Planned alcohol tax increase repealed by Fort Smith Board

The Fort Smith Board of Directors on Tuesday (Jan. 19) unanimously repealed an ordinance passed in December that would double the city’s supplemental alcohol tax on private clubs.

The board approved an ordinance to raise the supplemental alcohol tax on private clubs Dec. 17 by a vote of five to two with Directors George Catsavis and Neal Martin voting against the ordinance. Private clubs are already charged a 5% supplemental tax on alcohol sold in the club. This is on top of the 9.75% sales tax in the city. The ordinance will raise that to 10%, but because of an amendment, is not set to go into effect Dec. 1. Private clubs also must pay a permit fee, according to the ordinance.

The original ordinance to collect a supplemental alcohol tax was enacted in 1969. The increase in the alcohol sales tax is expected to raise about $500,000 annually, said Andy Richards, finance director for the city. The current 5% supplemental tax typically brings in $525,000 in annual revenue. In a memo explaining the agenda item from Deputy City Administrator Jeff Dingman said the increase in the tax was to be a “means of augmenting General Fund revenues to fund city operations in the FY2021 budget.”

In December, Catsavis and Martin said the raised tax would put too much burden on club owners and their customers, especially considering bars and clubs have been hard hit during the COVID-19 pandemic. Bars and restaurants had to close in-person dining for 74 days in spring 2020 due to state mandates during the COVID-19 pandemic and still can only be open to limited capacity and shortened hours.

“I was against this when it originally passed,” Martin said. “We do need to hear from our citizens. We need to hear when are right. We need to hear when we are wrong. In this case, we were wrong. I am excited to repeal this and not hurt our bars and restaurants any more than this pandemic has.”

Director Kevin Settle requested repealing the ordinance be put on the Jan. 19 agenda at the Jan. 12 study session. Director Lavon Morton agreed. Settle said since the ordinance had been approved, he had heard from several business owners and citizens regarding the tax and realized it was just too much of a burden to pass along. He said though he had originally supported the tax increase, he realizes he was wrong and he will admit that.

“Even if the pandemic was to end tomorrow, these business owners are looking at years to recoup the loss they have suffered. We just can’t do this to them,” Settle said.

Although the tax was not to go into effect until December, Settle said addressing the issue now instead of waiting until closer to December to see how the pandemic was and how businesses were fairing was “the right thing to do.”