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How to Tax Sweetened Beverages in Minnesota


 Behold the soda aisle.

Some areas of the country are considering a Department of Revenue simply wants to be sure that the existing taxes on soft drinks are properly applied. To that end, it has issued a fact sheet entitled Soft Drinks and Other Beverages.

Minnesota provides a sales tax exemption for many food products. However, the exemption does not apply to soft drinks.

If once upon a time there was only Coke and Pepsi, nowadays the term “soft drinks” requires defining. In Minnesota, it is defined as nonalcoholic beverages containing “natural or artificial sweeteners.” Natural and artificial sweetener is defined as “an ingredient of a food product that adds a sugary sweetness to the taste of the food product.”

The number of beverages meeting that definition can surely fill a supermarket aisle.

Beverages with the following sweeteners are subject to sales tax:

  • Agave
  • Aspartame
  • Barley malt
  • Corn syrup
  • Dextrose
  • Evaporated cane juice
  • Fructose
  • Fruit juice concentrate
  • Honey
  • Invert sugar
  • Maltitol
  • Molasses
  • Rice syrup
  • Stevia
  • Saccharin
  • Sucralose
  • Sucrose

But that’s not all. Beverages containing “other artificial or natural sweeteners” are also taxable.

The drinks that meet this definition are surprisingly varied and include sweetened bottled or canned water, sweetened coffee and tea drinks, nonalcoholic beer, and Pedialyte.

Milk trumps sugar

But the inclusion of an artificial or natural sweetener does not necessarily a soft drink make. Beverages labeled as follows are generally not subject to sales tax (excluding exceptions, of course):

  • Milk or milk products
  • Soy, rice or similar milk substitutes
  • More than 50% vegetable or fruit juice by volume (even if they contain sweeteners)
  • Natural flavor, essence, or spice

This helps keep work interesting for retailers. Exempt beverages include apple cider, unsweetened water, and, most puzzling to me, the Frappuccino ®. Milk trumps sugar.

Oh, and vending machines and straws trump an exemption. Unsweetened bottled water is subject to sales tax when sold from a vending machine or with a straw or other eating utensils.

Automated sales tax software helps retailers manage sales tax wherever they sell. Learn more.

 

photo credit: mroach via photopin cc


Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.