Extras on Excise: 12-Year Ban on Local Grocery Taxes Causes Focus on Soda to Fizzle in California

On June 28, 2018, California Gov. Jerry Brown (D) approved A.B. 1838, which is also known as the Keep Groceries Affordable Act of 2018. The new law prohibits local governments from imposing, increasing, levying, collecting, and enforcing any taxes, fees, or other assessments on groceries until Jan. 1, 2031. It is effective immediately, and the prohibition applies to those taxes, fees, and assessments imposed after Jan. 1, 2018.

While the text of the law does not explicitly address soda taxes, the legislature’s goal to stem the rise of soda taxes is clear, as the law will not restrict new taxes on groceries that are “generally applicable to a broad range of businesses, business activity, or products” and do not apply a higher tax rate to different classifications of groceries. The legislature also notes that the “promotion of uniformity in the taxation of groceries is a matter of statewide concern.”

Had A.B. 1838 not passed, the California Business Roundtable, backed by the American Beverage Association, would have moved forward with a ballot initiative that sought to constrict local governments’ authority to tax by requiring approval from two-thirds of a local governing body and/or the electorate to impose, extend, or increase taxes or charges, rather than the current approval threshold of a simple majority. The prospect of this initiative being passed caused legislators angst and prompted them to support the more narrow restrictions in A.B. 1838. Shortly after the bill was passed, the ballot initiative was withdrawn.

The California cities of Berkeley, San Francisco, Oakland, and Albany currently impose soda taxes that will be unaffected by the new legislation since they were in effect prior to Jan. 1, 2018. Any cities that passed a soda tax in 2018, however, will be unable to enforce it.

Bloomberg Tax is operated by entities controlled by Michael Bloomberg, who has provided funding for soda tax campaigns in California and other jurisdictions.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Did California make the right decision on soda taxes?

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