Monday, February 21, 2011

Why the secrecy?

There's a...'discussion' taking place on the pro-privatization Facebook page in the past couple days about taxes, markups, and the "bottle fee," and one thing that's come out of it is the lack of a straightforward exposition on just how much The State Store System jacks up the price of booze, and how. Which led me to this:
If the State Stores are a PUBLIC business, the markup, bottle fee, and all taxes should be posted in every store as a public SERVICE. 
How's that strike you? Sound reasonable?They keep telling us that the State Stores are an "asset" that belongs to come we know so little about how our business is run? How about a little sunshine, Joe, PJ, et al?


Nathan said...

Oh, fer are the current LTMF rates:

50 ml -- 0.50
up to 500 ml -- 1.05
up to 1.5 L -- 1.20
1.75 L -- 1.55

up to 375 ml -- 1.10
up to 1.42 L (48 oz) -- 1.30
up to 2.25 L -- 1.50
3.0 L and up -- 2.00

LTMF is added on top of the wholesale price and the 30% markup over wholesale. These markups pay for the PLCB's operating expenses, just like any other retailer.

Then the 18% liquor tax is added on top of all of that, but that goes straight to the general fund just like sales tax.

All of this is explained in the annual retail report that the PLCB publishes on its website, except for the full schedule of LTMF rates, which anyone can get just by asking. For a government agency, that seems reasonably transparent to me.

Lew Bryson said...

Sorry to peeve you, Nathan. Is there something inherently wrong with posting these rates in a state agency? Especially considering that most "civilians" would have no idea what to look for, or what 'LTMF' even means? You'd rather citizens had to go online and dig through the PLCB's annual report, and then ask about the rates of something they most likely don't even know exists? Considering most people apparently didn't know about the Johnstown tax, I think you may be too close to the issue.

Nathan said...

Um, yes, I think it's perfectly reasonable for government agencies to publish their internal regulations and finances online instead of printing and distributing hundreds or thousands of copies that nobody requested. Cuts down on government waste and all.

Lew Bryson said...

"Hundreds of thousands of copies"? I suggested 623 (plus some for the wine kiosks and Garces Trading Company, I suppose). Printed once. With multiple printing offices at the State Capitol, I doubt that would even be a blip. And they don't even have to send it out; the PLCB has in-house graphics staff. As for government agencies' "internal regulations," the State Stores are a very particular case: a publicly-owned retail operation. An exception seems reasonable.

Want to go another round?

Nathan said...

Yes, let's! I enjoy an invigorating debate after staring at spreadsheets all day.

First of all, I didn't say "hundreds OF thousands," I said "hundreds OR thousands," figuring you might want this posted at every register instead of just one per store, but let's take this in a different direction.

What purpose would it serve to post the PLCB's mark-up policies for all customers to see? It can't possibly have any transactional effect--who is going to say, "Oh man, there's a $1.20 handling fee built into the price? Screw this, I'm outta here!"

Think of how it would affect the stores on a day to day basis. The first time anybody comes in to buy a bottle of booze, they're gonna stare at the chart of markups and taxes and wonder how the hell they're going to get charged. As soon as you get stuck behind somebody in a PLCB store who's arguing with the clerk that it's ridiculous to pay an 18% tax on top of the shelf price, you'll be ready to rip down all the signs yourself.

Lew Bryson said...

My mistake, you clearly did say "or". But one in each store -- as I, in turn, stated originally -- is plenty.

What purpose? Exposure and education. Most people I know are amazed when they learn that we're being charged the markup and the 18% and the bottle fee and a 6% cherry of sales tax on top of all that; amazed and pissed. I think people should know what they're paying when the state's running the registers, since after all: I can't vote to change the markup at Sears, but I can sure write to my rep about the State Stores...and I have.

As for this: "As soon as you get stuck behind somebody in a PLCB store who's arguing with the clerk that it's ridiculous to pay an 18% tax on top of the shelf price...", well, haven't you been reading? I wouldn't be ripping down signs, I'd be shaking the guy's hand! That's success, Nathan.

Nathan said...

But you're not paying 18% tax on top of the shelf price--that tax is already built in! Just like at a private retailer in a license state, the sticker price includes the wholesale cost, the retailer's markup to cover their operating expenses, a small profit, and the excise tax levied by state law.

The only thing to argue about with the price structure is whether the retail markup is reasonable and whether the excise tax is reasonable. The retail markup is in line with industry standards. The excise tax is...somewhat higher than most states.

Hypothetical question: would it be more helpful to raise awareness by removing the 18% excise tax from the retail price and charging it at the register like sales tax?

Lew Bryson said...

You're proving my point: if there was a sign explaining how it worked, there wouldn't be an argument. There'd be a guy at the counter saying "18%?! There's an 18% tax!?" And the thing is, there's NOT an industry standard markup; different stores select different markups. Private stores, that is.

Most people buying spirits -- and wine, and beer -- have no idea that they're paying excise tax, and therefore paying more than people who don't drink. It's a teachable moment. And yes, of course putting it on right there at the register would be great, especially when they then charged 6% sales tax on top of that. Fabulous.

Nathan said...

I don't want to get into the retail markup in too much depth since I'll be covering it on my blog as part of a series of articles I'm doing on privatization (and I heartily invite you to come rip my work to shreds), but gross profit margin for nearly all large consumer products retailers is about 25-40% depending on sector, and the PLCB's floats around 30-35%. Without actually auditing the PLCB's operating expenses, there's not much we can say, good or bad, about their markup.

It would be easy for the PLCB to put a line on every receipt that says something like "Your purchase today included $X.XX in Pennsylvania liquor taxes." It's trivial to calculate: just divide the pre-sales-tax total by 6.556. I bet the Republican-majority legislature would get behind that.

Albert Brooks said...

Nathan, I too think that it is perfectly reasonable for government agencies to publish their internal regulations and finances online. Where can I find how much the latest round of "courtesy training" costs? Or maybe how much they paid to come up with "Fine Wine and Good Spirits" or how about the rental rates for the stores compared to other stores in the same shopping area. I'd like to know why 6 delivery trucks have already been bought, and how much they cost, even though there are only 30 kiosks to support. Just for starters.

Lew Bryson said...

I'd much rather see the Republican-controlled legislature do what they said they'd do and privatize it. Then we can work on register tapes.

Ed Carson said...

And "LTMF" means?

Ed Carson said...

"Without actually auditing the PLCB's operating expenses, there's not much we can say, good or bad, about their markup."
Has anyone done an INDEPENDENT audit of the PLCB lately? If so, where are the results? If not, why not?