1 Stakeholder Implementation Meeting May 26, 2010 Washington State Department of Revenue Olympia, Washington Carbonated Beverage Tax

2  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?

3  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?”

4 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?

5 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

6 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 7 Examples – Bottlers, distributors, and retailers Assumes unrelated entities Distributor Bottler Consumer Exempt Bottler has exemption available

Retailer 8 Examples – Bottlers, distributors, and retailers Distributor Bottler Consumer Exempt Taxable Assumes unrelated entities Bottler has no exemption available

Retailer 9 Examples – Bottlers, distributors, and retailers Distributor Bottler Consumer Exempt Not applicable Assumes same legal entity Bottler has exemption available

Retailer 10 Examples – Bottlers, distributors, and retailers Distributor Bottler Consumer Taxable Not applicable Assumes same legal entity Bottler has no exemption available

11 Examples – Bottlers, distributors, and retailers Retailer Assumes out-of-state bottler does not have nexus Distributor Bottler Out-of-State Consumer Exempt Taxable Exempt Out-of-state bottler

12 Examples – Bottlers, distributors, and retailers Retailer Assumes both out-of-state bottler and distributor do not have nexus Distributor Out-of-State Bottler Out-of-State Consumer Taxable Exempt Out-of-state bottler and distributor

13 Examples – Bottlers, distributors, and retailers Retailer Distributor Inventory Consumer Exempt Taxable Inventory on July 1, 2010 Assumes inventory acquired before July 1, 2010 is sold on July 1 st and after.

14 Examples – Bottlers, distributors, and retailers Retailer Inventory Consumer Taxable Inventory on July 1, 2010 Assumes inventory acquired before July 1, 2010 is sold on July 1 st and after.

15 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

16 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

17 Education efforts  Special Notice  Question & Answers  Speakers’ Bureau

18 For further information  Contact JoAnne Gordon Department of Revenue Legislation and Policy or call  Check out the link on the new legislation page (coming soon)  Or call the Telephone Information Center