CHICAGO – Last Friday, a judge put Cook County's penny-per-ounce tax on sweetened beverages on hold at least until July 12. The tax was scheduled to take effect on Saturday, July 1.
The Chicago Tribune reports that the ruling by Circuit Judge Daniel Kubasiak to grant a temporary restraining order came days after the Illinois Retail Merchants Association and several grocers filed a lawsuit against the Cook County Department of Revenue seeking to block the tax, which they argue is unconstitutional and too vague.
County officials argue that the tax is needed to improve the public's health over time. The additional revenue would also be used toward the county’s operating budget: “This year, the operating budget calls for spending $4.4 billion. Of that, about $67.5 million was to come from the beverage tax. That's less than $17 million a month, based on the four months of beverage taxes the county expected to flow into its coffers during the remainder of its fiscal year,” writes the news source.
"The court is fully aware of the importance of the tax to defendant's budget," Kubasiak wrote in his ruling. "However, the court believes it is necessary to maintain the status quo to protect the interests of all consumers, all taxpayers" and the affected merchants.
Cook County Board President Toni Preckwinkle indicated that she would ask the appellate court to vacate the temporary restraining order: "Revenue from the tax is critical to both balancing our fiscal year 2017 budget and development of our fiscal year 2018 budget," she said in a statement. The news source adds that she has asked the finance department to look at "all options to compensate for the revenue that would have been generated by the tax," including job cuts.
Meanwhile, preparing for the soda tax has been a time-consuming process for Chicago grocery chain Pete's Fresh Market, which was still testing the tax's implementation on its checkout system Friday afternoon when word of the judge's ruling came down. "It's a relief," Vanessa Dremonas, executive officer for the family-owned chain, which has 11 of its 12 stores in Cook County, told the news source.
Per the temporary restraining order, the county cannot implement the tax until July 12, which is also when a hearing is scheduled on the preliminary injunction, writes the news source. Determining the unconstitutionality of the tax will be handled at a later date.
The Chicago Tribune writes that the retailers have argued that, under the Illinois Constitution, similar objects should be taxed uniformly. Under the sweetened beverage tax, drinks in a bottle or from a fountain machine are taxable. But on-demand, custom-sweetened beverages, such as those mixed by a server or barista, aren't subject to the tax. Also exempt are purchases made with food stamps.
David Ruskin, the lawyer representing the retailers, told the judge that a temporary restraining order was needed because there currently isn't a system in place for the thousands of consumers who would be due refunds, should the tax be found to be unconstitutional, writes the news source. If that were to happen, retailers would be vulnerable to class-action lawsuits by consumers.
The retailers' argument resonated with the judge, who said the county's "proposal for the refund of taxes" should the tax be struck down "does not provide a reasonable procedure to return the collected money to the taxpayers.”
The news source writes that Kubasiak also said the retailers "have persuaded the court that a fair question exists as to the constitutionality of the sweetened beverage tax."