Judge flushes retailers' concerns over Cook County 'soda tax'; tax cleared to take effect Aug. 2

By Jonathan Bilyk | Jul 28, 2017

Residents and shoppers in Cook County could soon pay significantly more for their soda, sweet tea, iced coffee and other bottled and fountain drinks, after a Cook County judge refused to extend an order barring the county from collecting its penny-per-ounce sweetened beverage tax.

Residents and shoppers in Cook County could soon pay significantly more for their soda, sweet tea, iced coffee and other bottled and fountain drinks, after a Cook County judge refused to extend an order barring the county from collecting its penny-per-ounce sweetened beverage tax.

On Friday, July 28, Cook County Circuit Judge Daniel Kubasiak denied the request from the Illinois Retail Merchants Association and a group of grocers from Chicago and the suburbs for an injunction, which would have formally put the tax on ice while the courts mulled claims the county ordinance was unconstitutional and would open recklessly open convenience store owners and others open to unnecessary lawsuits and other enforcement actions.

“As to the concerns that improper collection of the tax will open the Merchants up to litigation, any such notion is merely speculation at this point and does not render the Ordinance unconstitutionally vague,” Kubasiak wrote. “The fact that a statute might be susceptible of misapplication or varying interpretations does not necessarily make it unconstitutional.”

The ruling left the merchants group “disappointed,” and IRMA and the other plaintiffs in the case were “exploring all legal options,” said Rob Karr, president and CEO of IRMA, in a prepared statement Friday.

In a statement released following the ruling, Cook County Board President Toni Preckwinkle said the county will begin collecting the tax on Aug. 2.

“We applaud today’s decision by Judge Kubasiak granting our motion to dismiss the plaintiff’s lawsuit challenging the sweetened beverage tax,” Preckwinkle said. “We believed all along that our ordinance was carefully drafted and met pertinent constitutional tests.”

The matter had landed in Kubasiak’s courtroom just days before collection of the tax was set to begin on July 1.

Late last year, the Democratic-controlled Cook County Board, at Preckwinkle's urging, had enacted the ordinance establishing the tax, saying the tax would both discourage consumption of sweetened beverages, such as soda, thus improving public health, while helping the county government close a budget hole, by raising as much as $200 million in new revenue.

The tax would apply to sweetened beverages, including regular and diet soda, as well as sweetened tea and coffee beverages, among many others. The tax would apply to those sold in bottles and cans, as well as fountain beverages and other drinks sold in non-pre-measured containers. However, the tax would not be applied to made-to-order sweetened beverages, such as those made by a barista at Starbucks or other similar shops.

Retailers responded with a campaign against the tax, asking the county to rescind it, asserting the tax would hurt consumers and retailers alike, particularly in the county’s suburbs.

IRMA and the grocers group also filed the lawsuit at issue in court, arguing the ordinance was poorly written, leaving businesses attempting to collect the tax at grave risk of running afoul of federal food stamp rules and of being sued, in addition to potentially being fined by the county for not collecting the proper amount of taxes.

Kubasiak initially granted a temporary restraining order against the tax on June 30. That move, in turn, prompted Preckwinkle and other Democratic Cook County officials to publicly threaten to lay off hundreds of county employees, unless the tax could be implemented.

In her statement following the decision, Preckwinkle said “the delay in implementing the tax caused by the merchants’ lawsuit forced us to put into motion cost-saving measures to cope with this revenue loss, which currently is at $17 million.”

“Until we are able to fully implement and collect revenues from this tax, we will continue to review our financial position and make adjustments accordingly.”

In his decision, Kubasiak said he was mindful of those threats, but stated the budget concerns merely prompted him to accelerate his ruling, and did not weigh in his decision.

In his opinion, the judge shot down each of the retailers’ arguments.

The retailers, for instance, assailed the county’s justification for the tax on the grounds of improving public health by reducing the consumption of soda and other beverages. But the judge said the county didn’t need to provide any proof the tax would accomplish its stated goal. Rather, the county merely needed to state the goals to justify the tax.

“It is within reason for the Court to conclude that the Ordinance sets forth sufficient grounds to find that the tax will deter some level of consumption of such sweetened beverages and will promote public health, while at the same time raise revenue for the County,” Kubasiak wrote.

And the judge kicked over claims by the retailers that the tax was unfairly applied only to the sweetened beverages they sell in coolers, on shelves or at their fountains, and not to those made-to-order at coffe houses and other kinds of shops.

He noted the county justified this distinction by claiming the made-to-order beverages are less “widely available,” and would place too great of an administrative burden on those shop owners, as the sweeteners are added in varying amounts based on the customers’ orders.

He pointed to prior court decisions which determined governments can tax similar goods and activities differently, depending on various factors, without violating the Illinois constitution’s uniformity clause.

“The Merchants correctly point out the similarity of the products but their argument is misplaced,” Judge Kubasiak wrote. “The Court is not constrained by the question of whether the legislature should have taxed all sweetened beverages that may contribute to obesity.

“The Court need only consider whether there is a reasonable relationship between the tax classification and the objective of the Ordinance.”

And the judge brushed aside the retailers’ contentions the ordinance would improperly cause them to run afoul of federal food stamp program rules by inadvertently charging taxes on purchases made with cards issued under the Supplemental Nutrition Assistance Program (SNAP.) Such purchases are exempted by federal rules from sales and other local taxes.

The judge said county regulations drafted to guide enforcement of the ordinance “awkwardly overcome” the retailers’ contentions by requiring retailers to come up with some way to either program their sales registers to account for SNAP payments, or to issue an immediate refund of the tax to SNAP users.

How the retailers choose to do this is not the county’s problem, the judge said.

“While the requirement for this programming and procedures may be difficult to implement, and the County does not address how this immediate refund is to be accomplished, the Court does not believe it is unconstitutionally vague,” Kubasiak said. “The language provides people of ordinary intelligence a reasonable opportunity to understand what is required and it is explicit enough to serve as a guide to those who must comply with it.”

The retailers were represented in the action by attorneys Marilyn A. Wethekam, Jordan M. Goodman and David S. Ruskin, of the firm of Horwood Marcus & Berk, of Chicago.


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Organizations in this Story

Cook County Horwood Marcus & Berk, Chartered Illinois Retail Merchants Association

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