Cook County, IL, first approved a penny-per-ounce tax on sugary drinks, in hopes of raising $200 million a year, in November 2016. It was the seventh local government in the U.S. to pass such a levy, and was by far the largest area. The tax was originally set to go into effect July 1 but was delayed several times due to lawsuits. Now that the tax is implemented, additional challenges are being presented.
Walgreens is being sued over implementation of the sweetened beverage tax in Cook County, IL. Walgreens was accused of taxing unsweetened beverages, reported Chicago Tribune (Aug. 8).
A suit against McDonald's was also initiated, but was then retracted. The company reportedly added the beverage tax to the subtotal of orders before calculating other sales taxes, which, in turn, resulted in overcharging of taxes. The lawsuit was subsequently voluntarily dismissed. "After further investigation into the facts surrounding" the case, "in spite of plaintiff's initial good faith," it appears "sales tax was not applied to the amount charged to plaintiff under Cook County's new sweetened beverage tax...Accordingly, and because plaintiff has no reason to believe that customers were 'double taxed' at any other McDonald's restaurant in Cook County, plaintiff voluntarily dismisses his lawsuit," Cook County Circuit Judge Thomas Mulroy said, reported Chicago Tribune (Aug. 16).
Additionally, a class action lawsuit was filed against 7- Eleven over the sweetened beverage tax. The lawsuit alleges the convenience store chain is improperly applying the tax to unsweetened coffee. The complaint estimates the number of additional plaintiffs could number in the "many thousands," reported Cook County Record(Aug. 10).
Cook County's Board President is halting efforts to charge the Illinois Retail Merchants Association $17 million in damages for seeking to block the sweetened beverage tax. Toni Preckwinkle claimed the association's suit would cost the county $17 million in possible revenues, but the petition for damages was dropped after the Appellate Court rejected the emergency motion to stop the tax, reported Crain's Chicago Business (Aug. 9).
The county solved a problem with the tax that jeopardized about $87 million in federal food stamp funds. Retailers without programed point-of-sale systems were charging soda purchases made with food stamp benefits the penny-per-ounce tax. The county solved the issue by striking language permitting refunds from regulations as retailers now must make "manual adjustment" or take other steps to not tax food stamp recipients. USDA previously threatened to withhold funding, reported The State (Aug. 16).
Meanwhile, an Illinois state representative introduced legislation to prevent counties from taxing soda or other sweetened beverages. The bill would eliminate any current taxes on sweetened drinks as well, reported Daily Herald (Aug. 17).
The Illinois Liquor Control Commission is opposing the sweetened beverage tax in Cook County, IL. Even though the tax excludes alcohol, many of the wholesalers to which it applies distribute both kinds of products, according to a letter from the commission, reported Crain's Chicago Business (Aug. 15).
Editor's Note: The following piece was excerpted from the August 21, 2017 edition of The Food Institute Report. Food Institute Members receive this report every Friday as part of their membership. For more information on Food Institute membership, click here.