Modern versions of the old-time rum runner may be costing the District of Columbia at least $1 million in lost tax revenue.
Robert Lewis, chairman of the D.C. Alcoholic Beverage Control (ABC) Board, told a congressional hearing yesterday he believes large amounts of liquor are being bought in other states and trucked into the District for sale in stores, bars and restaurants. Since the District requires no mark on bottles to show that local taxes have been paid, the taxes are being avoided, he said.
While Lewis said he had no specific evidence that liquor was being brought in illegally, he said he concluded that "something is not quite right" because liquor tax revenues have plummeted from $14 million to $8 million over the last five years.
The revenues declined in part, Lewis said, because liquor sales in the District have dropped as suburban prices have become more competitive; because more consumers have switched to beer and wine, which are taxed at a lower rate, and because the liquor tax rate was reduced slightly in 1978.
Under D.C. law, liquor taxes are collected on the "honor system," with retailers passing on tax money collected from customers to the wholesalers, who in turn pay the city. The taxes usually run about $4 for a case of 12 bottles.
Lewis said the tax loss could be prevented by requiring that D.C. tax stamps be affixed to all bottles sold in stores or bars.
Mayor Marion Barry is considering proposing such legislation, which has been recommended by the ABC board.
Many states, such as Maryland, require a stamp on all bottles. Other states, such as Virginia, restrict sales to state-owned stores.
Robert (Buddy) Weizman, president of the D.C. Retail Liquor Dealers Association, challenged Lewis' estimate of widespread tax dodging. He said that while evasion might exist on a very minor scale, Lewis' accusation was "unfounded, . . . a smear on us."
One retail liquor store owner, who asked not to be named, said the tax-stamp proposal was "anticonsumer" because it would cost the liquor industry far more than the $1 million tax loss to buy and affix the stamps -- a cost that inevitably would be borne by liquor buyers.
Lewis' testimony came during hearings on next year's proposed budget for the Department of Licenses, Investigations and Inspections, which he also heads.
He said the ABC board has only seven inspectors who cannot regularly check invoices at all 2,500 licenses establishments in the District, including 350 liquor stores. He said four establishments have been cited for not paying the taxes and two have had their licenses suspended. The board was not able to prove its case against the other two.
Julian C. Dixon (D-Calif.), chairman of the House District appropriations subcommittee, said the board should cancel the violators' licenses outright. "All you have to do is hit one or two -- revoke their licenses -- the word would get around."