Mayor says liquor tax is already tapped

Councilwoman Cindy Bass elicited a chorus of agreement from her colleagues yesterday when she said shoddy liquor license enforcement – which she called an “honor system” – had led to as much as $36 million in drink tax going uncollected.

In a resolution, Bass called for an investigation of the Revenue Department by Council’s Finance Committee, tying lax collection to cash-strapped schools and the current search for funds to expand pre-K education.

But the Kenney administration fired back today, saying the Revenue Department’s collection efforts have improved like a fine wine.

“The Revenue Department is exceedingly thorough in capturing the liquor-by-the-drink tax,” wrote Kenney spokesperson Mike Dunn in an email. “In fact, the Revenue Department captures 91 percent of this tax from bars and stores during the year it is owed.”

Liquor taxes totalled $53 million last year, which means that if Bass’ figures were correct, the delinquency rate would be nearly triple what the Revenue Department reports.

Turns out that “$36 million” number that Bass tossed out in the Thursday council session was sourced from a 2015 Philadelphia Magazine article, which in turn referenced estimates from City Controller Alan Butkovitz on taxes owed to the city.

Deputy Revenue Commissioner Marisa Waxman said accepting those statistics would be giving tax cheats a lot of credit.

“That would mean black market sales accounted for nearly a third of total sales in the city – that’s a huge amount,” she said. “We recorded $10.9 million in outstanding liquor tax from the past six years.”

To be fair, liquor tax revenue, which goes directly to the school district, has actually increased year-over-year since 2009, according to department reports.

But a staffer in Bass’ office said she remains unconvinced of the department’s efficacy – for reasons that are as plain as day in neighborhoods like Germantown. 

The councilwoman became interested in tax collection as part of an effort to crack down on nuisance stop-and-go stores in her district, which have drawn neighbors’ ire for practices like selling liquor shots over the counter

Bass’ office said those sales should fall under the liquor-by-the-drink tax. But more importantly: What are the odds that the stop-and-go’s are reporting all of their cash receipts?

Waxman, who said she welcomed council’s partnership on collecting delinquent taxes, acknowledged it can be tough to keep cash-based businesses in line. She noted that collection rates rose to 97 percent the year after assessment and that her office had conducted millions of dollars worth of audit across the city this year alone.

“That means we’re finding the delinquencies,” she said.

Liquor Tax Resolution