WASHINGTON – Theresa Hancock can often tell when a liquor store is about to close.
The owners “call me all the time, try to sell me their licenses,” said Hancock, who has owned the Sunnyside Liquor Store since 1988.
Hancock has been getting more of those calls in the last few years as stores in the region close, one by one.
She works nine hours a day, six days a week to keep her store at 416 E. Edison Ave. afloat, but she isn’t sure how long she can hold out.
“After 30 years of being here, I don’t know how hard I want to push it,” said Hancock, who also serves on the Sunnyside City Council.
Hancock and other owners of former state-owned and state-contract stores continue to face what they say has been a stacked deck against them since the state privatized liquor sales in 2012.
When the state auctioned off many of these smaller-sized stores, which are exempt from a 10,000-square-foot retail space requirement by the state, officials pitched them as promising small-business opportunities.
But despite efforts by legislators to level the playing field in the last four years, a sizable percentage of these stores have gone out of business. Only 97 of 167 former state-owned stores and 111 of 162 former contract stores that were in business at the start of privatization are still operating. Contract stores were privately owned businesses contracted by the state to sell liquor.
In Yakima County, all but one former state-owned store are gone. Several former contract stores also have closed, leaving the county with five stores, including Hancock’s Sunnyside Liquor Store.
For Hancock, the struggle is all in the taxes and fees, including a 17 percent retail licensing fee for revenue on all spirits sold each quarter. She estimates that she pays $16,000 a month on taxes and fees.
Larger retailers, such as grocery store chains and big-box stores, have larger overall sales and are able to spread the cost of the fee to nonliquor items, an option not available to her, Hancock said.
Her prices are competitive with larger retailers, but her profit margin is smaller, she said.
For example, a bottle of Black Velvet whiskey costs her $6.53. She sells the bottle for $13.95, but after factoring in taxes and fees and the cost of purchasing the bottle, the profit is about $1.50, she said.
Several legislators in Olympia have tried to improve business conditions for these liquor stores. Rep. Chris Hurst, D-Enumclaw, has introduced several measures over the years.
These small, locally owned liquor stores, Hurst said, offer a high level of customer service and carry products that mass retailers do not, such as liquors from Washington state craft distilleries.
Hancock, for example, said providing special orders for products such as brandy from Azteca De Oro in Mexico, and offering local items such as apple pie moonshine from Yakima’s Swede Hill Distilling, has been crucial to her business.
Hurst said he’s up against a strong lobby from various parts of the alcohol industry. “Now, my goodness, there’s probably 70 entities with an army of lobbyists,” he said.
Still, there have been some key victories. In 2013, a law was passed that exempts state-owned and contract liquor store owners from the 17 percent retail license fee on revenue earned from sales to restaurants and bars.
Hancock said a lot of local restaurants also like to do business with her because she does not have the requirements that distributors have, such as one mandating the purchase of liter-size bottles and setting a minimum purchase amount.
Also, in July, former state-owned and contract stores were allowed to team up and buy in volume to get discounts available to larger retailers.
During this legislative session, Hurst introduced several bills to help local liquor stores. House Bill 2504 sought to drop the retail licensing fee from 17 percent to 5 percent over a four-year period. While the bill applies to all businesses, it would provide small liquor stores with a larger profit margin. Another bill, House Bill 2831, added wine to the items that liquor stores could collectively buy in volume.
These measures did not get very far, however. HB2831 passed through committee, but included only the provision to allow volume buying of wine. Then it stalled.
While a reduction in the retail license fee is the No. 1 desire for many liquor store owners, such tax reductions are challenging at a time when the state is searching for revenue for such things as education, Hurst said: “You can’t shoot a $94 million hole in the budget.”
Still, Hurst said, something needs to be done eventually. He recently received a report that stated Washington state has lost nearly $6 million in tax revenue during the recent biennium from Washington residents purchasing liquor in neighboring Oregon. And officials in Idaho have credited Washington shoppers for a boost in that state’s liquor sales.
Meanwhile, Hancock is considering her prospects. She’s looking into perhaps offering beer growlers or selling exclusively to restaurants. She knows she can’t stick with the status quo if she wants to stay in business.
She maintains that stores like hers offer a valuable niche.
“It will be a sad day in Washington state when we can’t find those items that we want that aren’t on the (larger retailers’) list of items to carry,” she said.