Back in November of 2016, the Cook County Board of Commissioners passed the Cook County Sweetened Beverage Tax Ordinance. The tax is imposed at the rate of $0.01 per ounce on the retail sale of all sweetened beverages in Cook County. The tax was originally intended to go into effect July 1, 2017, but was delayed when a trial court issued a temporary restraining order while it evaluated the legality of the tax. The tax survived the legal challenge despite widespread confusion, limited and inconsistent guidance and administrative uncertainty. It went into effect August 2, 2017, and now we all have to deal with it.
Cook County is not alone in taxing Sugar-Sweetened Beverages (SSB). Four California cities; Boulder, Colorado; Philadelphia, Pennsylvania; and Seattle, Washington have passed new taxes on SSBs. The theory behind the SSB taxes is to discourage unhealthy choices while raising money for government programs. These various localities do not seem to have much concern for the administrative burden placed on retailers and distributors.
Who Pays the Cook County SSB Tax?
The short answer is everyone. Distributors collect the tax from retailers and submit it to Cook County beginning August 2, 2017. Retailers must submit a “floor” tax on their SSB inventory as of August 1, 2017. Retailers that purchase SSBs from unregistered distributors that do not collect the tax must self-assess and remit the tax. Retailers must then separately charge the consumers the tax, in effect reimbursing themselves for the tax paid to the distributor. Retailers are required to separately collect the tax and cannot just absorb it.
Unfortunately, with the Cook County SSB tax, there are more questions than answers. How do retailers know how to pass through the tax for drinks that do not post predetermined volume? What happens with free refills? Will retailers have to charge the tax on each refill? What about when ice is offered with drinks? The list of questions is seemingly unending and the retailer is going to have to shoulder the administrative burden of figuring it out and updating point-of-sale systems.
What to Do Now?
Properly update your sales systems. Within a week of the SSB tax’s implementation, at least three class action law suits were filed against retailers who were allegedly improperly collecting the tax from their customers. The floor tax return is due September 20, 2017. The first monthly tax return for those collecting the tax is also due September 20, 2017.
Penalties for the violation of this ordinance are $1,000 for the first offense and $2,000 for the second and each subsequent offense. So it is important to comply with this new law. More information can be found on the Cook County website.