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Moonshiners case reveals 50/50 rule issues
Meanwhile, 3 places start 3-day alcohol suspensions today
alcohol

City Council has given Moonshiners, a “sports restaurant” under Statesboro’s Alcoholic Beverages Ordinance, more time and instructed the owner to get accountant-certified reports showing whether the business had more non-alcohol than alcoholic beverage sales the first half of this year.

Meanwhile, the council suspended the alcohol licenses of three businesses for three days, which began at 12:01 a.m. Thursday. One of those businesses is Gata’s Sports Bar & Grill, licensed to Farid Gharachorloo, also the manager of Moonshiners. Gata’s license is suspended for an admitted second offense within 12 months of employees furnishing alcohol to a customer under age 21.

The license of Gate Station No. 226 at 240 South Main St. is also suspended today through Saturday for an acknowledged second offense of underage sales. After alleged second and third violations, the license of Shenanigans at 1 University Plaza is suspended for the same three days, but under a no-contest agreement with the city for a 10-day suspension with the other seven days waived unless another violation occurs. Applebee’s and Big Show Burgers received first-offense warnings.

 

The ‘50/50 rule’

Unlike the other cases heard Tuesday by City Council, the Moonshiner’s case does not involve underage sales. Instead, the city’s allegation was that the business violated an Alcohol Ordinance requirement that places with pouring licenses get at least 50 percent of their revenue from things other than alcohol. This is often called the “50-50 rule.”

Some city officials question the fairness and value of the rule, and some did so during the hearing. Businesses report the numbers themselves, usually in less detail than Gharachorloo did for the first two quarters of 2015.

“He’s probably been about as forthcoming with the numbers as anybody has been the last five years, and he’s standing up here in trouble because of it. …,” said Councilman Phil Boyum. “People have been putting Coke and ice and napkins and $500 hotdogs and whatever you’ve got to do to make 50-50, and we’re going to punish the only honest guy because he submitted a halfway realistic report.”

The alcohol ordinance, as adopted by council in December 2011, makes no provision for bars, authorizing on-premises alcohol consumption only at restaurants and “sports restaurants.” Sports restaurants are not required to have kitchens and minimum seating like regular restaurants, but restaurants and sports restaurants alike are required to make at least 50 percent of their money from “nonalcohol sales.”

Moonshiners, previously named Club 125 and identified that way in the first and second quarter reports, is at 125 Gata Drive, behind Gata’s from Lanier Drive. Moonshiners has no kitchen, but has sub sandwiches available and could provide customers food from neighboring Gata’s, Gharachorloo said. But he added that nobody orders food at Moonshiners. He said he is now making it a club for patrons age 21 and over.

Gharachorloo submitted a first-quarter report to the city in April showing 75 percent of Club 125’s sales were from alcoholic beverages, including 52.5 percent from distilled spirts and 22.5 percent from malt beverages and wine. The other 25 percent was food and non-alcoholic beverage sales.  He submitted a second-quarter report in July showing 70 percent alcoholic beverage sales, including 50 percent from distilled spirts and 20 percent in malt beverages and wine.

A certified public accountant, John L. Fulcher, sent a the city a letter Sept. 18 saying that stating that Club 125 realized that the reports were filled out incorrectly after submitting them. Gharachorloo then submitted amended returns showing alcoholic beverage sales of 45 percent for the first quarter and 41 percent for the second quarter.

Fulcher did not certify the reports. In the letter, he said only that Gharachorloo would be submitting amended returns.

Appearing with Gharachorloo in front of the council Tuesday, attorney Wes Taulbee asked for more time for his client to provide better reports based on a new sales accounting system he has set up. Previously, Gharachorloo had reported he price of mixed drinks entirely as alcoholic beverages. The new system divides the price into a portion of alcohol and a portion of nonalcoholic mixers.

This is what made the biggest change in the reports, Taulbee said.

“The discrepancy comes in, as I understand it, with the mixed drinks and sales that are a combination of alcohol and nonalcohol. … ,” he said. “I know that’s one thing  historically that maybe the city is considering how to deal with, when someone orders an alcoholic drink that contains Red Bull or Coke or some other nonalcoholic portion, then exactly how that is divided up.”

But Boyum suggested Gharachorloo had reported the value of the mixed drinks correctly the first time.

“If you put Red Bull and vodka in one glass, you don’t then separate it out in the accounting,” Boyum said. “That is a $3 drink; you tax it at $3, period. Now, granted, the practice has been different, but the way the ordinance reads is very clear.”

 

Tax affected

City Attorney Alvin Leaphart agreed that this is clear in a requirement for businesses to pay a 3 percent city excise tax on alcoholic drinks, including the full value of mixed drinks. When Taulbee asked if the same language is in the 50-50 rule, Leaphart said he didn’t think this was spelled out there.

But he noted that Gharachorloo had also applied the changes to the excise tax portion of his amended returns, reducing his tax.

Leaphart acknowledged that the practice of separating alcohol from mixers in the reports is widespread, and said it is costing the city a lot of money.

“The loss of revenue to the city is rather profound, based on what people do to meet the 50-50 requirement,” he told the council. “I mean, the city is only collecting a third of the excise tax it is due under the ordinance. So what you see is a system in place that over the years has deprived the city of enormous amounts of revenue.”

More than a year ago, Leaphart first presented the council a draft of a new alcohol ordinance that would have eliminated the 50-50 rule. After several revisions and lengthy work sessions, the council has yet to adopt any version of the new ordinance.

Meanwhile, Statesboro Police Lt. James Winskey, who presented the alcohol compliance cases, noted that Club 125’s reported sales of wine and beer, not affected by the mixed drink question, had also been reduced in the amended returns.

For the first quarter, the reduction was from $11,238 to $7,316. For the second quarter, the change was from $3,498 to $1,152, reducing these from 20 percent to 7 percent of total sales.

Gharachorloo said employees pressed the wrong key in entering these sales in the new system.

Councilman Travis Chance made a suggestion based in the discussions for the new ordinance.

“We’ve talked about having an accountant certify the report,” Chance said. “It’s a great opportunity to have one presented to us. If he’s, since he’s, told the truth and been very forthright, why not give him an extension.”

With the further suggestion from Boyum that the CPA-certified reports include versions with mixed drinks whole and separated, the three council members present unanimously continued the hearing to the first council meeting in November. Gharachorloo was instructed to submit the reports one week before the meeting.

Al Hackle may be reached at (912) 489-9458.

 

 

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