Only 4 Percent are Delinquent on County Drink Tax

Allegheny County has released a list of 138 bars and clubs that are delinquent in paying the county’s 7 percent Alcoholic Beverage Tax. Only 87 of them currently are in business.

In the North Hills, the bars that remain open but delinquent on the tax are:

* Jay's Other Place in Hampton

* Mt. Royal Inn in Shaler

* Honda’s Pub in Shaler

* Billy's Roadhouse in McCandless

* Blue in McCandless

* Fodi's Tavern in Hampton

The closed but delinquent bars include:

* Barie’s in West View

* C.J.’s Highway Bar and Grill in Allison Park

* Doc’s Route 8 Brewhouse in Hampton

* the Mason Jar in Millvale

* Whitey’s Place in Millvale

* the D’Vine Wine Bar in Ross

Bob Miecznikowski, manager of the county’s special tax division, says the list was released “to embarrass bar owners” into paying their taxes.

“There are bars all over the county that pay diligently every month,” he said. “Why should some pay while a very small percentage don’t?”

The Pennsylvania Liquor Control Board lists 2,113 active liquor licenses countywide. Only 4 percent of the active licenses are delinquent. The numbers in the North Hills are similar:

* Millvale has 14 active licenses (zero delinquent).

* West View has 12 active licenses (zero delinquent)

* McCandless has 20 active licenses (two delinquent)

* Ross has 47 active licenses (zero delinquent)

* Shaler has 21 active licenses (two delinquent)

* Hampton has 12 active licenses (two delinquent)

Despite this, the drink tax has been controversial since its inception.

Allegheny County's Chief Executive Dan Onorato signed it into law Dec. 4, 2007. The drink tax required bar and club owners to pay 10 percent of every sale. So if a whiskey sour cost $5, for example, the bar owner would add an extra 50 cents to the drink’s price and submit the extra cash to the county. Bar owners are required to self-report their earnings and submit the appropriate amount to the county at the beginning of each month.

The tax was decreased to 7 percent in January 2009 after it brought in a third more revenue than it was intended to bring in. The revenue generated was earmarked toward helping support public transit.

“People are tired of paying extra,” says Ned Sokoloff, 63, the president and chief executive officer of Specialty Group, a North Hills lending firm that caters exclusively to entrepreneurs in the bar and restaurant business. “At a certain point, you gotta say to yourself, do we really need another tax on beverages?”

Sokoloff says his company has worked with bars and restaurants since 1970 and that Allegheny County’s alcoholic drink tax has affected the restaurant and bar industries like no tax he’s seen before.

“What it seems no one stopped to think about was how quickly these taxes build up,” he said. “Of course the tax depends on your sales, but you don’t ever hear of anyone who’s got a drink tax of six dollars; you hear that bar owners have unpaid drink taxes of $10,000, $20,000, $50,000. These people are getting stuck because the business is tough enough. They’ve got their sales tax, their income tax, the possibility that they’ll be cited, in addition to renewal fees, corporate income taxes, personal taxes. They just get slammed from every direction.”

The drink tax primarily hurts mom-and-pop stores that serve smaller communities feeling the brunt of the burden, he said.

Sokoloff said that 2010 was one of his business’ strongest years. More entrepreneurs were opening bars and restaurants than ever before, but Sokoloff fears for the future.

“I think a lot of these new entrepreneurs are going to be very surprised at the amount of their profit that goes directly to the government,” he said.

Kevin Joyce, who owns the Carlton Restaurant in the Mellon Building in downtown Pittsburgh and is president of the Pennsylvania Restaurant Association, said the tax not only put a damper on his business but in bars and restaurants countywide.

He said that bars and restaurants spent 4.2 percent less with the Pennsylvania Liquor Control Board in 2009 and that this indicates bar and restaurant revenues are going down and that businesses are suffering.

“And that was a trend that was contrary to what was happening in the state,” he said. “It was a bad economic time, and we fell by 4 percent, but statewide they grew about a half percent. And surrounding counties grew by as much as 7 percent. So it was clear that the drink tax was causing a lot of consumers to book their parties elsewhere.”

Other bar owners say the taxes negative impact might have been exaggerated.

Keith Strobel, who owns Drinks Café at 348 Center Avenue, said he’s not closing his doors because of the tax.

“I mean, the tax is there so you gotta pay it,” he said. “I don’t like it, but what are you gonna do? Life goes on.”

Kedy’Ky Sherrill is the market research analyst for VisitPittsburgh, the official tourism promotion agency for Allegheny County. She says VisitPittsburgh hasn’t done specific research about how the drink tax has influenced visitors to spend money in the region but that she can’t think of even anecdotal information about anyone citing the tax as a deterrent to visitor spending.

“As far as taxes go, [visitors] pay a hotel tax, they pay the drink tax, they pay all kinds of taxes they’re probably not aware of,” she said. “They pay different taxes all the time when they travel, so I don’t know why any one tax would be more of a detriment than any other. I’m sure most people don’t even notice it.”

That’s the point, according to Anthony C. Infanti, a professor of tax law at the University of Pittsburgh.

When governments try to raise revenue, they “try to raise revenue with as little complaint as possible. Indeed, it has been famously said that taxation is the art of plucking the most feathers from a goose with the least hissing,” he said in an email

Infanti said that relying on taxes that are essentially hidden accomplishes that.

“A tax on drinks is one that most people will not notice when they go to a bar,” he said. “The county may have been hoping for this result.”

Vicki Fodi, who owns Fodi's Tavern in Hampton, said not paying the tax is not necessarily an act of disobedience.

“I just got behind,” she said. “I’m not protesting it. I just need to honor it and pay it. I don’t have anything bad or good to say about [the tax]. It’s just something I’m falling behind on and need to take care of.”

Fodi said the treasurer’s department has contacted her and said it could sue her for as much as $15,000 in back taxes and maybe close the bar, which has been in her family since Prohibition. She says she plans to take out a bank loan to catch up.

“There’s a ton of work to be done,” she said. “There’s paperwork, bartending, plumbing. I run this place basically alone. There are many hats in the job. Sometimes I fall behind.”