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PROPOSED AMENDMENT TO ITEM 16-5931
(Finance Public Hearing and Committee 11/10/2016)
INCLUDES AMENDMENT PROPOSED ON FLOOR BY COMMISSIONER GAINER
Sponsored by: TONI PRECKWINKLE, President, and JOHN P. DALEY, STANLEY MOORE and LARRY SUFFREDIN, Cook County Board of Commissioners
PROPOSED ORDINANCE
SWEETENED BEVERAGE TAX
WHEREAS, the County of Cook is a home rule unit of local government pursuant to Article VII, Section 6(a) of the 1970 Illinois Constitution; and
WHEREAS, the Illinois Constitution provides that home rule units may 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 the public health, safety, morals and welfare; to license; to tax; and to incur debt; and
WHEREAS, Illinois law (55 ILCS 5/5-1009) permits home rule units to impose "taxes not based on the selling or purchase price or gross receipts from the use, sale or purchase of tangible personal property"; and
WHEREAS, the U.S. Department of Health and Human Services, the U.S. Department of Agriculture, and the World Health Organization, based on a summary of the available evidence linking intake of added sugar and sugar sweetened beverages to adverse health outcomes including obesity and diabetes, have recommended that Americans consume no more than 10% of their daily calories in the form of added sugar; and
WHEREAS, numerous organizations and agencies, including the American Heart Association, American Diabetes Association, American Academy of Pediatrics, Institute of Medicine of the National Academies, American Medical Association, and the Centers for Disease Control, recommend limiting intake of added sugar and sugar sweetened beverages to improve health; and
WHEREAS, studies show that sugary beverages flood the liver with high amounts of sugar in a short amount of time and that this “sugar rush” over time leads to fat deposits and metabolic disturbances that cause diabetes, cardiovascular disease, and other serious health problems; and
WHEREAS, diseases connected to sugary beverages disproportionately impact minorities and low-income communities; and
WHEREAS, two out of three adults and one out of three children in the United States are overweight or obese and on any given day, half the people in the U.S. consume sugary drinks, with one in four consuming at least 200 calories from such drinks and 5% drinking at least 567 calories (equivalent to four cans of soda); and
WHEREAS, the University of Connecticut RUDD Center for Food Policy & Obesity found that residents of the City of Chicago consume approximately 140 million gallons of sweetened beverages per year; applying such analysis to the County, Cook County residents are estimated to consume approximately 269 million gallons of sweetened beverages per year; and
WHEREAS, sodas, sports drinks, coffees and other sugar sweetened beverages packed with calories constitute the largest source of added sugars in the diets of American children and consuming only one sugar sweetened beverage per day correlates positively with weight gain for children and adolescents; and
WHEREAS, a 2008 study found drinking more than two servings of diet soda (a beverage containing non-caloric sweeteners) a day doubled the risk for kidney decline in women; and
WHEREAS, the Multiethnic Study of Atherosclerosis found that daily consumption of beverages containing non-caloric sweeteners was associated with 36% greater risk for metabolic syndrome and 67% increased risk for type 2 diabetes; and
WHEREAS, a 2012 study found that consumption of diet soft drinks was associated with increased risk for vascular events, including stroke;
WHEREAS, in the San Antonio Heart Study, participants who drank more than 21 beverages containing non-caloric sweetener per week were twice as likely to become overweight or obese as people who did not drink such beverages; and
WHEREAS, the World Health Organization recently stated that implementing taxes on sugar sweetened beverages can lower consumption and reduce obesity, type 2 diabetes and tooth decay; and
WHEREAS, in an effort to promote public health, including lowered obesity rates, the Board of Commissioners has determined that a County tax not based upon the selling or purchase price or gross receipts from the use, sale or purchase thereof should be imposed on the sale of sweetened beverages in Cook County, as provided herein.
NOW THEREFORE BE IT ORDAINED, by the Cook County Board of Commissioners, that Chapter 74 - Taxation, Article XXII. Sweetened Beverage Tax, Sections 74-850 to 74-859 of the Cook County Code is hereby enacted as Follows:
ARTICLE XXII. - SWEETENED BEVERAGE TAX
Sec. 74-850. - Short title.
This Article shall be known and may be cited as the Cook County Sweetened Beverage Tax Ordinance.
Sec. 74-851. - Definitions.
The following words, terms and phrases, when used in this Article, shall have the meanings ascribed to them in this Section, except where the context clearly indicates a different meaning:
Beverage for medical use means (1) a beverage suitable for human consumption and manufactured for use as an oral nutritional therapy for persons who cannot absorb or metabolize dietary nutrients from food or beverages, or for use as an oral rehydration electrolyte solution formulated to prevent or treat dehydration due to illness; and (2) medically necessary foods, as defined in the federal Orphan Drug Act, 21 U.S.C. 360ee(b)(3), as amended. Beverage for medical use shall not include drinks commonly referred to as "sports drinks” or any other common names that are derivations thereof.
Beverage dispensing machine means a fountain drink machine, a device that combines syrup or syrup concentrate and carbon dioxide with chilled and purified water, or other refrigerated beverage machine used to serve non-carbonated or carbonated drinks.
Bottle means any sealed container regardless of size or shape, including, but not limited to, those made of glass, metal, paper, plastic, or any other material or combination of materials, including cans.
Bottled sweetened beverage means any sweetened beverage contained in a bottle that is ready for consumption without further processing such as, but not limited to, dilution or carbonation.
Caloric sweetener means any caloric substance used as an ingredient of a beverage, syrup, or powder that includes sucrose, fructose, glucose and/or other sugars, suitable for human consumption which adds calories to the diet of a person who consumes that substance.
County means the County of Cook.
Department means the Department of Revenue.
Distributor means any person, including manufacturers and wholesale dealers, who receives, stores, manufactures, bottles or distributes bottled sweetened beverages, syrup or powder, for sale to retailers doing business in Cook County, whether or not that person also sells such products to purchasers.
Milk means natural liquid milk regardless of animal or plant source or butterfat content, natural milk concentrate, whether or not reconstituted, regardless of animal or plant source or butterfat content, or dehydrated natural milk, whether or not reconstituted and regardless of animal or plant source or butterfat content.
Natural fruit juice means the original liquid resulting from the pressing of fruits or the liquid resulting from the dilution of dehydrated natural fruit juice.
Natural vegetable juice means the original liquid resulting from the pressing of vegetables or the liquid resulting from the dilution of dehydrated natural vegetable juice.
Non-alcoholic beverage means any beverage that contains less than one-half of one percent alcohol per volume.
Non-caloric sweetener means any non-caloric substance used as an ingredient of a beverage, syrup or powder that includes aspartame, saccharin, stevia and/or sucralose, suitable for human consumption which does not add calories to the diet of a person who consumes that substance.
Person means any individual, corporation, Limited Liability Corporation, organization, government, governmental subdivision or agency, business trust, estate, trust, partnership, association and any other legal entity.
Powder means any solid mixture, containing any caloric sweetener or non-caloric sweetener as an ingredient, intended to be used in making, mixing or compounding a sweetened beverage by combining the powder with one or more other ingredients by hand or in a beverage dispensing machine.
Purchaser means any person who purchases in a retail sale.
Retail sale means any sale to a person for use or consumption, and not for resale.
Retailer means any person engaged in the business of selling sweetened beverages at retail in the County.
Sale, resale and selling means any transfer of ownership or possession or both, exchange or barter, conditional or otherwise, in any manner or by any means whatsoever for valuable consideration.
Sweetened beverage means any non-alcoholic beverage, carbonated or non-carbonated, which is intended for human consumption and contains any caloric sweetener or non-caloric sweetener, and is available for sale in a bottle or produced for sale from using through the use of syrup and/or powder. Sweetened beverage does not include (1) beverages consisting of 100% natural fruit or vegetable juice; (2) beverages in which milk, or soy, rice, or similar milk substitute, makes up more than 50% of the beverage or is the first listed ingredient on the label of the beverage; (3) beverages to which a purchaser can add, or can request that a retailer add, caloric sweetener or non-caloric sweetener; (4) infant formula; (5) beverages for medical use; (6) any liquid sold as a therapeutic nutritional meal replacement or for use for weight reduction as a meal replacement; or (7) any syrup or powder that the purchaser himself or herself combines with other ingredients to create a beverage.
Syrup means a liquid mixture, containing any caloric sweetener or non-caloric sweetener as an ingredient, intended to be used, or actually used, in making, mixing or compounding a sweetened beverage by combining the syrup with one or more other ingredients using a beverage dispensing machine.
Sec. 74-852. - Tax imposed and liability for payment.
(a) Effective July 1, 2017, a tax at the rate of $0.01 per ounce is hereby imposed on the retail sale in Cook County of all sweetened beverages in Cook County.
(1) The tax shall be imposed at the rate of $0.01 per ounce of bottled sweetened beverages sold.
(2) The tax on sweetened beverages produced through the use of syrup and/or powder, sold either as syrup or powder or as a sweetened beverage derived from that syrup or powder shall be $0.01 per ounce of sweetened beverage produced from that syrup or powder. For purposes of calculating the tax, the volume of sweetened beverage produced from syrup or powder shall be equal to the largest volume, in ounces, of sweetened beverages that could be produced from the syrup or powder. The largest volume shall be determined based on the manufacturer’s instructions.
(b) The ultimate incidence of and liability for payment of the tax levied in this Article is to be borne by the purchaser of the sweetened beverage. Nothing in this Article shall be construed to impose a tax upon the occupation of distributors or retailers.
(c) It shall be deemed a violation of this Article for any distributor or retailer to fail to include the tax imposed in this Article in the sale price of the sweetened beverage, syrup and/or powder or to otherwise absorb the tax, unless otherwise required by law. The tax levied in this Article shall be in addition to any other taxes.
(d) Except as provisions are made in this Article for the collection of the tax levied in this Article upon the sweetened beverages, syrup and/or powder in the possession of retailers on the effective date of the ordinance from which this Article is derived, the tax levied in this Article shall be collected by each distributor when it sells sweetened beverages, syrup and/or powder to a retailer or a purchaser in Cook County.
(e) Any distributor of bottled sweetened beverages and any distributor of syrup and/or powder used to produce a sweetened beverage shall collect the tax levied by this Article from any retailer to whom the sale of bottled sweetened beverages or syrup and/or powder used to produce a sweetened beverage is made and shall remit the tax to the Department. Any retailer shall in turn then collect the tax from the purchaser of sweetened beverage. Should a distributor sell sweetened beverages directly to a purchaser, the distributor shall collect the tax from that purchaser. The tax shall be paid to the person required to collect it as trustee for and on behalf of the County.
(1) The tax on bottled sweetened beverages shall be based upon the number of whole ounces stated on the sealed container.
(2) For purposes of the distributor’s collection of the tax from its sale to a retailer of syrup and/or powder used to produce a sweetened beverage, the tax shall be $0.01 per ounce of sweetened beverage produced from that syrup or powder. For such sales, the tax shall be calculated based upon the largest volume, in whole ounces, of sweetened beverage that could be produced from the syrup or powder, with a reduction of two five percent of the calculated tax to account for spillage and product preparation at the retail level. The largest volume shall be determined based on the manufacturer’s instructions.
(3) Any retailer shall in turn then collect the tax from the purchaser of sweetened beverage.
(4) Should a distributor sell sweetened beverages directly to a purchaser, the distributor shall collect the tax from that purchaser.
(5) The tax shall be paid to the person required to collect it as trustee for and on behalf of the County.
(f) On or before August 20, 2017, every retailer of sweetened beverages doing business in the County shall file with the Department, on forms prescribed by it, a sworn tax return reporting the inventory of sweetened beverages, as well as the inventory of syrup and/or powder used to produce sweetened beverage, on which the sweetened beverage tax was not previously paid, in its possession or control on June 30, 2017. With said tax return, the retailer shall remit to the Cook County Collector the taxes due with respect to all sweetened beverages and syrup and/or powder used to produce sweetened beverage on which the sweetened beverage tax was not previously paid that was in the retailers’ possession on June 30, 2017. The retailer shall in turn collect the tax from its purchasers. For the purpose of determining the amount of tax due on the amount of product in a retailer’s possession or control on June 30, 2017, the following shall apply:
(1) The tax on bottled sweetened beverages shall be based upon the number of whole ounces stated on the sealed container.
(2) The tax for syrup and/or powder used to produce a sweetened beverage shall be $0.01 per ounce of sweetened beverage produced from that syrup or powder, calculated based upon the largest volume, in whole ounces, of sweetened beverage that could be produced from the syrup or powder, with a reduction of two five percent of the calculated tax to account for spillage and product preparation at the retail level. The largest volume shall be determined based on the manufacturer’s instructions.
Sec. 74-853. - Registration and remittance.
(a) Any distributor who engages in the business of selling sweetened beverages, syrup and/or powder in the County must register with the Department, in accordance with procedures prescribed by the Department, within 30 days after the effective date of this ordinance, and after such 30 days has passed, prior to engaging in the business of selling sweetened beverages, syrup and/or powder for resale, use or consumption in the County. Failure to register pursuant to this section shall be considered a violation of this Article.
(b) Distributors shall file each month with the Department a tax return reflecting sales of sweetened beverages, syrup and/or powder, in such form as prescribed and furnished by the Department, on or before the 20th day of the month following the month for which the return is due. Each tax return shall be accompanied by a remittance of the appropriate amount of tax applicable to the sales reported. The remittance shall be made payable to the County Collector. Registered distributors must file a monthly return even if no tax is due. Failure to file a monthly return and remit applicable tax shall be considered a violation of this Article.
(c) Any retailer who acquires sweetened beverages, syrup and/or powder from an unregistered distributor or on which tax was not previously paid, must file a tax return, in such form as prescribed and furnished by the Department, on or before the 20th day of the month following the month in which the sweetened beverages, syrup and/or powder were acquired. Each return must be accompanied by a remittance of the appropriate amount of applicable tax. The remittance shall be made payable to the County Collector. Failure of a retailer to file a return and remit applicable tax shall be considered a violation of this Article.
(d) The Department, in its discretion, may require that registration be completed, tax returns be submitted, and payments be made electronically.
Sec. 74-854. - Tax-free sales.
(a) Registered distributors shall not pay or collect a tax with respect to sweetened beverages, syrup and/or powder which are otherwise subject to the tax when the sweetened beverages, syrup and/or powder are being sold to the following:
(1) Another registered distributor; or
(2) An unregistered distributor, a retailer or a purchaser when the selling distributor, or its agent, delivers the sweetened beverages, syrup and/or powder to a location outside of Cook County.
(b) The tax imposed by this Article shall not apply to purchases of sweetened beverages by a passenger on an interstate carrier; nor shall this tax apply to purchases that are specifically exempt from taxation under Federal law. It shall be presumed that all sales of sweetened beverages from distributors or retailers are subject to the tax under this Article until the contrary is established.
Sec. 74-855. - Tax in addition to other taxes.
The tax imposed by this Article is in addition to all other taxes imposed by the Government of the United States, the State, or by any unit of local government.
Sec. 74-856. - Books and records.
(a) Every distributor and every retailer shall keep accurate books and records showing all transactions that gave rise, or may have given rise, to any tax liability, exemption or defense to liability.
(b) Books and records and other documents shall be kept, by distributors and retailers, for the taxable time period as listed in the statute of limitations section of the Cook County Uniform Penalties, Interest and Procedures Ordinance, Chapter 34, Article III, Sec. 34-60 et seq. All books and records shall be kept in the English language and, at all times during business hours, shall be subject to and available for inspection or copying by the Department. Failure to keep books and records pursuant to this section shall be considered a violation of this Article.
Sec. 74-857. - Violation; penalties.
Any person determined to have violated this Article, as amended, by failing to file a return and/or failing to remit taxes shall be subject to the penalties listed in the Cook County Uniform Penalties, Interest and Procedures Ordinance, Chapter 34, Article III. Any person determined to have violated any other provisions of this Article shall be subject to a fine of $1,000.00 for the first offense, and a fine of $2,000.00 for the second and each subsequent offense. Separate and distinct offenses shall be regarded as committed each day upon which said person shall continue any such violation, or permit any such violation to exist after notification thereof. It shall be deemed a violation of this Article for any person to knowingly furnish false or inaccurate information to the Department. Criminal prosecution pursuant to this Article shall in no way bar the right of the County to institute civil proceedings to recover delinquent taxes, interest and penalty due and owing as well as costs incurred for such proceeding.
Sec. 74-858. - Application of uniform penalties, interest and procedures ordinance.
Whenever not inconsistent with the provisions of this Article or whenever this Article is silent, the provisions of the Cook County Uniform Penalties, Interest and Procedures Ordinance, Chapter 34, Article III shall apply and supplement this Article.
Sec. 74-859. - Rulemaking.
(a) The Department shall prescribe reasonable rules, definitions, and regulations necessary to carry out the duties imposed upon it by this Article. Such rules, definitions, and regulations shall take into account existing practices of sweetened beverage distributors and retailers for collection and remittance of the tax herein levied. Such rules shall include but not be limited to tax deductions/credits for breakage, spoilage, spillage, sweetened beverage expiration, sweetened beverage destruction and tax free sales.
(b) On or before August 20, 2017, every retailer of sweetened beverages doing business in the County shall file with the Department, on forms prescribed by it, a sworn tax return reporting the inventory of sweetened beverages, syrup and/or powder, on which the sweetened beverage tax was not previously paid, in their possession or control on June 30, 2017. With said tax return, the retailer shall remit to the Cook County Collector the taxes due with respect to all sweetened beverages, syrup and/or powder, on which the sweetened beverage tax was not previously paid which were in the retailers’ possession on June 30, 2017. The retailer shall in turn collect the tax from its purchasers.
Effective date: This ordinance shall be in effect beginning March 1, 2017
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