HB 248-ELECTRONIC TAX RETURNS & ALCOHOL TAX  3:26:39 PM CHAIR OLSON announced that the first order of business would be HOUSE BILL NO. 248, "An Act requiring the electronic submission of a tax return or report with the Department of Revenue; relating to the excise tax on alcoholic beverages; and providing for an effective date." 3:27:04 PM DALE FOX, President/CEO, Alaska Cabaret, Hotel, Restaurant and Retailers Association (CHARR), informed the committee Alaska has the highest alcohol taxes in the nation; in fact, Alaskans pay the highest taxes on wine and the second highest on beer and spirits. Currently, the excise tax on spirits is $12.80 and the proposal to double that will put the tax at $25.60, however, the national average $4.45, and $25.60 is five point seven times the national average. The excise tax on wine is currently $2.50, doubling that will put the tax at $5.00; the national average is $0.83, and $5 is six times the national average. The excise tax on beer is $1.07, doubling that will put the tax at $2.14; the national average is $0.28, and $2.14 is seven point six times the national average. Mr. Fox said the issues related to HB 248 are equity and unintended consequences. One example of an unintended consequence is that the discrepancy in price between the cost of alcohol in Alaska and Outside makes it possible to skip the $5 per gallon tax on wine in Alaska, and ship wine from California where the tax is $0.20 per gallon, saving enough money to pay shipping costs. The same is true with spirits, where the tax in Kentucky is $1.92. Mr. Fox said high taxes in Alaska will make residents buy off the Internet, as they do with so many other products. Although beer is heavy, with Oregon taxes at $0.08 per gallon, the same thing can happen with beer. He suggested that residents could buy beer in Oregon, whiskey in Kentucky and wine in California, skipping the Alaska taxes, and local distributors and retailers. Mr. Fox stressed that Alaskans should not pay seven times the national average, and urged legislators to defeat the bill. 3:31:20 PM DIANE THOMPSON, President, Alaska Hospitality Retailers, said her association is a coalition of restaurants, hotels, retailers, and coffee shops and is not a liquor lobby, although many of its venues sell liquor as part of their services to their customers. She is a co-owner of Fire Tap in Anchorage and is opposed to the proposed increase in liquor taxes. Ms. Thompson agreed that the government needs more money and suggested implementation of a general sales tax, thus liquor taxes would "pay their part, but would not be singled out." She referred to materials provided in the committee packet that show liquor taxes in Alaska to be higher than those in the rest of the nation. An article provided from the [Anchorage Daily News, dated 9/15/13] shows that liquor sales did not decline because of increased taxation. She said there is testimony that increased liquor taxes are needed to provide treatment for alcohol abuse, and this concept is not a problem for the industry; however, currently, taxes are not being used to do so. Ms. Thompson recalled that a $4 million appropriation to deal with chronic inebriates in Anchorage was changed by the Department of Health and Social Services "into a homeless program, and now a year-and-a-half, two years later, not a dollar ... of it has been spent on alcohol treatment ...." She concluded that her association believes there should be a focus on general tax measures, such as a sales tax that could provide more revenue, and that the industry supports the work of the legislature to balance Alaska's budget and prevent another recession. 3:34:27 PM RYAN MAKINSTER, Executive Director, Brewers Guild of Alaska, said he agreed with the two previous speakers and added that last year the craft beer industry in Alaska provided approximately 965 direct jobs, with a full-time equivalent job impact of approximately 1,700 positions. The craft brew industry in Alaska is responsible for a total economic impact of $454 million, and currently pays almost $30 million in state and local taxes and fees, including multiple licensing and distilling fees. Total instate expenditures that his members pay to other Alaska businesses is approximately $150 million. Mr. Makinster clarified that his member breweries fall under the exemption in HB 248 and in previous related legislation, and thus currently pay $0.35 per gallon, and the increase in HB 248 would mean the breweries will pay over twice the national average. He further explained that the exemption applies to all craft breweries producing under a certain amount and all of the guild members fall under that limit. The growing craft brewery industry is important to the state and local communities; in fact, in other states the industry has attracted new residents of the younger generation. Although craft breweries inside and outside the state would be affected by the tax increase, local breweries must pay to ship in their supplies such as glass, cans, and hops - which are not available locally - in addition to the higher tax. Because of this, the higher tax is a bigger issue for guild members. Craft breweries' products are priced higher than others and the experience in other states is that reaching a certain price level "prices" people out of the local market. Finally, Mr. Makinster noted that the state has worked to promote his industry because it is an economic driver and an expanding manufacturing industry, thus it is counterproductive to double taxes on an industry that the state seeks to promote. 3:39:46 PM CHAIR OLSON announced that public testimony would remain open. [HB 248 was held over.]