You'd think that owning what was the biggest and highest selling liquor store in the state would be a great investment, but the owners of Seattle's Downtown Spirits have reached a sobering reality.
"The sales from what the store was doing before privatization have dropped by about 95 percent," said owner Meru Belbayeva.
Belbayeva's family bought the liquor license for the store from the state for $167,000 when they were auctioned off after the passage of Initiative 1183, which took the state out of the liquor business. The initiative was heavily funded by Costco. Many believed passage would lower prices for consumers. Two years later, prices are mostly higher, Costco is selling booze by the pallet and Downtown Spirits still hasn't turned a profit.
"The way the tax structure is set up, it's impossibe to just be a spirits retailer in the state of Washington," said Belbayeve. "We're essentially a tax collector for the state."
What's gone wrong?
For one, any business bigger than 10,000 square feet can sell booze. A Bartells drug store less than a mile from Downtown Spirits now advertizes draft beer. Mom & pop operations can't comptete with the buying power of Costco, QFC or national alcohol retailers like Bevmo, which offer discount prices.
Restaurants and bars no longer have to buy from state liquor stores, so they are more likely to buy from the big box retailers instead of mom & pops. But the single issue impacting small liquor stores the most, according to Belbayeva, is a 17 percent retail tax that is devouring profits.
"We pay 53 percent of our profits to the state. That's before rent or anything else," she said. "This is really a killer of small business."
Retailers are now turning to lawmakers, pushing for tax relief that would allow stores with lower sales to pay less than that 17% rate. However, Belbayeva says that stores like hers were recenctly written out of Bill 6237, leaving only "contract stores" with some tax relief. Hoping to make up the losses, Downtown Spirits has opened a massive beer and wine room with thousands of bottles to choose from, but the store may still have to shut. "We've put about $800,000 into our business," said Belbayeva. "We wouldn't have done this if we didn't think it would be profitable. There was a track record of profitability." Belbayeva argues with 60% of the once profitable liquor stores sold by the state now going out of business, the problem is bigger than individual retailers. "I think when you look at those types of numbers you realize there is something fundamantally wrong with how the system was set up and some of these stores need a little bit of help," she said.
If that help doesn't come, Belbayeva believes the rest of the stores auctioned by the state will hit rock bottom, as well. "167 stores are going to be out of business," she said. "That's 167 families that have lost their life savings. 167 families going bankrupt."