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Top 5 Worst States for Alcohol Taxes

8 glasses of wine and spirits

by on October 21, 2013

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From 4th of July beer-n-brats to eggnog by the yule log fire, drinking is a distinctive part of the American experience. But how much of your hard-earned cash is going to your favorite adult beverage and how much is enriching your state treasury?

To find out, NerdWallet took a look at the least tax-friendly states when it comes to imbibing. We crunched to numbers to find the states with the highest taxes on alcohol and compared those numbers with the total volume of beer, wine and spirits consumed in each state. The result? A definitive guide to which states tax their citizens the most for enjoying booze.

Top 5 states with the HIGHEST taxes on booze:

1. Washington

Despite booming wine production and a thriving beer scene, Washington clocked in at No. 1 on our list, mainly because of its hefty taxes on spirits. The good news is that beer is taxed at a relatively low rate (7¢ per drink), making it easy to enjoy events like the Everett Craft Brew Festival. To stretch your dollar, go for wine (a glass will only cost you 3.5¢ in state taxes). Washington’s Wine Commission makes it easy to find a winery, so you can stop in for a taste.

2. Alabama

Birthplace of the civil rights movement and known as the Heart of Dixie, Alabama is also home to some of the highest state tax rates on alcohol in the nation (9.8¢ for beer, 3.4¢ for wine and a whopping 21.4¢ for liquor). All liquor sales are controlled by the state and regulated by the Alabama Alcoholic Beverage Control Board.  Sentiment appears to be shifting toward laxer regulation around alcohol, with homebrewing recently becoming legal in May.

3. Alaska

Along with being the largest state, Alaska is home to some of the heftiest alcohol taxes. With state taxes on beer (10¢), wine (9.8¢) and spirits (15¢) all uniformly high, ordering drinks in the wild north can turn into an expensive proposition. Despite laws prohibiting patrons from being drunk in bars, Alaska residents looking to cut loose can enjoy events like the Great Alaska Beer and Barley Wine Festival. Microbrew aficionados will also appreciate the reduced alcohol tax rates for breweries that produce less than 2 million barrels a year.

4. Oregon

How does the state that ranks 4th in number of craft breweries per person end up on a list of state with high alcohol taxes? Astronomical taxes on spirits. While a shot will cost you over 25¢ in state taxes, beer (0.8¢) and wine (2.6¢) are comparatively cheap. To save cash, swap out your vodka tonic for a chardonnay – you’ll be sure to find a vintage that suits your taste from the 3rd largest wine producer in the country.

 5. Virginia 

Old Dominion is sure proud of its beer and wine offerings, though their state taxes put them in the top 5 of the nation. Beer is by far the best deal, with around 2.5¢ in state taxes per drink. Wine will run you 5.9¢ and liquor is a pricey 24.1¢. With the government narrowly avoiding shutting down right next door, it’s a fair bet that at least a few people will be getting their drink on.

To learn more about the states with the lowest taxes on alcohol, check out our guide to the best states for alcohol tax, or take a look at the full rankings below:

Rank State Taxes per standard drink (¢)
Beer Wine Spirits
1 WA 7.1 3.4 41.3
2 AL 9.8 6.6 21.4
3 AK 10.0 9.8 15.0
4 OR 0.8 2.6 26.6
5 VA 2.4 5.9 24.1
6 TN 11.0 5.0 5.2
7 NC 5.8 3.1 15.3
8 KY 7.1 12.3 8.0
9 UT 3.8 N/A1 13.2
10 HI 8.7 5.4 7.0
11 GA 9.5 5.9 4.4
12 MN 4.5 4.7 10.3
13 SC 7.2 4.2 6.4
14 FL 4.5 8.8 7.6
15 IA 1.8 6.8 15.2
16 MI 1.9 2.0 14.0
17 MS 4.0 N/A1 8.3
18 NM 3.8 6.6 7.1
19 IL 2.2 5.4 10.0
20 MD 4.2 5.4 5.2
21 AR 3.0 5.5 7.7
22 MT 1.3 4.1 10.9
23 ID 1.4 1.8 12.8
24 OK 3.8 2.8 6.5
25 ND 3.7 4.1 5.5
26 ME 3.3 2.3 6.8
27 OH 1.7 1.3 11.5
28 CT 2.2 2.8 6.3
29 SD 2.5 4.7 5.5
30 NJ 1.1 3.4 6.4
31 NE 2.9 3.7 4.4
32 NY 1.3 1.2 7.5
33 PA 0.8 N/A1 8.5
34 DE 1.5 3.8 4.4
35 LA 3.0 0.4 2.9
36 NV 1.5 2.7 4.2
37 MA 1.0 2.1 4.7
38 RI 1.0 2.3 4.4
39 AZ 1.5 3.3 3.5
40 CA 1.9 0.8 3.9
41 WV 1.7 3.9 3.3
42 KS 1.7 1.2 2.9
43 TX 1.9 0.8 2.8
44 IN 1.1 1.8 3.1
45 WI 0.6 1.0 3.8
46 VT 2.5 2.1 02
47 CO 0.8 1.3 2.7
48 NH 2.8 N/A1 02
49 MO 0.6 1.6 2.3
50 WY 0.2 N/A1 02

1 Control states where the government controls all sales. Due to pricing controls, no direct tax rate is calculated. Ranking is based on tax rate and consumption for other alcohol categories.

2 Control state where price controls for spirits result in effective excise tax rate of 0 or less.

For more information on taxes, check out NerdWallet’s Ask an Advisor, where you can get your questions answered by tax professionals for free.

All tax rates based on data and methodology developed by Distilled Spirits Council of the U.S.  Ranking is based on weighting according to consumption in each state based on report from the National Association on Alcohol Abuse and Alcoholism (NIAA).

 

Photo of 8 glasses of wine and spirits courtesy of Shutterstock.

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  • DifficultyBreathing

    I can’t image why PA is not on this list. The Walmart-esque booze monopoly forces down the price it pays vendors to absurdly low levels, and jacks up the price paid by consumers to absurdly high levels, then add the taxes on that, including the onerous Johnstown flood tax. Methinks the methodology left out monopoly states.

    • Alex McAdams

      Interesting point! We were focused primarily on state alcohol taxes, but that definitely doesn’t tell the whole story on drink prices.

  • Albert Brooks

    PA is consistently ranked in the upper few for alcohol taxation. It can’t be in the top two for alcohol taxes collected and be 33rd for taxes paid per drink. The idea is absurd which makes your entire ranking structure questionable.

    • Alex McAdams

      Great point, Albert. Another thing to consider is that total taxes collected is also a function of volume, not just prices. Given that PA is the 6th most populous state, it makes sense that their total tax revenues would be quite high, even if their tax rates per individual drink aren’t the highest.