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Seattle mayor seeks soda tax

  • Feb 23, 2017 | Gail Cole

 Do soda taxes cause us to drink less soda?

Seattle, Washington is the latest city to consider a tax on sugary beverages. In his February 21 State of the City address, Mayor Ed Murray proposed a tax of 2 cents per ounce on the distribution of sugary drinks (i.e., energy drinks, juice, soda, and sweetened teas). If approved, the tax could generate as much as $16 million annually, which would go towards improving education in the city.

Specifically, the funds would be earmarked for the Education Action Agenda, which has a mission to “eliminate the opportunity gap between white students and African American/Black students and other historically underrepresented students of color.” The city would use the revenue to expand Birth-to-Five programs as well as before and after school programs, support educator workforce diversity, reduce disproportionality in discipline, and more.

Mayor Murray emphasized the amount of revenue a soda tax could generate, as the city desperately needs more money for education. That’s true for the state of Washington, too. Education has been underfunded in the state for decades, meaning that “Washington is failing to meet its constitutional obligations for fully funding K-12 basic education.” Governor Jay Inslee (D) hasn’t called for a statewide tax on sugary beverages, but his proposed budget for 2017–19 includes repealing the sales and use tax exemption for bottle water.

The proposed Seattle soda tax is about money. But it’s also about health. The mayor pointed out that the Centers for Disease Control and Prevention finds soda taxes to be “the single most effective remedy to reverse the obesity epidemic” because they help decrease consumption. The health benefits of taxing sugary beverages have been part of tax debates in other parts of the country as well.

Soda taxes in the United States

As the mayor noted in his address, soda taxes are becoming more popular in the United States.

A 1-cent-per-ounce tax on sugary beverages in Berkeley took effect on January 1, 2015 and has raised approximately $2 million to date. While this is less than expected, the tax also appears to be lessening soda consumption in the city’s poorest neighborhoods by about 20 percent.

Sales of soft drinks have been subject to Vermont sales and use tax since July 1, 2015. As of the beginning of 2016, overall sales tax revenue in Vermont was down, and the soda tax was bringing in less than anticipated. This was attributed in part to a lack of compliance, which was thought to be largely due to retailer confusion about what is and isn’t subject to the new tax.

A tax on the distribution of sweetened beverages in Philadelphia took effect on January 1, 2017, so it’s too soon to know if it’s bringing in the desired revenue (also for education). The tax is being challenged by the American Beverage Association, the Philadelphians Against the Grocery Tax coalition, and other groups.

Similar taxes in Boulder, Colorado; Oakland, California; and Cook County, Illinois will take effect July 1, 2017. The distribution of sugar-sweetened beverages will be subject to tax in San Francisco as of January 1, 2018. Voters in Albany, California decided to tax sugary drinks during the November 2016 election, but the tax doesn’t yet have an effective date.

Taxes on sugary beverages are also under consideration in Alabama and Massachusetts, as well as in Santa Fe, New Mexico.

Changes in product taxability are often unpopular among consumers. For retailers, they can make sales and use tax compliance that much more challenging. Fortunately, tax automation software facilitates compliance for businesses of all sizes, in all states. Learn how it works.

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.