This California Liquor Distributor is Shaking Down San Francisco Bars

Twin Peaks bar in the Castro (Courtesy Creative Commons/Flickr/Stephen Kelly)

Update: Good news! It seems like the pressure from people in the bar industry worked and Young’s Market is rescinding the the surcharge! See their statement at the bottom of this article.

Looks like Tech CEOs aren’t the only ones trying to avoid paying their fair share of taxes in San Francisco. It seems that now a liquor distribution company is greedily attempting to squirm away from the taxes that San Francisco voters have mandated they pay.

Earlier this week Esther Mobley broke a story in the Chronicle suggesting that liquor distributor, Young’s Market Co., is essentially shaking down local bars so that they don’t have to pay the taxes enacted by the passing of Prop C in November. If you recall, Prop C, which was passed by 61 percent of voters, put a fraction of a percent tax on gross receipts for all businesses in San Francisco with more than $50 million in revenue. While this tiny tax only costs the companies around $1750 for every million dollars made, it creates over $300 million a year to battle our homelessness epidemic.

The brilliance of Prop C is that it took into account the income inequality plaguing the Bay Area. It only taxes the very richest in our city to tackle an issue that they themselves have greatly exacerbated. And yet Young’s Market is trying to shirk their responsibility by passing the tax down to the bar owners, instead of paying it themselves. They’re doing this by more than doubling the wholesale tax that bars pay for liquor distribution.

To which I say: Shame on you Young’s Market. Shame on you.

For those unfamiliar with the way the liquor industry works in California, regulations called “tied-house laws” were set up after the end of Prohibition, mandating that distributors act as the middlemen between alcohol manufacturers and bars/liquor stores. The goal of this was to avoid alcohol companies creating monopolies by owning the manufacturing, distribution, and retail of their booze. Unfortunately, it made these middlemen distributors incredibly powerful, and at this point there are two companies who have near monopolies on wine and liquor distribution in San Francisco. One of them is Southern Glazer’s Wine & Spirits (which is facing class action law suits in other states for their shady practices) and Young’s Market Co. There’s a similarly broken system for beer distribution, but that’s for another time.

Veuvio in North Beach (photo from slyscope)

I talked to Art Lipton from the Law Office of Lipton & Piper, LLP, who has previously represented small distributors who arguably went out of business due to having their prices undercut by the sales tactics of Southern and Young’s. When I asked how these two companies were able to lock down this near monopoly he said, “the major delivery companies slowly narrowed down to those remaining two. To my knowledge, there has been no governmental effort to bring anti-trust pressure against this two headed near monopoly.”

This is all a long way of saying that Young’s Market are being real assholes right now. They have exclusive rights to distribute such humongous brands as Captain Morgan Rum, Tito’s Vodka, Jack Daniel’s Whiskey, and Patron Tequila. Every time you drink any of these or hundreds of other liquor brands in any bar, Young’s Market gets paid. Yet, they are passing the cost on to the small independent bars. Between the $200k it costs for a liquor license in San Francisco, and the $15 minimum wage, it’s already difficult to run a bar in The City. So these bars might have raise their prices just to absorb Young’s chicanery.

Suddenly the tax meant to get the ultra wealthy to battle our homelessness epidemic might be being paid by you and I every time we belly up to the bar.

And the real rub here, the real underhandedness that Young’s is perpetrating is that they may not even be subject to paying the higher tax rate! According to Mobley’s article, the spokesperson for Young’s Market “acknowledged that wholesalers paid the increased rate only on their gross receipts over $50 million, but did not clarify whether Young’s was actually subject to that rate.”

So Young’s might be raising their rates and blaming it on a tax that they might not even be actually paying themselves. God damn that’s shady!

Li-Po Lounge in Chinatown ( photo from Seattle Times)

So here’s what you can do: Before you go to the bar next time, go to Young’s Market Co.’s website and find out if your favorite liquor is distributed by them by checking out their portfolio. If it is, email the booze company with this article and tell them that you might stop drinking their product unless they pressure Young’s to rescind their tax hike. If these companies get enough backlash you can guarantee they will have a talk with Young’s since The Bay Area is such an enormous booze market.

As we saw with Prop C, the only way to get multimillion and multibillion dollar business to act responsibly is to force them to. Sometimes it takes passing laws, sometimes it take kicking them in the pocketbook. This time it takes going over their head.

Now who needs a drink?

Statement from Young’s Rescinding their Surcharge