Extras on Excise: New Soda Taxes May Leave a Bad Aftertaste for Some

The holiday season is officially upon us, and for many that means the arrival of glorious get-togethers and office potlucks. However, in spite of how tempting it may be to bring some budget-friendly soda to the party instead of paper products, this season may harken higher prices on your go-to sugary beverages.  

Cook County, Ill., Boulder, Colo., and Albany, San Francisco and Oakland, Calif., have passed a tax on sugar-sweetened beverages, despite well-funded opposition from organizations such as the American Beverage Association, Coca Cola Inc., PepsiCo Inc. and Dr. Pepper-Snapple.  

Albany, Oakland, San Francisco and Cook County approved a $0.01 per-ounce tax on sugar-sweetened beverages to be levied on distributors; Boulder residents approved a $0.02 soda tax. These five localities join Berkeley, Calif., and Philadelphia, which also impose taxes on sugary beverages. The Cook County tax is in addition to Chicago’s 3 percent soft drink occupation tax and 9 percent fountain soft drink tax.  

Berkeley became the first city in the country to adopt a $0.01 per ounce tax on sugar-sweetened beverages to curb the consumption of sugary beverages in 2014. In June, Philadelphia passed a $0.015 per fluid ounce sugar-sweetened beverage tax to promote revenue for pre-K expansion, community schools and rebuilding community infrastructure. And depending on the jurisdiction’s definition of “sugar-sweetened beverage,” the tax may also apply to items like pre-sweetened coffee or tea, sport drinks, flavored water, energy drinks and drinks containing artificial sweeteners. The tax may also be imposed on fountain drinks at convenience stores.

At the state level, Arkansas, Tennessee, Virginia and West Virginia also impose excise taxes on soft drinks. 

Together, these states and localities represent a growing trend to tax sugary beverages to raise revenue and reduce health care costs associated with sugary beverage consumption. Studies have shown that increased consumption of sugary beverages is directly linked to obesity, low bone density, caffeine dependence and increased risk of hypertension. 

Soda taxes are already reducing soft drink consumption in one city. In August, UC Berkeley published a study finding that Berkeley’s excise tax on sugar-sweetened beverages has decreased soda and sport drinks consumption by 21 percent in low-income communities. Another UC Berkeley study found that increased sugary beverage shelf prices have reduced consumer consumption overall. These findings could encourage soda tax advocates to campaign for sugar-sweetened beverage taxes on future ballots in other jurisdictions. 

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What city or state will impose a soda tax next?

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