Soft Drink and Syrup Tax 

Legislation:  Chapter 629 (effective July 18, 2008) 

Law:  Title 36, c. 720, §§4851 – 4858 

General Description:  Imposes a tax on every “distributor, manufacturer or wholesale dealer” at the following rates:

            $4 per gallon of “syrup” or “simple syrup”

            $0.42 per gallon of “bottled soft drinks”

            $0.42 per gallon of soft drink that is produced from “powder or base product” 

A “retailer” that purchases from an unlicensed seller is liable for the tax. 

Effective date:  August 1, 2008 

Definitions:

            Distributor, manufacturer or wholesale dealer:  Any person who

                        Receives, stores, manufacturers, bottles or sells to retailers

                                    Bottled soft drinks

                                    Syrup

                                    Simple syrup

                                    Powder or base products 

Soft drink: Any nonalcoholic beverage, whether naturally or artificially flavored, whether carbonated or noncarbonated, sold for human consumption, including, but not limited to, soda water, cola and other flavored drinks, any fruit or vegetable drink containing 10% or less of natural fruit juice or natural vegetable juice and all other drinks and beverages commonly referred to as soft drinks, but not including coffee or tea unless the coffee or tea is bottled as a liquid for sale. 

            Bottled soft drink:  Any ready to consume soft drink contained in a bottle (any closed or sealed glass, metal, paper or plastic container or any other type of container regardless of size or shape) 

            Syrup:  Liquid mixture of basic ingredients used in making soft drinks by mixing with water, simple syrup, ice, fruits, vegetables, juice or any other product suitable to make a soft drink. 

            Simple syrup:  Mixture of sugar and water 

            Powder or base products:  Solid mixture of basic ingredients used in making soft drinks by mixing water, simple syrup, ice, fruits, vegetables, juice or any other product suitable to make a soft drink. 

            Retailer:  Any person other than distributor (etc) who

                        Receives, stores, mixes, compounds or manufacturers any soft drink and sells or otherwise dispenses the soft drink to the ultimate consumer. 

Requirements:

            Licensing of distributor, manufacturer, wholesale dealer and certain retailers.

            Monthly reports due on the 15th of the following month

            Tax imposed of the products “sold or offered for sale” to the retailer

            If retailer is distributor, tax imposed when property is transferred to a retail store for sale to ultimate consumer. 

Exempt products:

            Sales to Federal Government

            Products exported from State

            Powder or base products used in preparing coffee or tea

            Juice or vegetable concentrate with more than 10% juice

            Juice or vegetable drinks containing more than 10% juice

            Sales to other licensed distributors, manufacturers or wholesale dealers

            Liquid or powder infant formula

            Water (unflavored, non-carbonated)

            Liquid or powder dietary aids for use as supplements or weight reduction

            Powder or base products intended to be mixed by ultimate consumer

            Any product containing “milk” or milk products 

Issues:

            Who’s responsible:

Soda companies (Coke, Pepsi)

Box stores (Sams, BJs)

Department stores (WalMart, Kmart, Target)

Retail Grocers (Shaws, Hannaford)

Wholesale Suppliers (AG, C&S, Pine State)

Natural food stores

Food Service (Sysco, NorthCenter)

Convenience Stores (Cumberland Farms, Irving)

Drug Stores (CVS, Rite Aid)

Fast Food (McDonalds, Burger King)

Restaurants (Applebees, Longhorns)

Vending companies

Products:

Plant based milk products (soy, rice, almond)

Soda syrup sold at pharmacy

Non-alcoholic beverages

Bottled coffee (Starbucks) contains milk 

            Definitions: 

            “Milk” is defined in part as “natural liquid milk regardless of animal source or butterfat content…”  This clearly exempts all animal milk products (cow, goat, etc) but because of the reference to “animal source”, it is questionable whether soy, rice or almond is exempt or taxable.   This area is under consideration by MRS and will be addressed in the public informational bulletin intended to be published by June 1, 2008.

FAQ’s received to date 

Since tax is imposed on syrup, soft drinks and powder base, is tax on both syrup to make soft drink and the soft drink produced? 

No.  Tax is imposed on “sale” of these products by distributor/mfg to retailer.  No tax on syrup used by mfg to make soft drink.  Only on soft drink sold to retailer.

Effective date is August 1st.  Is that the ship date, order date, invoice date or some other date? 

For consistency, we are leaning toward invoice date at this time.

If soft drinks are sold to a retailer and delivered to their warehouse in Maine, but the retailer subsequently removes them to a store out-of-state, is the entire delivery to taxable?

Yes.  Statute only allows exports by distributor to be exempt.  

Can retailer opt to become a distributor and report directly to MRS? 

No.  

Can distributor and/or retailer separately identify this tax on invoices or sales slips?  Statute is silent.  But tax is imposed on distributor, not purchaser. 

Is the syrup used by a manufacturer to create root beer and sold in a keg subject to this tax?  The syrup used by the manufacturer is not taxable since there is an exemption for syrups and soft drinks sold to licensed distributors.  The root beer that is produced is a soft drink and the keg does meet the definition of “bottled soft drink”.  The tax of 42 cents per gallon would apply to the product produced.

SOFT DRINK AND SYRUP SUMMARY

Based on a review of shelf items at Shaw’s Supermarket, Augusta, Maine  

General Guidelines: 

Taxable items include flavored waters, carbonated drinks, and beverages containing 10% or less fruit juice.

Exempt items include: Beverages containing more than 10% fruit or vegetable juice, milk or milk products; consumer bases, and alcoholic beverages.

Consumer bases are powders or other bases, like frozen concentrate, intended to be mixed by the home consumer to create a non-alcoholic drink.

Drinks were found throughout the store in special displays, on end caps, in Ethnic foods, Natural foods, Organic/produce area, Alcohol aisle, and in the dairy case.

Examples of some EXEMPT items 

Containing more than 10% fruit or vegetable juice or pure water

            Goya juices – some are over 10%, some are less

            Juice Cocktails – most appear to be more than 10% - be sure

            Juicy Juice (100%)

            Newman’s Lemonade (15%)

            Ocean Spray Energy Juice Drink (20%)  (note: Ocean Spray sprays are 4-7%)

            Recharge Sports Drinks (50%)

            Robinsons

            Tipperary

            V8 Fusion (note: V8 Splash did not have more than 10%) 

Consumer mixes

            Chocolate Syrup for making chocolate milk

            Grenadine

            Kool-Aid in packets/canisters

            Sweetened lime juice

            Lemonade drink mix

            Ice Tea mix                         

Containing milk or a milk product

            Dreamerz

            Herseys Chocolate Drink

            Sobe Lizard Lava and Lizard Fuel

            Starbucks Coffees (milk or cream)

            Yoohoo (nonfat dry milk)

Examples of some TAXABLE items 

Flavored Waters

Life

Propel

Replenish

Snapple 

Carbonated Waters

            Club Soda

            Seltzer Water

Beverages containing less than 10% fruit or vegetable juice and Energy Drinks

            Arctic Splash

            CapriSun

            Fuze

            Gatorade

            Goya juices – some are over 10%, some are less

            Hawaiian Punch (5%)

            Hi-C Blast

            Kool-Aid Jammers (10%)

            Lipton Iced Tea

            Lucozade

            Minute Maid Fruit Punch (5% - found in the refrigerated dairy/juice case)

            Ocean Spray sprays (4-7%) (note: many Ocean Spray drinks contain more than 10%)

            Odwalla Vanilla Almond Drink

            Nestle’s Milo

            Powerade

            Red Bull

            Ribena

            Riley’s Chillers (no juice)

            Sunny D (5%)

            Tropicana Twister  (10%)

            Turkey Hill (found in the refrigerated dairy/juice case)

            V8 Splash (note: V8 Fusion did have more than 10%)

Non-alcoholic Beer/Wine

            Goya Champagne

            Goya Malt

(From LD 2247, P.L. 2007, c.629)

PART F

Sec. F-1. 36 MRSA c. 720  is enacted to read:

 CHAPTER 720

SOFT DRINK AND SYRUP TAX

§ 4851.  Definitions

As used in this chapter, unless the context otherwise indicates, the following terms have the following meanings. 

1.  Bottle.     ”Bottle” means any closed or sealed glass, metal, paper or plastic container or any other type of container regardless of the size or shape of the container. 

2.  Bottled soft drink.     ”Bottled soft drink” means any ready-to-consume soft drink contained in a bottle. 

3.  Distributor, manufacturer or wholesale dealer.     ”Distributor, manufacturer or wholesale dealer” means any person who receives, stores, manufactures, bottles or sells bottled soft drinks, syrup, simple syrup or powder or base products for mixing, compounding or making soft drinks for sale to retailers or other manufacturers, wholesale dealers or distributors for resale purposes. 

4.  Milk.     ”Milk” means natural liquid milk regardless of animal source or butterfat content; natural milk concentrate, whether or not reconstituted, regardless of animal source or butterfat content; or dehydrated natural milk, whether or not reconstituted. 

5.  Natural fruit juice.     ”Natural fruit juice” means the original liquid resulting from the pressing of fruit, the liquid resulting from the reconstitution of fruit juice concentrate or the liquid resulting from the restoration of water to dehydrated fruit juice. 

6.  Natural vegetable juice.     ”Natural vegetable juice” means the original liquid resulting from the pressing of vegetables, the liquid resulting from the reconstitution of vegetable juice concentrate or the liquid resulting from the restoration of water to dehydrated vegetable juice. 

7.  Nonalcoholic beverage.     ”Nonalcoholic beverage” means any beverage not subject to tax under Title 28-A, Part 4. 

8.  Place of business.     ”Place of business” means any place where soft drinks, syrups, simple syrups or powder or base products are manufactured or any place where bottled soft drinks, syrup, simple syrup, powder or base product or any other item taxed under this chapter is received. 

9.  Powder or base product.     ”Powder or base product” means a solid mixture of basic ingredients used in making, mixing or compounding soft drinks by mixing the powder or other base with water, ice, syrup, simple syrup, fruits, vegetables, fruit juice, vegetable juice or any other product suitable to make a soft drink. 

10.  Retailer.     ”Retailer” means any person, other than a distributor, manufacturer or wholesale dealer, who receives, stores, mixes, compounds or manufactures any soft drink and sells or otherwise dispenses the soft drink to the ultimate consumer. 

11.  Sale.     ”Sale” means the transfer of title or possession for a valuable consideration of tangible personal property regardless of the manner by which the transfer is accomplished. 

12.  Simple syrup.     ”Simple syrup” means a mixture of sugar and water. 

13.  Soft drink.     ”Soft drink” means any nonalcoholic beverage, whether naturally or artificially flavored, whether carbonated or noncarbonated, sold for human consumption, including, but not limited to, soda water, cola and other flavored drinks, any fruit or vegetable drink containing 10% or less of natural fruit juice or natural vegetable juice and all other drinks and beverages commonly referred to as soft drinks, but not including coffee or tea unless the coffee or tea is bottled as a liquid for sale. 

14.  Syrup.     ”Syrup” means the liquid mixture of basic ingredients used in making, mixing or compounding soft drinks by mixing the syrup with water, simple syrup, ice, fruits, vegetables, fruit juice, vegetable juice or any other product suitable to make a soft drink.

§ 4852.  Tax rate 

1.  Tax imposed.     There is imposed a tax on every distributor, manufacturer or wholesale dealer to be calculated as follows:

A.  Four dollars per gallon of syrup or simple syrup sold or offered for sale; 

B.  Forty-two cents per gallon of bottled soft drinks sold or offered for sale; and 

C.  When a package or container of powder or base product is sold or offered for sale in the State, the tax on the sale of each package or container is equal to 42¢ for each gallon of soft drink that may be produced from each package or container by following the manufacturer’s instructions. This tax applies when the powder or base product is sold to a retailer for sale to the ultimate consumer after the soft drink is produced by the retailer. 

2.  Purchase from unlicensed seller.     A retailer who purchases bottled soft drinks, syrup, simple syrup or powder or base product from an unlicensed distributor, manufacturer or wholesale dealer is liable for the tax imposed in subsection 1.

§ 4853.  Tax credited to Dirigo Health Enterprise Fund

The State Controller shall transfer by the 15th of each month from General Fund revenues to the Dirigo Health Enterprise Fund established under Title 24-A, section 6915 the amount of tax collected pursuant to this chapter.

§ 4854.  Exemptions

The following are exempt from the tax imposed by section 4852: 

1.  Sales to Federal Government.     Syrups, simple syrups, powder or base products or soft drinks sold to the Federal Government; 

2.  Products exported from State.     Syrups, simple syrups, powder or base products or soft drinks exported from the State by a distributor, manufacturer or wholesale dealer; 

3.  Coffee or tea base.     Any powder or base product used in preparing coffee or tea; 

4.  Juice or vegetable concentrate.     Any frozen, freeze-dried or other concentrate to which only water is added to produce a nonalcoholic beverage containing more than 10% natural fruit juice or natural vegetable juice; 

5.  Fruit or vegetable juice.     Any nonalcoholic beverage containing more than 10% natural fruit juice or natural vegetable juice; 

6.  Sales to another distributor, manufacturer or wholesale dealer.     Syrups, simple syrups, powders or base products or soft drinks sold by a distributor, manufacturer or wholesale dealer to a distributor, manufacturer or wholesale dealer who holds a license under section 4856 if the license number of the distributor, manufacturer or wholesale dealer to whom the syrups, simple syrups, powder or base products or soft drinks are sold is clearly shown on the invoice for the sale that is claimed to be exempt. This exemption does not apply to any sale to a retailer; 

7.  Infant formula.     Any product, whether sold in liquid or powder form, that is intended by its manufacturer for consumption by infants and that is commonly referred to as infant formula; 

8.  Water.     Water to which no flavoring, whether artificial or natural, has been added and that has not been artificially carbonated; 

9.  Dietary aids.     Any product, whether sold in liquid or powder form, that is intended by its manufacturer for use as a dietary supplement or for weight reduction; 

10.  Consumer mix.     Any powder or base product that is intended by its manufacturer to be sold and used for the purpose of domestically mixing soft drinks by the ultimate consumer; and 

11.  Milk products.     Any product containing milk or milk products.

§ 4855.  Reports

A distributor, manufacturer or wholesale dealer and any retailer subject to the tax imposed by this chapter shall file a monthly return with the assessor and pay the tax on or before the 15th day of the month following the month in which the sale or purchase was made. The return must be made on a form prescribed by the assessor. The return must contain any information the assessor requires for the proper administration of this chapter. When a retailer is also acting as a distributor, manufacturer or wholesale dealer, the duty to report and pay the tax imposed by this chapter arises when the property is transferred to a retail store for sale to the ultimate consumer, as reflected by the records of the taxpayer.

§ 4856.  Licenses 

1.  Distributor, manufacturer or wholesale dealer.     Any distributor, manufacturer or wholesale dealer who sells or offers for sale to retailers within the State syrups, simple syrups, powder or base products or soft drinks shall obtain from the bureau a license for the privilege of conducting such business within the State.

2.  Retailer.     Any retailer who purchases syrups, simple syrups, powder or base products or soft drinks from a distributor, manufacturer or wholesale dealer not licensed under subsection 1 shall obtain a license from the bureau for the privilege of conducting such business. 

3.  Location; display.     Any person required to obtain a license under this section shall obtain a license for each place of business owned or operated by that person. The license must be conspicuously displayed at the place of business for which it was issued.

§ 4857.  Penalties 

1.  Failure to file, pay.     A person required to file a return and pay tax under this chapter is subject to the same penalties as for failure to file and pay sales tax under Part 3. 

2.  Failure to obtain license.     A person required to obtain a license under section 4856 who fails to do so is subject to the same penalties as for failure to register as a retailer under section 1754-B.

§ 4858.  Rules

The assessor may adopt rules under the Maine Administrative Procedure Act to provide for the administration of this chapter. These rules may provide for a fee to cover the cost of issuing licenses required under section 4856. Rules adopted pursuant to this section are routine technical rules as defined in Title 5, chapter 375, subchapter 2-A.

Sec. F-2. Effective date. This Part takes effect August 1, 2008.