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Kicking Bars When They’re Down – the Comptroller Refuses Sales-Tax Relief

How are bars supposed to stay in business now?EXPAND
How are bars supposed to stay in business now?
Taylor Adams

On Sunday, Dallas County Judge Clay Jenkins ordered all the bars to close indefinitely at 11:59 p.m. the following day. Since the industry is also a rumor mill, the move was not totally unexpected, but the speed, lack of notice and sense of finality still shocked operators and workers.

Leaders in other jurisdictions who resisted similar closure orders or issued half-measures were roundly criticized.

But with the president recommending gatherings smaller than 10 followed by Gov. Greg Abbott’s statewide closure proclamation, there is now broad consensus that bars cannot be operated without greatly increasing the spread of COVID-19.

Ordered not to serve on premises, restaurants have also been severely burdened by the pandemic response; but unlike bars, they can still make money on takeout and delivery.

Bars plunged to zero income in a day.

As federal and state efforts to provide some relief from the need to battle COVID-19 through social distancing began to come through this week, it became apparent there would be nothing for the bars.

While the governor waived a Texas Alcoholic Beverage Commission rule to allow restaurants to serve to-go alcohol so long as it was paired with food, the exemption explicitly does not allow the same for bars. Then the feds issued the impossibly lame Families First Coronavirus Relief Act that puts a defunct bar on the hook for paid sick leave for its employees but exempts Walmart.

“They forgot us. They forgot all the fun they had,” says Kim Finch of Doublewide and Singlewide.

Lee Daugherty of Alexandre’s sees intent.

“There's a lot of anti-bar resentment, it could be from past 'alcohol bad' religious upbringing, could be a conspiratorial link to crime, but bars often get thrown under the bus when most of us are hardworking and contribute to community,” he says.

The bar at Alexandre's, back when sales were allowedEXPAND
The bar at Alexandre's, back when sales were allowed
courtesy Alexandre's

Hanlon’s Razor guides us not to attribute to malice what is adequately explained by incompetence, but in a situation in which bars have been hit with the most punishing regulations, what explains the utter lack of any mitigation?

Both Finch and Daugherty agree on what their spending priority is: workers. And that creates a pressing and sizable economic question this week when sales tax collected on liquor by the drink in February is due to be remitted to the Texas Comptroller of Public Accounts.

“I think I’m not,” says Finch when asked about whether she will pay. “I think it’s more important to pay my people so they can, you know, live.”

Daugherty has an unusually close relationship with his employees, who were in the process of unionizing (with his encouragement), and Daugherty was one of the leading advocates for mandatory paid sick time (Dallas is the only city in the South with this benefit).

“I started budgeting four to five weeks ago to be able to pay my employees for four weeks because I saw this coming,” he says.

A fundraiser funded another four weeks beyond that. (Disclosure: This writer’s household contributed $150.) Daugherty’s not remitting.

The comptroller (an elected position and pronounced the same as “controller”) sees it differently. In a statement released March 17, Glenn Hegar says:

“I know this will be difficult for many businesses, especially small businesses, that are facing a severe downturn in customer activity,” Hegar said. “These dollars, however, represent money collected from individual Texans, and Texans expect those dollars to be available to provide emergency health care and support other emergency operations during this difficult time.” 

Part of this is accurate, and part isn’t. He’s right that the sales tax money was collected from bars’ customers, but the attempt to tie it to healthcare is a real stretch. Texas funds the vast majority of its healthcare from local property taxes. The sales taxes largely go to a state budget that included a $12.5 billion rainy day fund at the start of the last legislative session.

The comptroller’s office declined to comment on how it would handle enforcement activities if bars across the state do not remit February’s sales taxes.

And here’s why every operator I talked to is interested in suspending remittance: They all want to reopen when it’s safe. They’re bar owners, they want to keep being bar owners, and the government has told them, “That thing you do is the thing you can’t do starting immediately.”

They employ workers. They have leases. Finch told me her vendor had refused to cancel sanitation service even though it’d be illegal for her to need it. So they’re not even protected from overhead by cooperating with protection of public health.

The pandemic has had a great clarifying effect on public policy and regulation. Stupid ideas and rules look extra stupid in the middle of a health crisis. The need to support people who must not support themselves because of distancing is crystal clear to anyone with the smallest shred of human decency.

Do we not think that bar patrons polled today would support redirecting the tax they paid on their drinks to the small businesses they presumably want to drink in again when it’s safe to do so?

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A suspension of sales-tax collection activities applicable to bars specifically would be the most immediate, least administratively complicated way to provide a small amount of relief to one of the hardest-hit industries in our economy.

Our state government is nationally recognized for incompetence.

What Hegar’s office chooses to do on Monday when bars don’t remit has a chance to start changing that reputation. And since the primary power of his office is to shut down the already-closed bars, the alternative is pretty dumb.

This story has been updated to include a more thorough quote from Daugherty.

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