Liquor tax cut a top priority for music venue lobbying group

Music venues in Austin are lining up to try to get their state liquor tax rates reduced in a bid that’s being presented as a needed step to preserve clubs and bars that heavily promote live music.

The effort is still in its nascent stages and could be something of a reboot of a 2013 push by former state Rep. Mark Strama (D- Austin) that would have cut the liquor tax rate in half for clubs and bars that prominently feature live music performances.

That bill stalled in committee because of concerns that it could have given reductions to too many businesses statewide and slashed state tax revenue by $60 million to $80 million a year.

Leading the effort for the 2017 legislative session is the Music Venues Alliance, a newly formed Austin pro-business group that is working to rally clubs and bars that are increasingly feeling the effects of rising rents and other costs on their thin bottom lines.

The MVA is the first satellite group sprung from the United Kingdom’s Music Venue Trust, which was formed in 2014 to help stabilize the business fortunes of small music venues around London and elsewhere that were increasingly being forced out of business by growth and development pressure.

Local music industry attorney Rebecca Reynolds and Don Pitts, manager of the city of Austin’s music and entertainment division, pushed for Austin to become aligned with the UK group because live music clusters around Austin are facing similar pressure.

Reynolds is leading the activities of the MVA and said it will be legally filed as either a 501(c)(3) nonprofit or a 501(c)(6) organization soon. Her intent is to establish two or three priorities for the music venue community as a whole each year that will improve their business prospects, and, in theory, translate into more money making its way to musicians in Austin.

Improving the livelihood of musicians and other creatives in Austin has become a priority for Mayor Steve Adler and other local leaders following a 2015 report that found the city had lost about 1,200 music-related jobs in the previous five years.

“Reducing the (liquor) tax rate is absolutely a priority, and the argument is that grassroots music venues are a cultural asset that are being overregulated,” Reynolds said. “Don approached me about this because I was already trying to engage with venues to work together to have a more solidified voice at City Hall and in the legislature.

“After our first meeting with some venue owners and managers and talking about all the struggles they face, it became clear that the best thing to do is to become the first chapter of the MVA,” she said.

Reynolds added that another objective of the MVA will be joining efforts with other advocacy groups to work with developers and lobby city government to make creative spaces such as music venues and galleries incentivized, ground-floor components of new building projects around Austin.

Her characterization of clubs that frequently feature original live music as “grassroots music venues” is a deliberate branding tactic to remove negative connotations like “dive bars” from lawmakers’ discussions about the importance of live music venues to Austin and Texas as a whole.

The MVA’s welcome packet for members spells out which types of establishments qualify as grassroots music venues, from the way they feature live music to the equipment, staff and other infrastructure they use to regularly present performances.

Those designations will likely shift and grow, and they will be important in attempting to shape policy language that gives existing venues a tax break but doesn’t open loopholes to let other bars dress themselves up as music venues purely to qualify for the cut.

Another wrinkle comes with the 2014 change in how the state levies and calculates the liquor tax.

Strama’s 2013 bill aimed to cut in half the 14 percent tax on gross receipts of mixed beverages at all bars, restaurants and nightclubs. Beginning in 2014, those businesses became responsible for a 6.7 percent tax on their receipts, while customers began paying an 8.25 percent alcohol sales tax on their purchases, making the math for how to best arrive at a reasonable amount of business tax relief unclear.

Looking at monthly state liquor tax receipts, however, makes some back-of-the-envelope calculations possible for clubs like those in the Red River Cultural District, which Reynolds and other live music boosters hold up as one of the city’s most important creative areas.

State records show that in October, the Mohawk nightclub paid $8,071 in liquor taxes at the 6.7 percent rate. Cutting that rate to a flat 5 percent would have reduced the club’s tax bill by almost $2,000 for the month.

Similarly, neighboring venue Cheer Up Charlies would have seen an October tax total that was almost $2,200 less than the $8,426 it paid if the state’s liquor tax had been adjusted down to 5 percent.

Photo by Earl McGehee made available through a Creative Commons license

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