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Stakeholder Implementation Meeting

May 26, 2010

Washington State Department of Revenue

Olympia, Washington

Carbonated Beverage Tax

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Imposed on bottlers, distributors, and retailers selling carbonated beverages in this state

Tax rate equals 2 cents per 12-ounce can – 48 cents per 24/12 ounce can case

Imposed from July 1, 2010, through June 30, 2013

What is the carbonated beverage tax?

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Any packaged nonalcoholic liquid intended for human consumption that contains carbonation – natural or artificial – and:

Caffeine

Extracts

Fruit juice or concentrated fruit juice

Herbs

Sweeteners

Syrup – containing sugar or sugar substitutes

A carbonated beverage does not include carbonated bottled water

What is a “carbonated beverage?”

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The carbonated beverage tax does not apply to the first $10 million of sales of carbonated beverages by a bottler

For bottlers only

A person who bottles, cans, or otherwise packages carbonated beverages in beverage containers

A bottler is not a person who contracts with a processor for hire for the bottling activity

Who is a bottler?

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Does the $10 million exemption for sales apply to out-of-state bottlers?

An out-of-state bottler that has established nexus in Washington may claim the exemption

An out-of-state bottler that does not have nexus is not making sales of carbonated beverages in this state and is not subject to the tax. The exemption for successive sales of previously exempt carbonated beverages does not apply to purchases of product from such an out-of-state bottler

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Exemptions – Bottlers, distributors, and retailers

Successive sales of previously exempt product (documentation of exempt status necessary)

Successive sales of previously taxed product (documentation of exempt status necessary)

Retailer

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Examples – Bottlers, distributors, and retailers

Assumes unrelated entities

Distributor

Bottler

Consumer

Exempt

Exempt

Exempt

Bottler has exemption available

Retailer

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Examples – Bottlers, distributors, and retailers

Distributor

Bottler

Consumer

Exempt

Exempt

Taxable

Assumes unrelated entities

Bottler has no exemption available

Retailer

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Examples – Bottlers, distributors, and retailers

Distributor

Bottler

Consumer

Exempt

Not applicable

Not applicable

Assumes same legal entity

Bottler has exemption available

Retailer

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Examples – Bottlers, distributors, and retailers

Distributor

Bottler

Consumer

Taxable

Not applicable

Not applicable

Assumes same legal entity

Bottler has no exemption available

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Examples – Bottlers, distributors, and retailers

Retailer

Assumes out-of-state bottler does not have nexus

Distributor

BottlerOut-of-State

Consumer

Exempt

Taxable

Exempt

Out-of-state bottler

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Examples – Bottlers, distributors, and retailers

Retailer

Assumes both out-of-state bottler and distributor do not have nexus

DistributorOut-of-State

BottlerOut-of-State

Consumer

Taxable

Exempt

Exempt

Out-of-state bottler and distributor

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Examples – Bottlers, distributors, and retailers

Retailer

DistributorInventory

Consumer

Exempt

Taxable

Inventory on July 1, 2010

Assumes inventory acquired before July 1, 2010 is sold on July 1st and after.

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Examples – Bottlers, distributors, and retailers

RetailerInventory

Consumer

Taxable

Inventory on July 1, 2010

Assumes inventory acquired before July 1, 2010 is sold on July 1st and after.

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Reporting the carbonated beverage tax

Report using the Excise Tax Return or E-file

Report using line for carbonated beverage tax

Report based on case equivalent

Case equivalent equal to 24 – 12 ounce cans

Tax rate for case equivalent equals $0.48 per case

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Can bottlers, distributors, and retailers add the tax as a line-item charge?

Any person who sells carbonated beverages at wholesale or retail is subject to the tax, unless a specific exemption applies. The tax is a cost of doing business.

There is no statutory prohibition for identifying the tax as a line- item charge

Consider:

Impact on B&O tax Nelson v. Appleway

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Education efforts

Special Notice

Question & Answers

Speakers’ Bureau

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For further information

Contact JoAnne GordonDepartment of RevenueLegislation and Policyjoanneg@dor.wa.gov or call 360-570-6121

Check out the link on the new legislation pagehttp://dor.wa.gov/NewLegislationhttp://dor.wa.gov/ConsumerProducts (coming soon)

Or call the Telephone Information Center 1-800-647-7706