Cook County soda tax due to take effect today

By Mary Ellen Shoup contact

- Last updated on GMT

The Cook County soda tax is expected to generate more than $200m next year, according to the Illinois Department of Revenue. ©iStock/OcusFocus
The Cook County soda tax is expected to generate more than $200m next year, according to the Illinois Department of Revenue. ©iStock/OcusFocus
A penny-per-ounce Sweetened Beverage Tax in Cook County, Illinois, goes into effect today after a temporary restraining order on the levy was dismissed in Cook County Circuit Court. However, retailers have announced they will continue their fight against the tax.

The Illinois Retail Merchants Association (IRMA) had succeeded in obtaining a temporary delay in the implementation of the tax (originally due to come into effect on July 1); but on Friday last week a judge dismissed the lawsuit. 

However, late yesterday the IRMA announced that it has filed an appeal on the court's decision to dismiss the lawsuit. 

Judge deems tax within county's authority

Last week Cook County Circuit Court Judge Daniel Kubasiak ruled that the Sweetened Beverage Tax was within the county’s authority based on Article VII of the Illinois Constitution, which allows local governments to “exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of public health.”

“The only question and duty before this court is to determine if the merchants have set forth sufficient substance in the verified complaint to withstand the county’s motion to dismiss,” ​Kubasiak said.

“The court concludes that the merchants have not, and that the county’s motion to dismiss must be granted."

The judge's decision came after the Illinois Retail Merchants Association (IRMA) was granted a temporary restraining order a few days before the soda tax was originally set to go into effect on July 1, 2017. IRMA argued that the regulations of Sweetened Beverage Tax were too vague, leaving retailers vulnerable to tax penalties.

The IRMA had been considering the legal options since the judge's decision to dismiss: saying in a statement last week that “While we are disappointed by the judge’s ruling to dismiss the Cook County sweetened beverage tax last Friday, we continue to weigh our legal options to find the best path to move forward.”

"The exposure to lawsuits should not been taken lightly,"​ IRMA president and CEO, Rob Karr, told BeverageDaily last week. "We’ve seen that occur in other tax areas where the government's already laid out their regulations, we’re following them, and we still get sued."

Late yesterday the IRMA announced it would fight the judge's motion to dismiss its lawsuit.

"We have filed an appeal on the Circuit Court's decision to grant Cook County's Motion to Dismiss the Sweetened Beverage Tax lawsuit. Looking forward to our day in court," ​it said via a statement on its social media pages.

A protest opposing the soda tax is also scheduled to be held in the city of Chicago today.

What’s included and what’s exempt

The tax is to apply to any ready-to-drink sweetened non-alcoholic beverage, carbonated or non-carbonated, that contains a caloric or non-caloric sweetener such as regular and diet sodas. Sweetened drinks from beverage-dispensing machines will also be taxed, according to the ordinance.

The tax does not include beverages consisting of 100% natural fruit or vegetable juice or beverages in which a dairy alternative such as soy, almond, or rice milks make up more than 50% of the drink or is the first ingredient listed. Infant formula and any liquid sold as a nutritional meal replacement or for weight loss purposes will not be taxed.

Syrups or sweetened powders used as an ingredient to create an at-home sweetened beverage are also exempt from the tax.

Easing state debt

Revenue from the Sweetened Beverage Tax is projected to bring in $67.5m this year and $200.6m in 2018 helping alleviate the state’s mounting debt. More than 300 employees were laid off last month in Cook County as a result of the state’s budget crisis.

The delay in the soda tax implementation cost the county $17m in revenue, according to Cook County board president, Toni Preckwinkle.

“I regret that these actions are necessary – and I deeply regret the impact they have on individual employees. One of the main reasons I proposed the modest tax on sweetened beverages last year was specifically to avoid these kind of cuts,”​ Preckwinkle added.

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