Tax & Accounting Blog

Soda Taxes May Bubble Up On Voting Day

Indirect Tax, ONESOURCE November 7, 2016

Previously we discussed the record number of revenue measures that Californians are voting on November 8th, and we noted that three cities would be voting on soda taxes. Those cities – San Francisco, Oakland, and Albany – are joining the city Boulder, Colorado in weighing whether to tax sugary beverages such as soda. Presently only the city of Berkeley and the city of Philadelphia have these taxes on the books. In 2014, voters in the city of San Francisco voted 54.5% to 45.5% to impose a soda tax, however a 2/3 majority was required to enact the tax.

This year Prop V would enact the Sugary Drinks Distributor Tax Ordinance, which would enact a $0.01 cent per ounce tax on sugar sweetened beverages, with the tax to begin January 1, 2018. These beverages are defined to contain Caloric sweetener that adds 25 calories per 12 fluid ounces. Excluded from these beverages are any beverages that are designed for Medical Use, Infant Formula, Milk Products, or 100% Fruit/Vegetable juices. Unlike the previous attempt at passing the tax, this proposed tax would support general revenue and thus only need a majority of voters to approve it. In Oakland, Measure HH would similarly add a $0.01 cent per ounce tax to begin on July 1, 2017 and also requires a simple majority for passage. In Albany, Measure O1 would create a $0.01 cent tax and would take effect after passage.

In Boulder voters will decide Ballot Question 2H, which would impose a highest in the nation $0.02 cent per ounce tax on sugar sweetened beverages effective July 1, 2017. For a two-liter bottle that would equate to a $1.36 tax on distribution, and for a standard pack of 12 ounce cans the tax would be $2.88. Sugar sweetened beverages are defined in the Boulder ordinance to mean any beverage that contains at least 5 grams of caloric sweetener per 12 fluid ounces but contains similar exemptions to the California taxes.

The World Health Organization has issued a bulletin which found that a sugar sweetened beverage tax in Mexico helped reduce consumption of these drinks, however stopped short of directly advocating for these taxes, instead stating that governments should consider, “other price policies such as subsidies for, or lower taxation of, healthy food as well as initiatives to encourage people to eat a healthier diet, avoid tobacco and be more physically active.”