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Chicago: Still water is taxable, sparkling water is exempt

  • Aug 23, 2016 | Gail Cole

 Does Chicago's bottled water tax apply?

The City of Chicago imposes a special tax on the retail sale of bottled water. The 5-cent tax should be collected by wholesalers; failing that, however, retailers are required to collect it.

According to the Chicago Department of Finance, the Bottled Water Tax applies to “all brands of non-carbonated bottled water intended for human consumption.” It does not apply to the following:

  • “Any beverage that qualifies as a “Soft Drink” per the Chicago Soft Drink Tax ordinance
  • Pedialyte
  • Gatorade
  • Vitamin Water
  • Sobe Life Water
  • Propel Fitness Water
  • Water Joe
  • Perrier, Seltzer Water, Club Soda or Tonic Water
  • Mineral Water
  • Distilled Water
  • Other products similar to those listed above due to carbonation and/or other features such as flavoring, vitamins, caffeine, or nutritional additives
  • Water provided by home or business water delivery services, where the water is delivered in a reusable container that is not sold with the water”

It’s easy to see how a retailer could mistakenly apply the bottled water tax to a bottle of sparkling water. And indeed, one man has now filed a class action suit in the Cook County Court, alleging that several stores (part of a chain) charged him sales tax on beverages that should have been exempt. He doesn’t have receipts to prove his claims, and “doesn’t know how many people allegedly may have been similarly overcharged,” but would like the court to allow his attorneys to examine the company’s “books and records” to learn more.

The easiest way to avoid such a lawsuit is to collect the proper sales tax on every transaction. Sales tax software-as-a-service (SaaS) makes that possible. Learn more about automated sales tax compliance.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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.