No libation
without taxationRestaurants and bars unable
to show they've paid their taxes
cannot renew liquor licenses
About three dozen restaurants and bars across the state last week found themselves banned from selling liquor because of a state law that requires county liquor departments to put a hold on license renewals unless the establishment shows that it doesn't owe federal or state taxes.
One operator, Meritage in Restaurant Row, allowed customers to bring in their own liquor for a couple of days before it could come up with $24,000 to clear its tax bills. William Cheng, president, was delighted he was able to do that by the end of the day Thursday so he could pick up the license and sell wines and beers through the Fourth of July weekend.
Alcohol-free
The following Oahu businesses did not have current liquor licenses, as of yesterday, because of outstanding tax obligations:>> The Inner Label
>> U4EYA Distribution Ltd.
>> Beretania Florist Inc.
>> Happy Snack Shop
>> JNJ The Food and Beverage Store Inc.
>> The Little House
>> Emerald Palace Chinese Seafood Restaurant
>> Golden Dolls Showgirls
>> New Mui Kwai Chop Suey Restaurant
>> Sandy & Jen's
>> The Spot
>> Stop Light Exotics
>> Volcanoes
>> Kevin's Two Boots
>> Kularb Lao Thai Restaurant
>> Malia Cafe & Poi Bar
>> Ocean Sport Restaurant
Source: City and County Liquor Commission
California Pizza Kitchen's three Oahu outlets didn't make the deadline, but company officials said the problem was quickly rectified and liquor sales are up and running.
A suspended liquor license leaves business owners with the choice of serving drinks for free or allowing customers to slip out to a liquor store for a bottle or two while their dinner is being prepared.
Both options are legal, said Wally Weatherwax, Honolulu liquor law administrator, whether or not an establishment has a license, provided all other liquor rules are obeyed, such as not serving minors, not serving drunks and not showing racial or other discrimination.
At least one establishment closed its doors July 1 after failing to get its license cleared and is still closed. Maui Brews Island Bistro & Nightclub in Lahaina didn't get its tax clearances and decided to close altogether, managers said last week.
Yesterday, a phone message at the eatery's number said voice mail was not available. Franklyn Silva, director of the Maui County Department of Liquor Control, said the restaurant still had not picked up its license and was still closed.
Kauai had only two licensees who didn't make the deadline. Hawaii County had four without tax clearances. Maui had 11.
Oahu, home of the vast majority of state's wining and dining places, bars and liquor stores, had 27 who had not produced tax clearances as of the middle of last week and were therefore not allowed to pick up their liquor licenses. By late yesterday, that list had slipped to 17 on Oahu.
Restaurant and bar managers complain that the plethora of taxes, federal in particular, they must pay have nothing to do with their ability to sell liquor carefully and within all the regulations of the local county commissions.
"Why is our liquor commission collecting taxes for the Feds?" said one restaurant operator who did not want his name used.
That is not what is happening, said Honolulu liquor administrator Weatherwax.
"We don't have someone that goes out and actually enforces the federal statutes," he said.
State law simply says that a license won't be renewed if the licensee cannot show it is clear of taxes, and that doesn't just mean liquor taxes. It is Social Security withholding, income taxes and everything else.
But there are slightly different rules for federal and state tax clearance.
Honolulu will hand over a liquor license if the state tax department clears the taxpayer, perhaps by saying a monthly payment system has been arranged.
But it won't do that where federal taxes are involved, Weatherwax said.
A licensee must show that no federal taxes are owed, none at all, no matter what arrangement the licensee has made with the Internal Revenue Service, he said.
Honolulu attorney Wayne W.S. Luke, who has helped clients through the liquor-license process for many years, said he understands the connection between state taxes and county liquor licenses, but has never understood why a state and its counties should be involved in policing federal taxes.
But the law makes it so, he said, and is pretty straightforward.
The Hawaii Revised Statutes section 281-45 says in part that a county liquor license will not be renewed unless the applicant can "present to the issuing agency a signed certificate from the director of taxation and from the Internal Revenue Service" showing that the applicant does not "owe the state or federal governments any delinquent taxes, penalties or interest."
