is $7.20 for each draft barrel, or 24 cents per gallon if the beer comes in a smaller container.

“We have an interestingly wide variety of choices that have been made about arguably similar products on how to tax them,” Sullivan said.

The task force, which includes legislators, state administrators, and industry representatives, has until January to issue recommendations to the General Assembly on how to strengthen Connecticut’s liquor market while making it more consumer-friendly.

Wednesday’s meeting was the second of the task force, which was organized in mid-July and has just begun its research.

Rep. Kathleen Tallarita, D-Enfield, co-chairwoman of the task force, was surprised to learn of one little known feature of the state’s liquor permitting system: pharmacies are eligible to receive retail permits.

Does that mean, hypothetically, Tallarita asked, that a major pharmacy retail chain, like CVS, could seek state permission to sell beer? She observed that this would be inconsistent given that convenience stores, that offer many similar products, are ineligible.

“That’s correct,” Rubenstein replied. “They’d be entitled to a liquor permit.

The Enfield lawmaker, one of the legislature’s leading advocates of legalizing Sunday liquor sales said afterward that while the review of regulations and tax policy was somewhat surprising, she had no delusions about the complexity of the challenge facing her group.

“Our regulations are just so old and outdated,” she said. “I don’t expect this task force to be able to fix every problem, but I think we are going to get into the crux of some of these issues and make Connecticut more competitive.”