Topic:
FOOD LAW; TAXATION (GENERAL);
Location:
TAXATION;

OLR Research Report


December 23, 2002

 

2002-R-1004

TAXES ON JUNK FOOD

 

By: Judith S. Lohman, Chief Analyst

You asked if any state imposes a tax on “junk food” or ties tax rates to the fat content of food.

SUMMARY

According to the National Conference of State Legislatures (NCSL), no state imposes a “fat tax” (that is, a tax tied to fat content) on food. But seven states impose special taxes or fees on soda and soft drinks and 10 states, including Connecticut, exclude certain high-fat and high-sugar edibles (“junk food”) or soda and other soft drinks from their sales tax exemptions for food. In the 2002 session, a soda tax bill was introduced in the California legislature and a proposal to repeal a sales tax exemption for candy was introduced in the Washington legislature. Neither proposal was enacted.

SODA TAXES

Table 1 below shows the seven states that have special states taxes or fees on soft drinks and soda.

Table 1: Separate Taxes and Fees on Soda and Soft Drinks

STATE

TAX OR FEE

PAID BY

Arkansas

$2 per gallon of soft drink syrup or simple syrup sold in the state

$0.21 per gallon of bottled soft drinks or soda sold in the state or, if sold in powdered form, a per-package tax equal to $0.21 for each gallon of soft drink that may be produced from the package

Distributors, manufacturers, wholesale dealers

Missouri

Inspection fee of $0.003 per gallon of soft drinks manufactured or sold in the state, up to a maximum of $0.04 per month per case of 24 bottles or cans of a manufacturer's bottling capacity

Wholesale manufacturers and distributors

Rhode Island

$0.04 on each case (12 24 oz. cans) of beverage containers (soda, soft drinks, beer)

Retailer or consumer (collected by wholesaler)

Tennessee

1.9% of gross receipts derived from soft drink business

Manufacturers, producers, and sellers of bottled soft drinks in the state and those importing soda into Tennessee for sale

Virginia

Excise tax on gross receipts from soda sales as follows:

$50 if gross receipts are $100,000 or less

$100 if gross receipts are between $100,000 and $250,000

$250 if gross receipts are between $250,000 and $500,000

$750 if gross receipts are between $500,000 and $1 million

$1,500 if gross receipts are between $1 million and $3 million

$3,000 if gross receipts are between $3 million and $5 million

$4,500 if gross receipts are between $5 million and $10 million

$6,000 if gross receipts exceed $10 million

Wholesalers and distributors of carbonated soft drinks

Washington

$1 per gallon (proportionate for fractional amounts) on each wholesale sale of syrup (concentrate added to water to produce carbonated soda)

Wholesalers

West Virginia

Excise tax on sales, handling, use, or distribution of bottled soft drinks and soft drink syrup in the state as follows:

$0.01 on each bottle of 16 9/10ths fluid ounces or half a liter or fraction of bottled soft drink

$0.80 on each gallon of bottled soft drink

$0.84 on each four liters of soft drink syrup

$0.01 on each ounce or 28.35 grams of dry mix used to make soft drinks

Tax cannot be collected more than once with respect to any bottled soft drink or soft drink syrup made, sold, used, or distributed in the state. Revenues earmarked for fund to build four-year school of medicine, dentistry, and nursing

Manufacturers, wholesalers, and retail dealers or any other original consignee of soft drinks or soft drink syrup

Source: National Conference of State Legislatures

In 2002, a California state senator proposed a soda tax identical to the Arkansas tax. The revenue would have been dedicated to a new California Child Health and Achievement Fund. The money in the fund would have been distributed as follows:

● 50% to school districts that stop selling soft drinks on school campuses

● 25% to the state health department for programs to promote nutrition and physical activity

● 25% to hospitals, emergency and trauma care, and clinics (California Senate Bill 1520 (2002 session))

The bill was enacted without the tax provision.

SALES TAX EXEMPTION EXCLUSIONS

Table 2 shows the states that exclude certain “junk food” or soda from their overall sales tax exemption for food, thus making such foods taxable.

Table 2: Food Excluded from Sales Tax Exemptions for Food

STATE

SALES TAX RATE

NONEXEMPT FOOD AND BEVERAGES

Connecticut

6%

Soft drinks, soda, candy, and confectionery unless sold in school cafeterias, college dining halls, sororities and fraternities, hospitals, residential care homes, assisted living facilities, senior centers, day care centers, convalescent homes, nursing homes, or rest homes, or unless sold from a vending machine for less than 50 cents

Illinois

6.25%

Soft drinks

Indiana

5%

Candy, confectionery, chewing gum, soft drinks, soda, mineral water, carbonated water, and ice

Kentucky

6%

Candy, confectionery, chewing gum, soft drinks, soda, mineral water, carbonated water, and ice

Maine

5%

Soft drinks, iced tea, soda, water (includes mineral, bottled, and carbonated water), ice, candy, and confectionery

Minnesota

6.5%

Soft drinks, candy, and all food sold through vending machines

New Jersey

6%

Candy, confectionery, and carbonated soft drinks

New York

4%

Candy, confectionery, fruit drinks containing less than 70% natural fruit juice, soft drinks, and soda unless sold from a vending machine for less than 75 cents

North Dakota

5%

Candy, gum, carbonated beverages, soft drinks containing less than 70% fruit juice, powdered drink mixes, coffee, coffee substitutes, tea, cocoa, and cocoa products

Texas

6.25%

Carbonated and noncarbonated packaged soft drinks, diluted juices, ice, and candy

Washington

6.5%

Carbonated beverages, ice, bottled water

Sources: NCSL, Federation of Tax Administrators

A bill to eliminate a state sales tax exemption for candy was introduced in the Washington state legislature in 2002 (Senate Bill 6770). Under the bill, revenue from the candy tax would have been earmarked for the state's Health Service Account, which funds public health programs. The bill was not enacted.

For your further information on this topic, we enclose an abstract of an article, “Small Taxes on Soft Drinks and Snack Foods to Promote Health,” from the June 2000 American Journal of Public Health.

JL:ro