Could Maine constitutionally let the Bureau of Alcoholic Beverages set the markup on spirits and fortified wine to hit a fixed revenue target?

Plain-English summary

In 1996 the Legal and Veterans' Affairs Committee was working on Legislative Document 1706, which implemented the Task Force on Alcohol Beverage Sales' recommendations. One provision, proposed 28-A M.R.S.A. § 1651-A(1), would have moved the price-setting authority for spirits and fortified wine sold in Maine. Instead of the Legislature setting the markup directly, the bill would authorize the Bureau of Alcoholic Beverages and Lottery Operations to set the wholesale price, with the legislative instruction that the markup must produce General Fund revenue "substantially equal" to what was transferred in fiscal year 1994-95. The Bureau would also have authority to adjust prices to keep revenue at that target.

Representative True asked the AG whether that violated Me. Const. art. IX, § 9, which says "the Legislature shall never, in any manner, suspend or surrender the power of taxation." The AG concluded the provision was constitutional. The reasoning came directly out of Maine Milk Producers v. Commissioner of Agriculture, 483 A.2d 1213, 1220 (Me. 1984), which addressed the same kind of question for a milk-promotion levy. Maine Milk Producers said the Legislature can let an administrative agency calculate the amount of a tax, so long as the agency has no real discretion. If the agency is just doing arithmetic against an event of "independent significance" (here, the FY 1994-95 transfer figure that the Legislature had set as the target), the rate of tax is not being set by the agency in any constitutionally meaningful sense.

The AG worked through the mechanics. The Bureau would estimate the volume of spirits and fortified wine to be sold in the fiscal year, then calculate the per-bottle markup percentage required to generate enough revenue to hit the legislative target. Each step is a mechanical calculation. The Bureau exercises no discretion about how much to tax; it executes the Legislature's instruction to "raise X dollars" against a sales volume the market determines. That structure satisfies § 9 as Maine Milk Producers reads it.

Representative True had also flagged Me. Const. art. I, § 22, which says "no tax or duty shall be imposed without the consent of the people or of their representatives in the Legislature." The AG dismissed that quickly: the markup was being imposed by an act of the Legislature, so § 22 was clearly satisfied. The hard question was the delegation question, and on that the AG concluded the bill was on the right side of the line.

Currency note

This opinion was issued in 1996. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What is the spirits "markup" in Maine?

Maine has long operated a state-control alcohol system in which the state takes title to spirits and fortified wines and resells them. The "markup" is the spread between what the state pays for the product and what it charges the retailer or consumer. Economically, that spread functions much like a tax: it raises General Fund revenue from each bottle sold.

Why is the markup analyzed as a tax for constitutional purposes?

Because the markup is a government-imposed charge on the sale of a regulated good, the proceeds of which go to the General Fund. The Law Court treated a similar industry levy as a tax in Maine Milk Producers v. Commissioner of Agriculture, and the AG applied the same logic here. The label "markup" does not change the constitutional analysis.

What does Me. Const. art. IX, § 9 actually forbid?

It forbids the Legislature from "surrendering" the power of taxation. The Law Court reads that to mean the Legislature cannot delegate true discretion over the amount or imposition of a tax to a non-legislative actor. The Legislature can use an agency as a calculating mechanism, but cannot let the agency choose how much to tax.

Where is the line between a permitted tax calculation and an unconstitutional delegation?

The line is discretion. If the Legislature lets an agency decide how much revenue to raise (a free choice over the rate), that surrenders the taxing power and is unconstitutional. If the Legislature fixes the target itself and leaves the agency only to calculate the rate that hits it, the agency is a calculating mechanism and the delegation is permitted. Here the FY 1994-95 transfer amount was the fixed target; the Bureau had no discretion to depart from it, only the job of computing the markup that would produce it.

Could the Bureau adjust the markup later if sales went up or down?

Yes, that was the point of the second sentence of the proposed § 1651-A(1). If actual sales diverged from the Bureau's initial estimate, the Bureau could re-set the markup to keep revenue at the target. The AG read that as part of the same arithmetic exercise; the legislative goal remained the FY 1994-95 amount, and the Bureau remained a calculating mechanism.

Background and statutory framework

The proposed 28-A M.R.S.A. § 1651-A(1), as quoted in the opinion, would have provided: "The alcohol bureau shall determine the amount of markup and set a wholesale price for all spirits and fortified wine that the alcohol bureau determines will produce an amount of revenue to be transferred to the General Fund that substantially equals the amount transferred in fiscal year 1994-95. The alcohol bureau may adjust the amount of markup and wholesale prices as necessary to produce the required revenue."

The constitutional framework: Me. Const. art. IX, § 9 (no surrender of the taxing power) and Me. Const. art. I, § 22 (no tax without consent of the Legislature). The dispositive precedent is Maine Milk Producers v. Commissioner of Agriculture, 483 A.2d 1213 (Me. 1984), which set out the rule that an agency may calculate a tax by reference to events of independent significance without violating § 9, as long as the agency lacks discretion to choose the rate.

The Bureau's calculation here had two inputs the Legislature controlled: the revenue target (the FY 1994-95 transfer amount) and the goods to be taxed (spirits and fortified wine). The two inputs the market controlled were the volume sold and the underlying wholesale cost. The Bureau's role was to multiply the variables together and back into a markup percentage. No discretion, just arithmetic.

Citations

• Proposed 28-A M.R.S.A. § 1651-A(1) (Bureau of Alcoholic Beverages markup authority; pending in LD 1706, 117th Legislature)
• Me. Const. art. I, § 22 (no tax without consent of the Legislature)
• Me. Const. art. IX, § 9 (no surrender of the taxing power)
• Maine Milk Producers, Inc. v. Commissioner of Agriculture, Food and Rural Resources, 483 A.2d 1213, 1220 (Me. 1984) (agency may calculate tax by formula tied to events of independent significance without violating Art. IX, § 9)

Source

• Landing page: https://www.maine.gov/legis/lawlib/lldl/agops/agops.htm
• Original PDF: https://lldc.mainelegislature.org/Open/AG/Opinions/1996/ag_19960229.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

96-3

ANDREW KETTERER
ATTORNEY GENERAL

STATE OF MAINE
DEPARTMENT OF THE ATTORNEY GENERAL
6 STATE HOUSE STATION
AUGUSTA, MAINE 04333-0006

February 29, 1996

Representative Harry G. True
House Chair, Joint Standing Committee on Legal and Veterans' Affairs
115 State House Station
Augusta, ME 04333-0115

Dear Representative True:

I am writing in response to your letter of February 21, 1996, inquiring into the constitutionality of a provision of legislation currently pending before your Committee which would authorize the Bureau of Alcoholic Beverages and Lottery Operations (the "Bureau") to establish the so-called "markup" of all spirits and fortified wine to be sold in Maine. For the reasons which follow, it is the Opinion of this Department that the provision at issue would be constitutional.

The provision about which you inquire is proposed 28-A M.R.S.A. § 1651-A(1), which appears in Section A-38 of Legislative Document 1706, "AN ACT to Implement the Recommendations of the Task Force on Alcohol Beverage Sales." The provision, in its entirety, is as follows:

1. Amount of tax. The alcohol bureau shall determine the amount of markup and set a wholesale price for all spirits and fortified wine that the alcohol bureau determines will produce an amount of revenue to be transferred to the General Fund that substantially equals the amount transferred in fiscal year 1994-95. The alcohol bureau may adjust the amount of markup and wholesale prices as necessary to produce the required revenue.

Essentially, you ask whether this provision would violate Article IX, Section 9 of the Maine Constitution, which provides that "the Legislature shall never, in any manner, suspend or surrender the power of taxation."

In your letter, you also ask whether the provision would violate Article I, Section 22 of the Maine Constitution which provides: "No tax or duty shall be imposed without the consent of the people or of their representatives in the Legislature." Since the tax in question here would have been enacted by the Legislature, this Department can see no difficulty with this particular provision of the Maine Constitution. The principal question, discussed in the body of this Opinion, is whether the Legislature, having enacted the tax, has unconstitutionally delegated the manner of its establishment to an administrative agency in violation of Article IX, Section 9 of the Maine Constitution.

In interpreting Article IX, Section 9 of the Maine Constitution, the Supreme Judicial Court has made it clear that simply because the amount of a tax is fixed by an entity outside of the Legislature does not mean that the tax is necessarily unconstitutional. In Maine Milk Producers, Inc. v. Commissioner of Agriculture, Food and Rural Resources, 483 A.2d 1213, 1220 (Me. 1984), the Court held that it is not a violation of Article IX, Section 9 if the Legislature establishes a taxing scheme where the tax is fixed by an administrative agency on the basis of an event of "independent significance." Thus, so long as the agency has no discretion in determining the amount of the tax, but rather is confined to simply calculating the amount based upon other events over which it has no control, the vesting of the power to determine the amount of tax in the agency will not violate the clause.

With regard to proposed 28-A M.R.S.A. § 1651(1), this Department does not believe that the proposal would vest any unconstitutional discretion in the Bureau. Under the proposal, the Bureau would be empowered to establish the amount of the "markup" (or tax) to be imposed upon the sale of all spirits and fortified wine in the State, but the Legislature has determined that the amount of the markup would be no more or no less than that required to generate an amount of money equal to the amount transferred to the General Fund by the Bureau in fiscal year 1994-95. To accomplish this task, the Bureau would have to estimate the volume of spirits and fortified wine that would be sold in a particular fiscal year, and use that figure to establish the percentage by which the price of each bottle should be increased in order to raise the amount of money which the Legislature has determined must be generated. This process does not involve the exercise of any discretion by the Bureau; it is simply required to make a good faith estimate of the amount of sales, after which the calculation of the markup (or tax) becomes mechanical. Consequently, the proposal does not violate Article IX, Section 9 of the Maine Constitution.

I hope the foregoing adequately answers your inquiry. Please feel free to reinquire if further clarification is necessary.

Attorney General

AK:sw

cc: Senator Norman K. Ferguson, Jr.
Senate Chair, Joint Standing Committee on Legal and Veterans' Affairs
Senator Michael H. Michaud
Representative Eleanor M. Murphy
Members, Joint Standing Committee on Legal and Veterans' Affairs
Representative Nancy L. Chizmar
Sponsor, Legislative Document 1706
Eben Marsh
Director, Bureau of Alcoholic Beverages and Lottery Operations