Restaurant owners say the city liquor tax is hurting businesses

If you’ve ever purchased alcohol in Evanston, you may have noticed an additional 6% added to the total cost.

This comes from Evanston’s 6% liquor tax, collected on the sale of liquor for both on- and off-premise consumption. While most Chicagoland communities have a food and beverage tax or a packaged liquor tax, Evanston is the only nearby municipality with a liquor-only tax. The Liquor Control Review Board made a decision in December recommendation to the City Council to reduce taxes, but the city is reluctant to talk to community members.

The city’s long dry spell

Evanston’s history with banning and restricting alcohol dates back to its founding in 1855, when the founders of Northwestern University wanted to ban the sale of alcohol within a four-mile radius of the school. Although some who moved from Chicago to Evanston challenged this idea, Frances Willard, temperance movement leader, educator, women’s suffragist, and Northwestern alum, furthered the argument against liquor.

The Frances Willard House on Chicago Avenue. Credit: Matt Farrauto

After Willard’s death, the movement continued and many residents supported Prohibition in 1920. Even when the 21st Amendment repealed Prohibition in the United States, Evanston residents voted to keep the city dry.

Evanston’s dry status ended in 1972, when the City Council passed a liquor ordinance — the result of talks about competition with other suburbs.

Now, Evanston business owners are having a similar conversation with the city.

Standing out from his neighbors

Most communities in the Chicagoland area – including Lincolnwood, Arlington Heights and Des Plaines – impose a food and beverage tax on the sale of on-site prepared food, non-alcoholic beverages not in their original sealed containers and packaged spirits drink.

Other municipalities, such as Skokie, Hoffman Estates, Park Ridge and Morton Grove, have a packaged beverage tax in addition to a food and beverage tax. This tax is levied on the sale of packaged liquor for off-premises consumption.

Yet food and beverage taxes and packaged beverage taxes in other communities are typically 0.5% to 2% each, with the outliers being Hoffman Estates and Park Ridge with packaged beverage taxes of 3% and 4%, respectively.

Evanston, which has neither a food and beverage tax nor a packaged beverage tax, is notable for its 6% consumption tax on alcohol.

Entrepreneurs say ‘sin taxes’ are hurting business

Many business owners in Evanston call the tax a hindrance.

Diana Hamann, owner of The Wine Goddess on Main Street, said she is firmly opposed to what some business owners call the 6% “sin tax.”

In addition to allowing customers to try a variety of wines, Hamann’s company also offers classes and tastings; customers can also purchase a bottle to take home from the wine shop. According to Hamann, 95% of her sales come from alcohol purchases, and each purchase is taxed at 6%.

“Last year I gave over $50,000 to the city, which I raised off the backs of my patrons. Elsewhere on Main Street around me – if you’re a plant shop – you don’t collect an extra 6%. If you’re a music store, a bookstore, a coffee shop, a cosmetics store or the like, Evanston doesn’t come to these businesses hat in hand. But they feel like they can do this to the liquor companies, and I think it stinks,” she said.

Patrons enjoy drinks outside The Wine Goddess on Main Street. Credit: The wine goddess

Paul Hletko of FEW Spirits said “time has passed” on the liquor tax.

“Liquor and alcoholic beverages are a part of life right now, and … continuing to punish so-called sin taxes or sin products with additional taxes makes no sense,” he said.

Hletko said he believes Evanston is starting to fall behind other neighboring municipalities when it comes to nightlife and restaurants, something that is hurting the local economy and business landscape.

“Ten or fifteen years ago, Evanston was one of the most popular places to eat out. People came to Evanston from the city, from Lake Forest, all along the north coast, and quite a distance to the west as well. Our restaurants were full and packed and Evanston happened. That is no longer true,” he said.

According to Heather Behm, co-owner of pizza restaurant Union Squared, the tax will impact Evanston’s dining industry as a whole, deterring people from opening new businesses in the city.

“Unfortunately, if there are proposals that specifically target those small businesses, new restaurants coming in will look at that and say, ‘I don’t know if I really want to open a restaurant there,’” he says. Behm said.

While she says she doesn’t think the liquor tax will impact whether residents choose to dine in Evanston, she says it will impact the “bigger picture” of whether the city is friendly to local businesses that creating the attractiveness of Evanston.

Amy Morton, a restaurateur and owner of LeTour, a French-Moroccan eatery in Evanston, said she believes that instead of just examining the liquor tax, potential entrepreneurs will look at a city’s overall approach and consider where their business model would succeed. .

“Evanston needs to follow the program across the board and bring back a lot more food and drink. “I think because we’ve lost so much food and beverage to Wilmette, one of the best things they can do to recruit new operators is to get rid of it so it levels the playing field,” she said. “I think it’s not so much a disincentive as it would be a huge incentive to repeal it and let hospitality people know that Evanston is really focused on bringing them back.”

Morton, who has been doing business in Evanston for 14 years, said this is the first time the city has taken an initiative, and she attributes this attention to the issue to the COVID-19 pandemic.

“I think because there wasn’t competition with Evanston until COVID, we haven’t really seen it in the past, but I think we’re starting to see it more and more as a problem,” she said.

Hamann has been active in Evanston for just over a decade, and during that time she says she has met with three mayors to discuss the issue. She, too, has noticed a shift in discussions about the liquor tax, adding that Mayor Daniel Biss makes the possibility of changing the tax “entertaining, to say the least.”

“Really, I think the big difference is that we finally have a liquor commission in Evanston that is very open-minded and very business-oriented,” Hamann said. “I think this particular group of liquor commission members is our best bet to finally do something about this punitive tax.”

Hamann said that for the first few months she was in business, she paid the liquor tax instead of passing it on to her customers. Ultimately, Hamann realized this wouldn’t work.

“If I had done it again and known how unfair and what a racket the liquor tax was, I probably wouldn’t have opened in Evanston,” she said. “But to play devil’s advocate, the other thing is…Evanston probably has the best customer base in the entire region, and people are really trying to shop small here.”

Morton, like other restaurant and bar owners in Evanston, would like to see changes, although she believes the city should find a way to spread the tax across more businesses or purchases in the city.

Hamann said she would like to see the city implement this concept through a food and beverage tax of about 1% to 1.5%.

“That way it’s less of a burden, less of a sticker shock – 1% is a lot more palatable than 6%. And there would be a broader range of businesses contributing to this Evanstonian budget deficit than just the liquor companies, which have borne the city’s burden for far too long.”

Where the city council is located

In December, the Liquor Control Review Board voted to reduce the liquor tax from 6% to 2%.

Because the reduction would result in a loss of approximately $2 million in annual revenue, the liquor board also recommended increasing the sales tax from 1.25% to 1.5%. But this would make the sales tax replace the liquor tax as Evanston’s outer factor, as no other nearby city has a sales tax as high as 1.5%.

The board’s proposal passed 4-1, with Biss being the lone “no” vote.

“I didn’t feel comfortable voting to give us a sales tax rate higher than our neighbors without significant stakeholder input, and that’s what we’re looking for now. In my opinion, the Liquor Control Review Board has heard very valuable feedback from a variety of companies in the foodservice and beverage sectors, but I would like to hear from others who may be affected before I make a decision,” Biss said in a written statement . statement to the Round Table.

Mayor Daniel Biss, left, at the ribbon cutting for The Fat Shallot last week. Biss was the lone vote against a sales tax change on the Liquor Control Review Board. Credit: Richard Cahan

The Chamber of Commerce recently conducted a survey asking Evanston’s business community – including city owners, residents and employees – for their opinions on the liquor tax.

According to marketing and events manager Brianna Gray, most people were against the liquor tax.

“They felt it would hurt businesses, especially liquor companies … and possibly some restaurants as well,” Gray said, adding that the city plans to use this data to help inform their decision.

Councilman Devon Reid, who is not a member of the liquor board, said he is fine with keeping the liquor tax at 6%.

“The theory is that by lowering the liquor tax, more people will buy liquor in the city of Evanston. “If that is the case, then there is a limit at which we can lower liquor taxes, increase the number of sales in the city and not lose revenue – if their theory is correct,” he said. “I don’t think the theory is correct. I don’t think most consumers even know about the liquor tax or are concerned about the 6% tax.”

Reid also spoke out against raising sales taxes as part of the solution.

“If we want to reduce taxes, reduce taxes. But don’t cut taxes and then market the revenue we lose from cutting taxes on working families by raising general sales taxes or raising property taxes or raising taxes on things that are needed when there are no health benefits associated with alcohol. ” said Reid.

Councilwoman Clare Kelly, who said she is not in favor of raising the sales tax, also believes the City Council should take steps to strengthen Evanston businesses.

“There is still recovery from the COVID years, and we really don’t want to disadvantage our businesses, especially our local small businesses,” she said. “We want to keep them here. We don’t want to risk them leaving or struggling. We would like to empower them enough so that they can reinvest in themselves and become stronger and thrive.”

Although the liquor board voted in favor of the recommendation in December, Reid said Biss is keeping it off the agenda to allow time for community involvement.

The city’s long dry spell

Standing out from his neighbors

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