On most of the roads that enter our state there can be seen a sign saying “West Virginia - Open for Business”. According to the West Virginia Small Business Development Center (WVSBDC), which is supported by the West Virginia Development Office, “Starting a business can be gratifying…the WVSBDC will help you quickly and easily find the information you need to launch your business and keep it growing.  Federal statistics show that small business owners fuel the state’s economy and, in fact, 97 percent of West Virginia companies are classified as small businesses”. 

With apologies to Ronald Reagan, that sounds like they’re from the government and they are here to help. The fact is that West Virginia over the past fifteen years has been losing small businesses in droves. An article published by the Mountaineer News Center of the Reed College of the Media at West Virginia University entitled “Small businesses face uphill battle in West Virginia”, says that “Small and local businesses…have begun to disappear throughout the state of West Virginia in recent years”. It also says that “West Virginia lost nearly 4,000 of its small businesses (500 employees or less), from 2000 to 2010 alone, which equates to over 12 percent of the state’s total small employers”.

We are now in the process of losing another, one that is in our own back yard - the Bloomery Plantation and Distillery here in Charles Town. As reported previously in the Spirit, it has already closed down - the reasons given having to do with taxation and regulation. That’s right - an acknowledgement that taxes and regulation are killing small businesses. Wonders will never cease.

We can add another wrinkle - there is only one distributor of alcoholic beverages in the state - it’s a monopoly - and it is the state itself through its Alcohol Beverage Control Administration (ABCA). According to one of its officials, the Bloomery is one of eleven distilleries in the state and the only one that is having a problem with the current setup. To my mind, this is the type of response you might expect from a non-market-based, unaccountable and unelected official - “it’s not our problem that our rules caused you to go out of business”. This is the essence of why government is the problem and not the solution.

I asked co-founder Rob Losey what makes his business different. I will distill the answer (pun intended) based on my interpretation of his response. What it comes down to is as basic as the art of being an entrepreneur - something that the state simply cannot understand. How Losey explained it is that there are two components to the business model - the manufacturing component and the artistic or “vision” component. The manufacture of the product could be located anywhere - and then shipped to distributors and retailers.

However, here’s where the uniqueness of the business comes in - the entrepreneurial part - the part that requires vision. The Loseys, Rob and Linda, chose Jefferson County as the perfect marketing venue. It fulfilled their vision with regard to the right atmosphere and geography - enabling them capture the right experience for their customers. This blinded them to the negatives.

While they were trying to execute their business plan and realize their entrepreneurial vision, the state of West Virginia tied both their arms behind their backs and one of their legs. First, state code does not allow a distillery to sell its product by the glass on premises. Why? No one knows. In order to circumvent this arbitrary and capricious rule, the company gave away samples of the product to prospective customers relying on customers to then buy a bottle or two (or more) - adding layers of cost.

Secondly, according to state code, the company cannot sell its product on Sunday’s before 1PM. And thirdly, it is required to sell its product to the state and then buy it back after it has been marked up 28% since the state holds a monopoly on the distribution of alcohol. It is then required by law to mark it up another 10% and then pay an additional 10% tax to be remitted to retailers in the area called the “market zone tax”. Why? Because someone lobbied for it - and won. There are other taxes as well - by the time you or I get our hands on a bottle, more than 1/3 of the price is made up of taxes. Because of this (and the capricious regulations), the company has had to rethink its strategy of selling upwards of 90% of its product at its Charles Town location.

The Bloomery Plantation and Distillery falls under the category of “agro-tourism” and contributes to the overall success of the tourism industry in our county - an industry that provides more than one third of all of the jobs in our county. And while Rob Losey stresses that local state legislators have shown bipartisan support, however, current regulations and taxes make it impossible to continue to operate here in our state.

Earlier this week an editorial appeared in the Charleston Daily Mail entitled, “Why is the state [of West Virginia] still in the liquor business?” It goes on to say, “The state got out of the retail liquor sales business in 1990. But, for whatever reason, it still controls wholesale liquor sales”.

Great question. Here’s another: What do you do when you’re given an offer that you can’t refuse?