Cook County: Soda tax no longer runs afoul of food stamp rules
Friday, August 18, 2017
by Lauren Zumbach, Becky Yerak
Cook County officials say they've solved a problem with the new sweetened beverage tax that put roughly $87 million in funding used to run the federal food stamp program in Illinois at risk of being withheld.
Purchases made with federal food stamp benefits are exempt from the penny-per-ounce tax on sweetened beverages, but the county's regulation gave stores that hadn't been able to program point-of-sale systems not to tax those purchases the option of charging the tax and then issuing a refund.
The U.S. Department of Agriculture's Food and Nutrition Services, which oversees the food stamp program called SNAP, or Supplemental Nutrition Assistance Program, warned state officials last week that allowing refunds ran afoul of rules barring retailers from charging SNAP recipients the tax at any time.
The county solved the issue by striking language permitting refunds from the regulation, which "will ensure ongoing access of SNAP benefits for eligible Illinois households," county spokesman Frank Shuftan said in a statement Thursday.
The USDA confirmed that the county notified the agency that it had corrected the issue.
In a Thursday letter to the Illinois Department of Human Services, Cook County Director of Revenue Zahra Ali said county officials had not been aware permitting refunds was unacceptable. Under the revised regulations, retailers unable to program point-of-sale machines not to charge the tax must find an alternative, such as a "manual override" to avoid charging the customer the tax.
"We believe Cook County has taken the appropriate steps to come into compliance with federal guidelines," Meghan Powers, a spokeswoman for the Illinois Department of Human Services, wrote in an email. "We appreciate Cook County's prompt response on the issue and the collaboration that occurred from all levels of government."
Rob Karr, Illinois Retail Merchants Association president and CEO, expressed frustration Thursday with the way the county handled the situation, saying its solution "essentially tells retailers they have to figure it out themselves."
It's not known how many Cook County retailers are applying the tax to SNAP purchases and then offering refunds.
But another retailer is facing a lawsuit alleging it botched the rollout of the tax, this time by double-taxing a customer's sweetened beverage purchases.
Tinley Park resident Diane Kramer accused Circle K of overcharging her sales tax when she bought sweetened beverages at stores in Orland Hills, Tinley Park, Oak Forest and Chicago, according to a lawsuit filed Wednesday in Cook County Circuit Court.
The sweetened beverage tax "is not to be added to the pretax price of the good, but is itself to be added to the existing sales tax," the lawsuit says.
Kramer said she shopped at Circle K on Aug. 9 and Aug. 10 and the soda tax was combined with the pretax price for the order to arrive at a subtotal. Kramer was then charged sales tax on that amount — effectively taxing the tax, the suit alleges.
Five receipts were included with the lawsuit. Most showed only a beverage purchase. One receipt, for example, showed that she bought a 20-ounce pop for 79 cents and was charged a 20-cent soda tax, coming to a 99-cent subtotal. She was charged an additional tax of 10 cents on that subtotal, according to one of the receipts filed with the lawsuit.
The lawsuit, which seeks class-action status, was filed by the same lawyer who sued McDonald's last week, also alleging double taxation. The lawsuit against McDonald's was voluntarily dismissed earlier this week. "Because plaintiff has no reason to believe that customers were 'double taxed' at any other McDonald's restaurant in Cook County, plaintiff voluntarily dismisses his lawsuit," the judge wrote.
Circle K couldn't be reached for immediate comment.
Kramer seeks compensatory damages and punitive damages equal to at least 1 percent of the annual revenue of each of the Circle K stores during each year in which the violations occurred.
Walgreens and 7-Eleven have been sued for allegedly taxing unsweetened beverages.