Philadelphia liquor tax collections decline, affect school funding

The impact of the COVID-19 pandemic has crushed Philadelphia’s liquor tax collection, a major contributor to the funding of the city's school district.

Philadelphia’s drop in liquor tax collection is evidence of how restaurants and bars have been hurt during the pandemic by government restrictions and some residents' hesitancy to return to normal patterns of patronage.

The city collected $78.3 million in liquor taxes in 2019. That dropped to $60.2 million in 2020 and $37.1 million in 2021. One sector of the liquor tax was full-service and take-out restaurants, where liquor taxes dropped from $41.5 million in the prepandemic 2019 to $27.1 million in 2021. And liquor tax collections from bars dropped from $15 million in 2019 to $6.2 million in 2021. The city’s liquor tax rate is 10% of the sale price of an alcoholic beverage.

Ben Fileccia, senior director of operations for the Pennsylvania Restaurant & Lodging Association, said on top of the pandemic issues, bars and restaurants also have been dealing with a staffing shortage.

Fileccia said when restaurants were able to reopen after the pandemic closures in 2020, they had trouble finding employees. He said restaurants and bars in 2022 are still on reduced hours due to the worker shortage.

And Fileccia said customers are doing more delivery and pickup with bars and restaurants, a practice mandated during the 2020 pandemic closures.

However, Pennsylvania does not allow for mixed drinks to be sold for delivery and pickup. That ban was suspended during the pandemic as bars and restaurants were allowed to sell mixed drinks if the hotel and restaurant license holders lost 25% of their monthly sales due to COVID-19 restrictions. But that ended when the state Legislature ended the COVID-19 emergency declaration in June 2021.

The city put an emphasis on enforcing collections and the liquor tax revenue increased from $41.7 million in 2008 to $66 million in 2016.

In 2020, the city's liquor tax was the third-largest contributor to the school district behind real estate taxes and use and occupancy taxes.

The website closedinphl.com has tracked bars and restaurant closings in Philadelphia during the pandemic. It reported that 65 bars and restaurants in Philadelphia have closed permanently and 156 more have been temporarily closed.

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