The Texas Tribune posted an article today called “Mixed Views on Increased Beverage Tax” by Alexa Ura. The article discusses the recent changes to Texas’s mixed beverage taxing scheme that I blogged about last month. I’m quoted in the article briefly explaining why some oppose this change. I encourage you to read my blog post on the mixed beverage tax changes for a more complete and nuanced analysis of why some oppose this change to the mixed beverage tax. There are also good reasons to support the change, which I also discuss in my earlier post.
Currently, bars and restaurants that sell liquor must charge enough for drinks to cover the 14 percent mixed beverage gross receipts tax, since Texas law doesn’t allow them to collect it from customers. However, once the Legislature’s mixed beverage tax changes come into effect, the mixed beverage gross receipts tax will be reduced to 7 percent, and Texas law will require these bars and restaurants to collect an 8.25 percent sales tax from customers on the drinks they sell.
The amount this change in the mixed beverage tax will impact customers of bars and restaurants that sell liquor depends on whether bars and restaurants adjust their drink prices in response to the change. If bars and restaurants keep their drink prices the same, customers will pay more for drinks and bars and restaurants will make more money, since they will only have to pay half the tax on the same amount of receipts. But, if bars and restaurants reduce their drink prices to account for the gross receipts tax reduction, customers won’t pay much more for drinks. (However, they’ll probably still pay a little bit more since the total amount of tax Texas imposes on mixed beverages will increase from 14 percent with just the gross receipts tax to 15.25 percent with both taxes.)
It’s uncertain whether bars and restaurants will decrease their drink prices. Some may decrease their prices and others won’t. Thus, it’s too early to tell what impact the change will have on customers. However, as I noted in the Texas Tribune article, bars and restaurants don’t necessarily have much incentive to decrease their prices, as customers generally aren’t aware of how mixed beverage taxes operate and probably wouldn’t notice the difference. However, it’s possible that some owners of bars and restaurants will decrease prices anyway in the interest of equalizing total cost to the customers both before and after the change.