Among public-health state departments, the hot topic of the moment is the imposition of soda taxes. Carbonated, sports, energy, and certain noncarbonated drinks have high levels of sugar and sweeteners. And because of their popularity, caused in large part by well-targeted advertising campaigns, sugary soft drinks are contributing to high obesity rates. States have taken it upon themselves to look into new ways of discouraging excess soda consumption, to lower overall health costs related to obesity and diabetes. One option is to increase the price of soda with a small tax.
Despite a steady decline in soda sales since 2004, Coca Cola’s US sales as of March 2016 were over $20 billion. With similar sales numbers by PepsiCo, Dr. Pepper Snapple Group, and other soft drink producers, soda is still popular. What we see now in the market is a divided American public: consumers who distrust artificial sweeteners, thereby actively avoiding soda consumption, and those who consume soda regularly (despite public health warnings).
While delicious, sodas are far from offering nutritional value, and with plenty of evidence attributing sugary-drink intake to obesity (for instance, this Harvard study), states have been examining different ways of lowering consumption.
Californians Voted for Soda Tax in 2014
California is well-known for being a health-conscious state, so it’s no surprise that voters in Berkeley were the first to vote in favor of a soda tax. When studies revealed that 40% of Berkeley’s ninth-graders were overweight and that two in three California teens drink one soda or sugary drink every day, it seemed time to step in and take action. The money from the Berkeley soda tax will go to community health and nutrition programs, like school garden programs.
In 2016, Oakland voters approved a soda tax that is paid by the distributor. What this means is, whatever company brings the soda into Oakland is to pay the tax, instead of the consumer.
San Francisco Sugary Drinks Sales Tax
The soda tax in San Francisco reads similar to the one passed in Oakland, California, with the tax paid by distributors. To break this down, whoever is the first to bring the sugary beverage into San Francisco is responsible for paying the soda tax. This stipulation to the tax means if a restaurant owner purchases their soda from a distributor locally, they will not be subject to the additional tax. Restaurants have started networking with local companies to avoid the soda tax in San Francisco.
Which drinks are taxed?
Drinks that are 100% juice are not taxed, nor are coconut milk or dairy milk. Diet sodas are also not included, as they do not have added sugar. Because it has its own separate tax, alcohol is also exempt. Drinks that are taxed include sugary sodas, juices with added sugar, and syrups added to drinks.
For most states, beverages containing milk are not subject to the soda tax, but Florida does tax milk-based drinks and powders under their soda tax. Florida’s tax includes Nesquick powders, as well as some protein shake mixes.
- Caffeine-free sodas
- Non-diet sodas
- Sweetened coffee without added milk
- Sports drinks – such as Gatorade and Powerade
- Cocktail mixes which do not contain alcohol
- Sweetened teas
- Powdered beverages which contain sugar
- Syrups used to mix fountain drinks
Philadelphia Passes the Most Aggressive Soda Tax to Date
This past June, Philadelphia passed the highest soda tax in the country, with an overwhelming majority voting for the tax (13 to 4). The soda tax is estimated to generate more than $91 million for the city, funds that will allocate to community preschools, kindergartens, libraries, and public spaces. Some funds will also go toward the city’s general fund.
Not everyone is thrilled by the tax. “I don’t like it. I’m disappointed in it,” a Philly resident told Yahoo Finance. “I think it’s incredibly regressive, and I think the population it’s purported to aid and help is exactly the population it’s going to negatively affect.” Thousands of beverages will be taxed, except those that include 50% or more of juice or milk.
Steven Gortmaker, Ph.D., from the Harvard Prevention Research Center, led a team that estimates the new soda tax will save about 730 lives and help 36,000 people avoid obesity. Based on their calculations, public-health spending will drop by about $200 million over the next ten years.
Restaurants are also affected by soda taxes, although by how much depends on the city and state. In Philadelphia, restaurant and bar owners will most likely include the tax on customers’ bills to offset the extra charges.
Cook County and Chicago Soda Tax
As of Aug. 2, 2017, Cook County, which Chicago is part of, has adopted a substantial soda tax, which adds nearly $4 per 12-pack of soda.
Chicago had already imposed a non-alcoholic beverage tax before the Cook County sugary beverage tax was activated.
Retailers and restauranteurs near Chicago contend the expense disregards the state constitution by neglecting to assess comparative beverages consistently. Packaged or generally bundled beverages might be subject to the higher tax rate, yet drinks arranged to order are usually not. Also, they tested how the area could place a tax on fountain drinks consistently when ice displaces the amount of liquid, and refills are hard to take into account.
The appeal of Soda Tax in Cook County Unsuccessful
Consumers, retailers, and restaurant owners opposed the soda tax in Cook County and fought to appeal it. Complaints that opposers raised were due to inconsistencies in the tax law and uncertainty in where the money goes from soda taxes. Initially, the appeal was successful, but the tax was enacted by courts in Illinois when the appeal failed to uphold in court.
33 States Impose Soda Tax
Tax rates on soda vary wildly across states and localities. If you run a franchise across a wide area, you may see multiple tax rates and have different regulations to follow for each region.
Several states already impose a soda tax that consumers absorb in the price, yet it is not high enough to discourage soda intake. Recent developments in Berkeley, California, and Philadelphia, Pennsylvania, led the way for more aggressive approaches towards soda tax in other states.
Taxes are going into public parks, education systems, and healthcare with a hope to reduce the burden of issues caused by sugary-drinks on the surrounded communities. The California Center for Public Health Advocacy created a template for soda tax that many states adopted. The template was created with help from Yale University’s Rudd Center for Food Policy and Obesity, and shows other localities how they can benefit from a soda tax.
Potential for a Nationwide Soda Tax
As of now, soda taxes are on local and state levels, but there has been a push by national lawmakers to enstate a national soda tax. A nationwide tax would mean additional regulations to follow, and is widely opposed.
With the potential to lessen the burden on the health-care industry, a nationwide soda tax in the United States is still a possibility. No matter what part of the country your restaurant is in, or how many locations you have, you may see a soda tax become mandatory for your restaurant soon.
Chronic Disease Decline due to Soda Tax
The hope for the soda tax was to decrease the consumption of sugary drinks, which contribute to a multitude of chronic diseases. With fewer consumers drinking soda daily, overall healthcare costs have seen a decline in recent years. Obesity has been on a decline as consumers are more health-conscious about their drink choices.
With research pouring into our food and beverage choices and their effects on our health, the healthcare world is seeing a link between many chronic illnesses and the intake of sugar-sweetened beverages. See the list below for the most common chronic diseases linked to the consumption of sugary beverages.
Chronic Diseases Linked to the Consumption of Sugary Beverages
- Chronic Heart Failure
- Bone Density Loss and Osteoporosis
- Obesity (leading to other diseases)
What impact does the soda tax have on restauranteurs?
Any business which distributes or sells sugar-sweetened beverages where a soda tax is present must register with their local department of revenue to collect the soda tax. The restaurant will need to report taxes collected for soda tax separately from their previous sales tax reports. Due to added regulations, some restaurants are employing new POS systems to keep up with reporting requirements and simplify their process.
While consumers may be less likely to order a soda with an added tax, recent research has shown your patrons will order more of healthier options. As the consumption of soda decreases, the consumption of water and other healthier options has increased. The upside to this is that restaurants are offering beverages with a higher profit margin in place of sodas, and restaurants spend less time changing soda fountains and maintaining them.
Here’s a list of outcomes the restaurant industry has seen by charging the soda tax.
- Fewer customers are ordering sugar-sweetened beverages
- Need for updated POS systems to track soda tax
- Local and independent soda brands are rising in popularity
- Customers are making complaints to management about being taxed for their soda
- Customers are more health-conscious and make different menu choices after the soda tax
Other recent laws have addressed our salt intake and calorie counts on menus