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    Regional Report: West Update

    Blue laws fall in Colorado, while huge tax increases are possible in California on beer, wine and spirits, and Oregon faces debates on cigarette taxes and meal breaks.

    Blue laws prohibiting the sale of wine, beer and liquor on Sundays have tumbled down throughout the nation until there are now only 15 states with such restrictions on the books—and Colorado is no longer one of them. As of July 1, 2008, Colorado liquor stores are open for business on Sundays, something they've been unable to do since 1933.

    But there's a problem. Liquor store retailers can sell full strength beer, while the state's convenience stores can sell only 3.2 percent "prohibition" beer. The law that prohibits c-stores and other grocers from selling full strength beer is still firmly in place, and Mark Larson, executive director of the Colorado/Wyoming Petroleum Marketers Association/Convenience Store Association (CWPMA) thinks its grossly unfair.

    "There were two Sunday liquor sale proposals before the legislature last session," he said. "One allowing liquor stores to open on Sunday, and one allowing c-stores and groceries to sell wine and full-strength beer. Because of overwhelming objections by the liquor interests, only their proposal was passed. Ours, permitting c-stores and groceries to sell full-strength beer, was killed in committee and in one legislative swoop our stores lost 75 to 80 percent of their beer sales, since most of that business takes place on Sunday."

    The 2009 Colorado legislative session gets under way in January and CWPMA will be there, supporting legislation to take down the rest of the barrier that stands in the way of c-stores and groceries from selling full-strength beer. "All we're asking for is a level playing field," said Larson. "We're going to fight to get it."

    In January of this year California's projected budget deficit was $16 billion. Today it's estimated at $28 billion through June 30, 2010. And it's expected to come in at $22 billion a year every year until 2014.

    The question remains, where can California turn for more revenue? It has the highest state-mandated sales tax (7.25 percent), and the nation's highest state gasoline tax (45.5 cents a gallon). Alcohol as the answer for the governor of California, who is proposing higher taxes on beer, wine and spirits.

    Proposed are the following increases:

    -- Beer: from 20 cents to 73 cents a gallon, a 365 percent increase;
    -- Wine: from 20 cents to $1.40 per gallon, a 700 percent increase; and,
    -- Spirits, from $3.30 to $7.50 per gallon, a 227 percent increase.

    With such increases the California Department of Finance estimates the new taxes would raise $233 million during the 2008-2009 fiscal year, and $585 million in 2009-2010. Totaling $818 million, the proposed funds would be 2.92 percent of the expected deficit.

    Defenders of the increases noted the last alcohol tax hike took place 16 years ago and was only one cent on a glass of wine and two cents per can of beer and shot of spirits. The Wine Institute is opposed to any tax increases that would single out California's winegrape growers and vintners, which contributes $52 billion a year to the state in economic activity it generates.

    Also opposing the tax increases is the California Independent Grocers Association (CIGA), based in Sacramento. "We plan to mount vigorous opposition to the governor's proposal," said John Handley, CIGA Government Relations director. "The independent grocers of California are struggling hard enough to maintain profitability in today's market without the extra burden of tax increases that can only discourage sales and eat into their already slim margins. If the governor decides to go ahead with his proposal, we'll be there to oppose him on it."

    In November 2007 Oregonians were given a choice of accepting or rejecting a cigarette tax increase of 84.5 cents a pack to fund a health insurance program for children, and by an overwhelming vote of 59 percent to 41 percent it was rejected.

    But the initiative is not dead. On Jan. 12, 2009, when the legislative session for 2009 gets under way, the governor is expected to propose a cigarette tax increase again, aiming at a 60-cent increase, which would bring the per pack tax to $1.78 from $1.18, a 50.1-percent raise. The governor is also proposing to increase Oregon's tax on other tobacco products by 25 percent, but does not make clear whether the 25 percent increase represents a 25 percent increase in the amount of the existing tax (65 percent of wholesale price) or an increase that is equal to 25 percent of the wholesale price, representing a 38 percent increase in the amount of the existing tax.

    In spite of the lower rate, however, his proposal will not go unopposed; the Oregon Neighborhood Stores Association (ONSA) plans to campaign against it. "If the proposal passes Oregon will still be at an advantage to neighboring Washington State where the tax is $2.025, making it one of the top three or four highest tax states in the nation," said Richard Kosesan, ONSA executive director. "But we don't want to join that club, which is what will happen if the legislature keeps raising the tax every session. So we'll be fighting the increase when the legislature meets."

    On another matter, ONSA and other business stakeholders are working with the state's Bureau of Labor and Industries (BOLI) to resolve an issue relating to employee meal and rest breaks. BOLI's long-standing administrative rules allowed employees to remain on duty during meal periods when the "nature and circumstances" of the work so required, provided the employer paid the employee for the meal period time. In July, BOLI modified its rules to require employees receive 30 consecutive, uninterrupted minutes of meal break time, except in "exceptional and unanticipated circumstances." The new rule generated a substantial degree of concern in the business community. In response to these concerns, BOLI temporarily suspended the July rule and is now working to develop a new rule that will hopefully provide employers some additional flexibility in situations where it’s not feasible for the employer to completely relieve employees from duty during meal periods and rest breaks.

    There may be dark economic clouds over the nation these days, but in Arizona, where retailers are experiencing their own share of hardships, there’s a glimmer of hope on the horizon.

    "As a result of the last election and the appointment of our Democratic governor to head up Homeland Security in Washington, we will have a newly appointed Republican governor sitting in the capitol, along with a legislature that is controlled by Republicans in both houses," said Tim McCabe, president of the Arizona Food Marketing Alliance (AFMA). "There will be greater reliance on spending cuts to balance our state budget rather than tax increases. We think that’s an encouraging sign."

    However, Arizona’s budget deficit is the highest in the country on a comparative basis, and the association is prepared for any attempt to balance the budget, he said. "So there may be some alcohol and tobacco excise tax increases down the line, in addition to increased fees in some areas. Still, we don’t expect there to be as many increases as in other states."

    The state legislature convenes Jan. 12, 2009. AFMA members can celebrate at the AFMA Annual Golf Classic on March 5, 2009, at the JW Marriott Wildfire Golf Club in Phoenix. For reservations, call (602) 252-9761.

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