Privatizing spirits sales

Initiative 1183 requires Washington State to:

Close the state liquor stores on May 31, 2012.
Allow private spirits retailer licensees to sell spirits to the general public beginning June 1, 2012.

Go to our implementation information to see:

The implementation timeline.
How taxes apply to spirits sales.

What are spirits?

Spirits are:

Any beverage containing alcohol that is obtained by distillation, except flavored malt beverages as defined under RCW 66.04.010(20). These products have labels that indicate "proof."
Wines exceeding 24 percent alcohol by volume as indicated on the label.

How do I get a license to sell spirits?

You can apply for a license through the Business Licensing Service at http://bls.dor.wa.gov/liquor.aspx. The Washington Liquor and Cannabis Board (LCB) approves or denies license applications.

What taxes apply to spirits?

There are two types of spirits taxes: a spirits sales tax and a spirits liter tax.

Spirits Sales Tax (SST): This tax is based on the selling price of spirits in their original package.

Spirits sales tax rate paid by the general public: 20.5%

Spirits sales tax rate paid by on-premises retailers such as restaurants, bars, etc., on their purchases from distributors, distillers, etc.: 13.7%

Spirits Liter Tax (SLT): This tax is based on the volume of the spirits being sold in the original package.

Spirits liter tax rate paid by the general public: $3.7708 per liter

Spirits liter tax rate paid by on-premises retailers such as restaurants, bars, etc., on their purchases from distributors, distillers, etc.: $2.4408 per liter

Other taxes also apply.

Business & Occupation (B&O) taxes: B&O taxes apply to the manufacture and/or sale of spirits.
Retail sales tax: This tax is collected on drinks containing spirits sold by restaurants, bars or other establishments that have an on-premises license.

To see when these taxes apply, see the implementation chart below.

How do I report and pay spirits taxes?

Businesses that owe spirits taxes to the Department are required to report those taxes on their monthly tax returns using E-file, the Department's online filing system. The spirits sales tax and spirits liter tax are reported on the Other & Quantity section of E-file. Your payment options include electronic funds transfer, E-check, and credit card. To file your return, go to our E-file login page.

How to calculate spirits taxes

Use this Spirits Tax Calculator (.xls) to determine:

Your final price including the SST and SLT.
Your price before SST and SLT are calculated.

Documenting that the right spirits tax rate was collected

On-premises licensees pay the lower SST and SLT rates when purchasing spirits. Purchases of spirits by licensees such as: off premises, distributors, spirits manufacturers, or importers are exempt from spirits taxes.

In both cases, the purchaser must provide the seller documentation to purchase at the lower rate or exempt of spirits taxes. Acceptable documentation means one of the following:

A copy of the Business License which shows the type of liquor license(s) the purchaser holds
A copy of the "tear off" portion of the Business License
All of the following data elements:
- Taxpayer name
- Address
- Type of liquor license(s) with license number
- UBI
- Expiration date
A printed copy of the purchaser's business license as listed in the "business license search" found online at licenselookup.wa.gov.

The seller must keep a copy of the documentation for audit purposes.

The Department has created a one page Spirits License Purchase List (pdf). This list provides spirits sellers with the tax rate at which each type of spirits license can purchase.

Itemizing the spirits taxes

For spirits sold in the original packaging to the general public and on-premises licenses, the seller must separately state the spirits taxes. This can be on a price list made available to customers or on a sales invoice provided to customers. Advertised prices or shelf prices will be considered not to include the spirits taxes unless they clearly identify the amount of spirits taxes included in the listed price. The spirits sales tax and the spirits liter tax can be combined into one “Spirits Taxes” amount. The use of the term “tax included” will not suffice for the requirement to itemize the spirits taxes.

Sales to non-residents

The nonresident exemption for the general sales tax does not apply to spirits taxes. Nonresidents must pay the spirits taxes.

Spirits Sales Privatization Implementation Information

All sales presumed to be by licensed parties.

On December 8, 2011:

In-state craft distillers can begin selling to the general public (up to 2 liters per person per day for off-premise consumption), subject to these taxes:

Spirits sales tax (on selling price): 20.5%
Spirits liter tax: $3.7708 per liter
Manufacturing/retailing Business and Occupation Tax (B&O)

On March 1, 2012:

In-state craft and non-craft distillers can begin selling to:

On-premises licensees* (restaurants, bars, etc.), subject to these taxes:
- Spirits sales tax (on selling price): 13.7%
- Spirits liter tax: $2.4408 per liter
- Manufacturing/wholesaling Business and Occupation Tax (B&O). Multiple Activities Tax Credit (MATC) may apply.
Off-premises licensees (grocery stores, warehouse clubs, etc.), subject to manufacturing/wholesaling B&O (MATC may apply).
Distributors, subject to manufacturing/wholesaling Business and Occupation Tax (B&O). Multiple Activities Tax Credit (MATC) may apply.

Distributors can begin selling to:

On-premises licensees* (restaurants, bars, etc.), subject to these taxes:
- Spirits sales tax (on selling price): 13.7%
- Spirits liter tax: $2.4408 per liter
- Wholesaling Business and Occupation Tax (B&O).
Off-premises licensees (grocery stores, warehouse clubs, etc.), subject to wholesaling Business and Occupation Tax (B&O).
Other distributors, subject to wholesaling Business and Occupation Tax (B&O).

On June 1, 2012:

Off-premises licensees (grocery stores, warehouse clubs, etc.) can begin selling to:

The general public, subject to these taxes:
- Spirits sales tax (on selling price): 20.5%
- Spirits liter tax: $3.7708 per liter
- Retailing Business and Occupation Tax (B&O).
On-premises licensees (restaurants, bars, etc.), subject to these taxes:
- Spirits sales tax (on selling price): 13.7%
- Spirits liter tax: $2.4408 per liter
- Wholesaling Business and Occupation Tax (B&O).

In-state non-craft distillers can begin selling to the general public, subject to these taxes:

Spirits sales tax (on selling price): 20.5%
Spirits liter tax: $3.7708 per liter
Manufacturing/retailing Business and Occupation Tax (B&O). Multiple Activities Tax Credit (MATC) may apply.

Rev: 01262012/10A

* On premises licensees may begin selling the spirits they purchase from distributors and distillers, by the glass to the general public, on March 1, 2012.