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Soda taxes could bubble up everywhere

  • Sep 22, 2016 | Gail Cole

 Should soda be subject to higher taxes?

Update, 11.9.2016: Voters have approved taxes on sugar-sweetened beverages in Boulder, Colorado and Albany, Oakland, and San Francisco, California.

Soda taxes are controversial. Bring up the topic in a crowded room and you’re sure to generate a heated discussion, if not an outright argument. Yet taxes designed to curb consumption of sugary beverages seem to be on the rise.

Berkeley, California, was the first city in the nation to successfully enact a tax on soda and other sugary beverages. Voters approved it in November of 2014, on the same day voters in San Francisco rejected a similar measure. In July 2015, the state of Vermont extended its 6% state sales tax to sweetened beverages, and in June of 2016, a soda tax was approved in Philadelphia. Homer, Alaska used to exempt sugary beverages and a variety of other foods from sales tax during the winter months, but as of January 1, 2016, they’re taxable year-round.

Yet it was the Philadelphia tax, which won’t take effect until January 1, 2017, that made many tax wonks sit up and take note: the population of the City of Brotherly Love is more than two times greater than the population of Vermont.

This fall, a healthy handful of soda taxes will be on ballots. They include:

  • Boulder, Colorado: Ordinance No. 8230 seeks to impose an excise tax of 2 cents per ounce on the distribution of drinks with added sugar, and sweeteners used to produce such drinks.
  • Three cities in California:
    • Albany: Measure O1 would impose a 1 cent per ounce tax on sugar-sweetened beverages.
    • Oakland: Measure HH would impose a 1 cent per ounce tax on the distribution of sugar-sweetened beverages in Oakland. Products subject to the tax would include energy drinks, soda, sports drinks, and sweetened teas. Businesses with annual gross sales of less than $100,000 would be exempt from the tax.
    • San Francisco (city and county): Measure V would impose a 1 cent per ounce tax on the distribution of sugar-sweetened beverages, defined as a drink with added sugar and at least 25 calories per 12 ounces. Businesses with annual revenue of less than $100,000 would be exempt from the tax.

Cook County Board President Toni Preckwinkle is also considering a soda tax to help balance the Chicago’s budget.

Non-tax tactics

Taxing sugary beverages isn’t the only way to dissuade consumption. In San Francisco, outdoor advertisements for soda now include a warning of the risks associated with consuming soda, much like the warnings that appear on alcohol and cigarettes. Warning labels are also being considered by lawmakers in Baltimore and three states — New York, Vermont, and Washington — although they haven’t gained much traction. It's too early to tell if the warnings are affecting consumption in the Bay Area.

Effectiveness of soda taxes

The Berkeley tax, which has been in place since January 1, 2015, seems to be reducing soda consumption. Study results suggest that Berkeley residents have reduced their intake of sugary beverages by about 20% since the tax took effect, and more than one in five survey respondents said they had changed their drinking habits. However, 5% of people surveyed admitted they now purchase their sugary drinks outside of the Berkeley city limits. It remains to be seen whether or not the tax will have a positive effect on the health of the citizens of Berkeley.

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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.