Fort Smith liquor tax increase proposal is off the table

There will be no tax increase on the shot of whiskey you may consume in a Fort Smith sports bar and restaurant to celebrate a Razorback victory or, more likely, drown out a Razorback loss during the fall football season.

Responding to guidance from the Fort Smith Board of Directors to outline budget cuts and budget revenue options, city administration proposed increasing a liquor tax from 5% to 10%. The tax would apply to bars, restaurants and clubs that sell liquor by the drink for consumption on premises, according to Interim City Administrator Jeff Dingman.

A 5% increase would have raised an estimated $700,000, with proceeds going to the city’s general fund, which supports basic operations including fire and police. The 5% now raises about $880,000, but that applies to all businesses with an alcohol tax, Dingman said. The proposed 5% increase would only apply to the businesses that sell liquor by the drink.

Dingman said feedback from the board resulted in the tax increase discussion being removed from the March 4 board agenda.

Fort Smith City Director and Vice Mayor Jarred Rego said the decision to not pursue the tax increase is “exactly how the system would work.”

“This is an example of the local government interacting with the public working,’” Rego said. “You know, we put out a notice to interested parties that this was something that was under consideration, and we heard the feedback and we said, ‘Well, we’re going to pull back from that.'”

The city’s 5% liquor tax has been in place since 1969.

The board voted in December 2020 to raise the supplemental alcohol tax on private clubs. The increase was set to go into effect Dec. 1, 2021, but the board rescinded the increase before the effective date.