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Cocktails in Texas Will Soon Be 8.25% More Expensive

Photo: Brent Reeves/Shutterstock

The last time you sipped your favorite hand-crafted, fennel-and-heirloom-peppercorn-infused gin martini (or whatever highfalutin cocktail you're into these days), did you happen to notice how much of that drink tab was for state liquor tax? That's right, zero — as the current tax laws stand, a $10 drink is a $10 drink, making it easy enough to throw down 12 or 13 bucks in cash and go on your merry way. But the state of Texas is about to make calculating a tip through your booze-induced haze a little more complicated.

I'm not going to get all math-y on you here, but here's a pretty thorough primer on the numbers via the Texas Restaurant Association (keep in mind that piece is aimed at businesses rather than consumers). The general gist is that starting on January 1, 2014, your mixed drinks will likely cost you an additional 8.25% liquor tax. The state is lowering the tax rate for businesses that sell mixed drinks and passing part of the tax burden directly onto customers. UPDATE for clarity: The current tax law levies a 14% mixed beverage tax directly onto the business owner. As the TRA explains, "this is a hidden tax – consumers pay it as part of the cost of the drink they purchase – but they are unaware of it." The new law in effect "changes the mixed beverage gross receipts tax from a 14% tax paid by the permit holder to a 6.7% gross receipts tax paid by the permit holder and a 8.25% mixed beverage sales tax that is passed through to the customer."

So, a drink that cost $10 on December 31 will cost $10.83 the next day. (Thanks, State of Texas, for harshing my New Year's Eve buzz with a bunch of integers limply dangling after the decimal on my bar bill.)

Kartik Rathore, proprietor of Mockingbird Station cocktail bar The People's Last Stand, explains that while the new law makes the taxes paid by mixed drinks license holders more equitable with the rates paid by wine and beer license holders, businesses now face the dilemma of how to charge customers for the tax — or not. "That's a decision these bar owners and managers are going to have to make, how to adjust their prices once these taxes go into effect," Rathore says. "If their customers are so turned off that they start spending less money, then they might decide to drop their prices a bit." Under the new law, how to pass on the tax to consumers is entirely up to bar and restaurant owners; deciding to make their prices "tax included" and thus buffer customers from the actual numbers by rounding up prices would be one seemingly viable option that the TRA suggests.

Now, before you get all huffy and hit up your pasty friends at 4chan to launch a DNS attack on the State Comptroller's website, take a look at this map by the nonprofit Tax Foundation: Texas enjoys rock-bottom liquor tax rates compared to most of the nation. (It also explains why the denizens of Portland and Seattle are willing to pony up $6 for a cup of coffee — it's much cheaper than beer.)

An informal survey of servers and patrons (conducted by the very scientific method of me interrupting people at nearby tables whenever I was dining out over the past two weeks) yielded the full gamut of human responses to this new law, from utter confusion to complete indifference. Most bar managers don't yet have the tax on their radar, and none of the customers I asked said that adding less than $2 to a $20 bar tab would change their drinking habits. Of course, while an extra dollar tacked onto a $12 cocktail probably won't bother craft cocktail drinkers too much, those $2 you-call-its suddenly becoming $2.17 might seriously harsh some more budget-minded drinkers' vibes.

Bars and restaurants also have to consider the very important issue of how the new mixed drink tax is going to affect servers' and bartenders' tips. "If this tax is going to negatively affect them, then that's something I need to take into account when or if I redesign my menu pricing," says Rathore.

So when you see some unfamiliar extra numbers tacked onto your receipt at your favorite bar come January, don't say we didn't warn you. (And I, for one, don't want a pissed-off bartender making my drinks, so I think I'll be ramping up my tips accordingly.)

— Becky Ryan

· Mixed Beverage Tax Cut Q & A [Texas Restaurant Association]
· Weekly Map: State Spirits Excise Tax Rates [Tax Foundation]
· More Cocktail Week 2013 coverage [-EDFW-]