Extras on Excise: State Legislators Would Like to Buy the World a Coke . . . But Only From Licensed Sellers Who’ll Collect Taxes on It

There have been a large number of state excise tax bills targeting soft drinks over the past few years, but so far none of the states have been successful. While four states do have excise taxes, the only entity to approve a tax recently has been the city of Berkeley in California. However, lawmakers in Illinois, Vermont and Connecticut are trying once again.

Illinois’s bill, S.B. 1584, seeks to impose a $0.01 tax per ounce of bottled “sugar-sweetened beverages,” soft drink syrup and powder sold in-state. This means any non-alcoholic beverage with a caloric sweetener, soft drinks, flavored water, sweet tea and other similar drinks. However, diet beverages are exempt.

Sellers would need permits in order to sell these beverages. These permits have to be renewed each year, and they cost $250.

Illinois is not the only state toying with the idea of a soft drink permit. In Vermont, H.B. 24 would require sellers to first obtain licenses. Anyone selling without the license could face a penalty of up to $100 each day the seller makes a sale. H.B. 24 also imposes a $0.02 per ounce tax on bottled sugar-sweetened beverages.

Interestingly enough, the Illinois bill requires the distributor to pass the tax on to the retailer and for the retailer to do the same to customers. The tax burden in Vermont’s bill is just placed on the distributors, though customers would likely end up bearing costs of the tax.

H.B. 5461, the Connecticut tax bill which taxes soft drinks that are “high in calories and sugar” at $0.01 per ounce, does not have a licensing requirement. However, it does have a unique flavor; this penny-per-ounce tax applies to candy as well.

The legislative purposes, as cited in all these bills, concern public health. H.B. 235 and S.B. 1584 provide lengthy explanations about the danger of sugar. Excessive sugar consumption is linked to obesity and other conditions like heart disease and Type II diabetes. H.B. 5461 does not discuss health problems, but it does identify that the revenue’s purpose is to fund childhood obesity prevention efforts. The revenue from the Illinois and Vermont bills would also be allocated to state public health funds.

There has also been federal governmental fizz over the issue. The federal Dietary Guidelines Advisory Committee released a report last month that recommends taxing sugar-sweetened beverages and other high-caloric, high-sodium food. Last year, Rep. Rosa DeLauro (D-Conn.) introduced an unsuccessful bill, the “Sugar-Sweetened Beverages Tax Act,” that would have imposed a $0.01 tax per 4.2 grams of caloric sweetener in drinks.

Now it is up to the state legislatures whether these proposed soft drink taxes are the real thing.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Will the Texas Legislature repeal the state’s franchise tax this session?

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by Laura Lieberman