What would cost Tennessee more revenue: half of all wine purchases being smuggled in from out of the state, or people eschewing the local Borders in favor of Amazon.com?

The most common defense of the three tier system forwarded by the liquor distributor cabal is that it ensures the collection and distribution of sales and excise taxes, without which Tennessee roads may no longer be the State’s pride, and Tennessee schools might fall out of the top 49 in graduation rates.

Since interstate shipments would not be directly taxable, it is a valid point. But how valid, in dollar terms? Consider a comparison.

In 2004, Amazon.com had sales of nearly seven billion dollars. While they do not break this out by state, the Bureau of Economic Analysis reports that in 2004, Tennessee accounted for 1.8% of National Income. If book demand is roughly in proportion (avoiding the easy jabs linking demand for books and graduation rates), $125 million worth of Amazon merchandise was shipped into Tennessee. Of course, while the law-abiding citizen would declare this purchase and remit taxes to the State, lets assume that this does not happen often. This suggests about eleven million dollars in taxes foregone due to a single online retailer.

But what about wine? Collections from the wine excise tax amounted to less than eight million dollars in fiscal 2004 (TN Dept. of Revenue). Figures from industry lobbyists (pdf) put the total collections at about seventeen million, including licensing fees, fines, and confiscation income.

In short, even if we take the higher industry figure, and assume that 70% of all wine sales will be lost to out-of-state sales (a ridiculous idea when shipping costs are factored in), then the state still loses more from a single online retailer than the entire wine industry.

Following up on a previous post, and slightly paraphrasing Lipman’s dishonest defense of the monopolization of alcohol, we have (original in italics):

Requiring Amazon.com to sell through our local Borders Books promotes a safe marketplace and environment for citizens by limiting the authorized channels through which books enter our state. The system also helps ensure that minors are not given access to immoral, objectionable smut and that the state can collect taxes on alcohol sales. It also allows for a level playing field for retailers of all sizes, increasing competition and supporting small business. By having exclusive rights to distribution, Borders has a vested interest in helping build brands over a long period of time, affording better growth for the brand within the market.

Senators, please pass the Book Distribution Act now to stop the madness. Think of the children.

2 Responses to “A three-tier system for Amazon”

  1. [...] Some time ago, I emailed my state representatives asking for their positions on interstate wine sales. I received a letter from State Senator Douglas Henry in response. I wasn’t expecting much, since the Senator receives substantial contributions from the liquor wholesalers cabal. As anticipated, with his donations, the Senator also apparently received the industry’s standard talking points, which are easily dismissed. [...]

  2. [...] course, protecting the children is the liquor cabal’s favorite non sequitur. I’m sure that Mr. Wilensky’s own liquor store is diligently screening underage [...]

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