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WKYT Investigates: Sin Tax Revenue in a Pandemic

Why was a rise in tax revenue a big boon for the state, but a big bust for some small businesses?
Published: Jan. 11, 2021 at 5:22 PM EST
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LEXINGTON, Ky. (WKYT) - When COVID-19 hit Kentucky last March, businesses had to close. People started working from home, and if you ask brewers like Chris Paumi, more people started drinking from home.

“We had very little business the first week,” noted Paumi. His craft brewery, Fusion Brewing, in the distillery district in Lexington, was one of hundreds hurt by COVID-19 mandates. “When COVID hit, I had three of these tanks full. So I had over 600 gallons just sitting in these tanks. If you think that there’s on average eight pints per gallon each tank is the equivalent of eight times 200, so you’re talking 1600 glasses of beer at $5 a piece, so each tank is roughly $8,000 to me.”

Paumi started canning to save his company. He was bottling and shipping to stores, and losing almost half his revenue.

“Bigger breweries are still doing fairly well. They can take a big hit in their bottom line, and it doesn’t show as much as for me. 50% of my bottom line, and I’m out of business,” said Paumi.

When you look at 2019′s consumer tax revenue on beer and compare it to 2020′s - the pandemic months - that decline in customers really shows. Beer sales revenue went down almost two percent. Wine was up almost 13%, and distilled spirits was up about 12%. The revenue stream that increased exponentially - almost 40% - was the group, other tobacco products, and a big portion of that was vaping.

“It was a huge year for industry as a whole, unfortunately it was a really bad year for mom and pop brick and mortar stores because almost all that revenue was being generated from convenience stores and gas stations,” said Tony Florence. He’s owner of 723 Vapor. He says about a third of small smoke shops started closing in Kentucky, as shoppers turned to gas stations and online sales.

“The vape taxes generate a lot of revenue and that’s great for our Commonwealth, that’s good because hopefully that money will go to important things like education and such, but a lot of that revenue unfortunately were taken out of the hands of local business owners,” remarked Florence.

Small business owners say the tax revenue numbers for 2020 are more a reflection of big business than local retail.

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