2017 -- H 5787

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LC001591

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2017

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A N   A C T

RELATING TO TAXATION - SUGARY DRINKS

     

     Introduced By: Representatives Maldonado, Diaz, Ajello, Tanzi, and Barros

     Date Introduced: March 01, 2017

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Legislative Findings.

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     (1) Obesity is common as approximately one-third of adults (36.5 %) and approximately

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12.7 million (17 %) of children and adolescents ages two (2) to nineteen (19) years old living in

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the United States are obese; and

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     (2) Obesity has more than doubled in children and quadrupled in adolescents in the past

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thirty (30) years, and obese children are at least twice as likely as nonobese children to become

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obese adults; and

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     (3) Twenty-five (25) states currently have an adult obesity rate above thirty percent

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(30%), forty-three (43) states have rates of at least twenty-five (25%) percent, and every state has

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a rate above twenty percent (20%); and

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     (4) In accordance with the most recent data, twenty-six percent (26%) of the adults and

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over thirteen percent (13.2%) of children between the ages of ten (10)-seventeen (17) living in the

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state of Rhode Island are obese; and

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     (5) Obesity increases the risk of serious health conditions such as type 2 diabetes,

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coronary heart disease, stroke, hypertension, some types of cancer, sleep apnea and other

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respiratory problems; and

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     (6) Obesity-related health conditions have serious economic costs and overweight and

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obesity may account for one hundred forty-seven billion dollars ($147,000,000,000) in annual

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health care costs nationally, or nine percent (9%) of all medical spending; and

 

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     (7) In the United States, roughly one-half (1/2) of these costs may be paid by Medicare

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and Medicaid, meaning taxpayers absorb the costs for health care associated with obesity

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treatment; and

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     (8) Medicare and Medicaid spending would be eight and one-half percent (8.5%) and

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eleven and eight tenths percent (11.8%) lower, respectively, in the absence of obesity-related

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spending

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     (9) There is sufficient scientific evidence that regular consumption of sugary drinks

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causes excess weight gain and these beverages are unique contributors to obesity and type 2

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diabetes; and there is sufficient scientific evidence that reducing sugary drink consumption will

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have a significant impact on the prevalence of obesity and obesity-related diseases such as type 2

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diabetes and other metabolic diseases; and

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     (10) Sugary drinks are the single largest source of added sugars in the American diet and

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an average twenty ounce (20 oz.) sugary drink, such as soda, contains fifteen (15) to eighteen (18)

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teaspoons of sugar and upwards of two hundred forty (240) calories; and

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     (11) The American Heart Association recommends limiting the amount of added sugars

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adults consume to no more than half of their daily discretionary calorie allowance and for most

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American women, that is no more than one hundred (100) calories per day, or about six (6)

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teaspoons of sugar, and for men, it is one hundred fifty (150) calories per day, or about nine (9)

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teaspoons; and

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     (12) The American Heart Association recommends that a person eating a two thousand

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(2,000) calorie diet consume no more than four hundred fifty (450) calories from sugary drinks

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per week and if adults are sedentary, their consumption should be lower; and

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     (13) Taxes and subsidies on food can influence consumption and it is recommended that

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taxes should be implemented as part of a comprehensive strategy to prevent obesity; and

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     (14) In the case of sugary drinks, research suggests that a 10 percent (10%) increase in

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their prices may lead to an eight to ten percent (8 – 10%) reduction in sugary drink purchases.

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     SECTION 2. TITLE 44 of the General Laws entitled "TAXATION" is hereby

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amended by adding thereto the following chapter:

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CHAPTER 70

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SUGARY DRINKS TAX

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     44-70-1. Short title.

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     This chapter shall be known and may be cited as the "Sugary Drinks Tax".

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     44-70-2. Legislative Intent.

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     It is the intent of the general assembly, by adopting a sugary drinks tax and creating the

 

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children’s health promotion fund, to diminish the human and economic costs of obesity in the

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state of Rhode Island. The intent is to discourage excessive consumption of sugary drinks and to

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create a dedicated revenue source for programs designed to benefit public health and wellness.

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     44-70-3. Definitions.

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     As used in this chapter, the following words and terms shall have the following meanings

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unless the context clearly indicate another or different meaning or intent:

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     (1) "Beverage for medical use" means a beverage suitable for human consumption and

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manufactured for use as an oral nutritional therapy for persons who cannot absorb or metabolize

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dietary nutrients from food or beverages, or for use as an oral rehydration electrolyte solution for

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infants and children formulated to prevent or treat dehydration due to illness. "Beverage for

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medical use" shall also mean a "medical food" as defined in section 5(b)(3) of the Orphan Drug

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Act (21 U.S.C. 360ee(b)(3)); this chapter defines medical food as "a food which is formulated to

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be consumed or administered externally under the supervision of a physician and which is

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intended for the specific dietary management of a disease or condition for which distinctive

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nutritional requirements, based on recognized scientific principles, are established by medical

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evaluation." "Beverage for medical use" shall not include drinks commonly referred to as "sports

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drinks" or any other common names that are derivations thereof.

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     (2) "Bottle" means any closed or sealed container regardless of size or shape, including,

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without limitation, those made of glass, metal, paper, plastic, or any other material or

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combination of materials.

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     (3) "Bottled sugary drink" means any sugary drink contained in a bottle that is ready for

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consumption without further processing such as, without limitation, dilution or carbonation.

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     (4) "Caloric sweetener" means any caloric substance suitable for human consumption that

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humans perceive as sweet and includes, without limitation, sucrose, fructose, glucose, fruit juice

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concentrate or other sugars. "Caloric sweetener" excludes noncaloric sweeteners. For purposes of

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this definition, "caloric" means a substance which adds calories to the diet of a person who

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consumes that substance.

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     (5) "Consumer" means a person who purchases a sugary drink for consumption and not

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for sale to another.

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     (6) "Department of health" means the Rhode Island department of health.

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     (7) "Distributor" means any person, including manufacturers and wholesale dealers, who

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receives, stores, manufactures, bottles, and/or distributes bottled sugary drinks, syrups, or

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powders, for sale to retailers doing business in the state, whether or not that person also sells such

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products to consumers.

 

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     (8) "Division of taxation" means the Rhode Island division of taxation.

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     (9) "Fund" means the children's health promotion fund established pursuant to §44-70-8.

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     (10) "Milk" means natural liquid milk regardless of animal or plant source or butterfat

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content; including natural milk concentrate, whether or not reconstituted; or dehydrated natural

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milk, whether or not reconstituted.

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     (11) "Natural fruit juice" means the original liquid resulting from the pressing of fruits, or

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the liquid resulting from the dilution with water of dehydrated natural fruit juice.

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     (12) "Natural vegetable juice" means the original liquid resulting from the pressing of

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vegetables, or the liquid resulting from the dilution with water of dehydrated natural vegetable

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juice.

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     (13) "Noncaloric sweetener" means any noncaloric substance suitable for human

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consumption that humans perceive as sweet and includes, without limitation, aspartame,

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acesulfame-K, neotame, saccharin, sucralose, and stevia. "Noncaloric sweetener" excludes caloric

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sweeteners. For purposes of this definition, "noncaloric" means a substance that contains fewer

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than five (5) calories per serving.

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     (14) "Person" means any natural person, partnership, cooperative association, limited

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liability company, corporation, personal representative, receiver, trustee, assignee, or any other

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legal entity.

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     (15) "Place of business" means any place where sugary drinks, syrups, or powders are

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manufactured or received for sale in the state.

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     (16) "Powder" means any solid mixture of ingredients used in making, mixing, or

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compounding sugary drinks by mixing the powder with any one or more other ingredients,

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including without limitation water, ice, syrup, simple syrup, fruits, vegetables, fruit juice,

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vegetable juice, carbonation, or other gas.

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     (17) "Retailer" means any person who sells or otherwise dispenses in the state a sugary

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drink to a consumer whether or not that person is also a distributor as defined in this section.

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     (18) "Sale" means the transfer of title or possession for valuable consideration regardless

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of the manner by which the transfer is completed.

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     (19) "Sugary drink" means any nonalcoholic beverage, carbonated or noncarbonated,

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which is intended for human consumption and contains any added caloric sweetener. As used in

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this definition, "nonalcoholic beverage" means any beverage that contains less than one-half of

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one percent (.5%) alcohol per volume.

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     (20) "Syrup" means a liquid mixture of ingredients used in making, mixing, or

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compounding sugary drinks using one or more other ingredients including, without limitation,

 

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water, ice, a powder, simple syrup, fruits, vegetables, fruit juice, vegetable juice, carbonation, or

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other gas.

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     (21) "Tax administrator" means the tax administrator of the Rhode Island division of

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taxation or authorized agents and employees.

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     (22) "Water" means plain (nonflavored) or flavored with "natural fruit essence" (with no

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calories), or "natural flavor". The source of the water may be: artesian, mineral, spring, or well.

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The type may also include carbonated (sparkling, club, seltzer), still, distilled, or purified

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(distilled, demineralized, deionized, reverse osmosis).

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     44-70-4. License Required.

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     (a) Every distributor doing business in this state shall file with the division of taxation an

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application for a license to engage in a business under this chapter, for each place of business

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owned and operated by the distributor before the sooner of January 1, 2018 or a distributor's first

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acts which constitute the doing of business in the state. An application for a license shall be filed

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on forms to be furnished by the division of taxation for that purpose. An application must be

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subscribed and sworn to by a person with legal authority to bind the business. The application

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shall identify the owners of the applicant, the applicant's mailing address, the place of business to

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which the license shall apply, and the nature of the business in which engaged, and any other

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information the division of taxation may require for the enforcement of this chapter.

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     (b) Upon receipt of an application and any license fee hereafter provided for, the division

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of taxation may issue to the applicant, for the place of business designated, a nonassignable

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license, authorizing the sale of sugary drinks, syrups, and powders in the state. No distributor

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shall sell any sugary drink, syrup or powder without first obtaining a license to do so under this

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chapter. Licenses issued pursuant to this section shall expire on January 31 of each year and may

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be renewed annually.

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     (c) A license cannot be transferred, and shall at all times be prominently displayed in a

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distributor’s place of business. The division of taxation may refuse to issue a license to any

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person previously convicted of violations of this chapter under such procedures as the division of

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taxation may establish by regulation.

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     44-70-5. Tax Imposed.

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     (a) There is hereby imposed an excise tax on every distributor for the privilege of selling

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the products governed by this chapter in the state.

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     (1) The tax shall be calculated using the following tiered system.

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     (i) Tier 1: Beverages with less than five grams (5g) of sugar per twelve fluid ounces (12

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fl. oz.) will not be taxed.

 

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     (ii) Tier 2: Beverages with more than five grams (5g) but less than twenty grams (20g) of

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sugar per twelve fluid ounces (12 fl. oz.) will be taxed at a rate of one cent ($0.01) per ounce.

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     (iii) Tier 3: Beverages with twenty grams (20g) of sugar or more per twelve (12) fluid

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ounces will be taxed at a rate of two cents ($0.02) per ounce.

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     (2) Syrups and powders sold or offered for sale to a retailer for sale in the state to a

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consumer, either as syrup or powder or as a sugary drink derived from that syrup or powder, are

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taxable.

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     (i) Syrups and powders shall be taxed using the following tiered system.

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     (A) Tier 1: If the beverages made from the syrup or powder have less than five grams

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(5g) of sugar per twelve fluid ounces (12 fl. oz.), the syrup or powder will not be taxed.

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     (B) Tier 2: If the beverages made from the syrup or powder have more than five grams

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(5g) but less than twenty grams (20g) of sugar per twelve fluid ounces (12 fl. oz.), the syrup or

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powder will be taxed at a rate equal to one cent ($0.01) per ounce for each gallon of sugary drink

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produced from that syrup or powder.

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     (C) Tier 3: If the beverages made from the syrup or powder have twenty grams (20g) of

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sugar or more per twelve fluid ounces (12 fl. oz.), the syrup or powder will be taxed at a rate

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equal to two cents ($0.02) per ounce for each gallon of sugary drink produced from that syrup or

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powder.

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     (ii) For purposes of calculating the tax, the volume of sugary drinks produced from

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syrups or powders shall be the larger of:

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     (A) The largest volume resulting from use of the syrups or powders according to any

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manufacturer’s instructions; or

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     (B) The volume actually produced by the retailer, as reasonably determined by the tax

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administrator;

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     (3) The tax amounts set forth in this section shall be adjusted annually by the tax

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administrator in proportion with the Consumer Price Index: All Urban Consumers for All Items

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for the Northeast Region Statistical Area as reported by the United States Bureau of Labor

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Statistics or any successor to that index.

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     (4) Manufacturers, bottlers, wholesalers, or distributors shall add the amount of the tax

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imposed by this section to the retail price of sugary drinks.

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     (b) A retailer who sells bottled sugary drinks, syrups, or powders in the state to a

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consumer, on which the tax imposed by this section has not been paid by a distributor, is liable

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for the tax imposed in subsection (a) of this section at the point of sale to a consumer.

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     (c) The taxes imposed by this section are in addition to any other taxes that may apply to

 

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persons or products subject to this chapter.

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     44-70-6. Report of sales and tax remittances.

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     Any distributor or retailer liable for the tax imposed by this chapter shall, on or before the

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twentieth day of every month, return to the tax administrator under oath of a person with legal

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authority to bind the distributor or retailer, a statement containing their name and place of

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business, the quantity of sugary drinks, syrups, and powders subject to the excise tax imposed by

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this chapter sold or offered for sale in the preceding month, and any other information required by

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the tax administrator, along with the tax due.

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     44-70-7. Records of Distributors.

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     Every distributor, and every retailer subject to this chapter, shall maintain for not less

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than two (2) years accurate records, showing all transactions that gave rise, or may have given

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rise, to tax liability under this chapter. All records are subject to inspection by the tax

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administrator at all reasonable times during normal business hours.

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     44-70-8. Establishment of the Children's Health Promotion Fund.

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     There shall be established and set up a separate fund to be known as the children's health

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promotion fund. The department of health shall administer the fund. The fund shall consist of

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revenues from the state generated by the tax imposed by chapter 70 of title 44. The fund shall be

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expended first for the implementation, administration, enforcement and evaluation of chapter 70

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of title 44. Unexpended balances shall be allocated in a proportion to be determined by the

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director of the department of health in consultation with other agency heads. Qualifying programs

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and initiatives funded under chapter 70 of title 44 shall include, but not be limited to:

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     (1) Investments in biking, walking and outdoor recreation;

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     (2) Investments in safe routes to schools;

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     (3) Efforts to promote more frequent, effective physical education in schools;

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     (4) Initiatives that promote access to healthy foods, especially in underserved

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communities;

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     (5) Programs that significantly increase Supplemental Nutrition Assistance Program

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(SNAP) benefits when used to purchase fruits and vegetables;

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     (6) Initiatives that promote good nutrition, physical activity, and limited screen time in

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early childcare settings and out-of-school programs;

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     (7) Efforts to promote and achieve health equity;

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     (8) Programs that help children achieve a healthy weight;

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     (9) Development and promotion of materials that educate children, families and citizens

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about the health effects of consuming sugary drinks and promote the consumption of tap water;

 

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     (10) Other evidence-based methods of improving children's health and wellness in areas

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including, but not limited to, nutrition, physical activity, access to health care and oral care.

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     44-70-9. Exemptions.

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     The following shall be exempt from the tax imposed by this chapter:

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     (1) Bottled sugary drinks, syrups, and powders sold to the United States government and

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American Indian Tribal governments;

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     (2) Bottled sugary drinks, syrups, and powders sold by a distributor to another distributor

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that holds a license issued pursuant to chapter, if the sales invoice clearly indicates that the sale is

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exempt. If the sale is to a person who is both a distributor and a retailer, the sale shall also be tax

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exempt and the tax shall be paid when the purchasing distributor/retailer resells the product to a

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retailer or a consumer. This exemption does not apply to any other sale to a retailer;

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     (3) Beverages sweetened solely with noncaloric sweeteners;

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     (4) Beverages consisting of one hundred percent (100%) natural fruit or vegetable juice

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with no added caloric sweetener;

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     (5) Beverages in which milk, or soy, rice, or similar milk substitute, is the primary

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ingredient or the first listed ingredient on the label of the beverage;

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     (6) Coffee or tea without added caloric sweetener;

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     (7) Infant formula;

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     (8) Beverages for medical use;

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     (9) Water without any caloric sweeteners.

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     44-70-10. Penalties.

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     (a) Any person subject to the provisions of this chapter who fails to pay the entire amount

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of tax imposed by this chapter by the date that payment is due, fails to submit a report or maintain

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records required by this chapter, or violates any other provision of this chapter, or rules and

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regulations promulgated by the division of taxation for the enforcement of this chapter, shall be

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guilty of a misdemeanor and shall also be liable for the amount of the tax that may be due and a

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penalty equal to fifty percent (50%) of the tax due. The division of taxation, or its duly authorized

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representative, may determine the amount due in the event of any payment or underpayment that

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may come to its attention and demand payment of all such taxes and penalties. Interest shall

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accrue on non- or under-payment of tax at a rate of twelve percent (12%) per annum from the

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date the tax was due until paid. For good reason shown the division of taxation may waive all or

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any part of the penalties imposed, but shall have no power to waive interest.

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     (b) All administrative provisions of the chapter 18 of title 44 including those which

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provide for the apportionment of economic activity between that within the tax jurisdiction of the

 

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state and such activity outside that jurisdiction, which fix damages, penalties and interest for

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nonpayment of taxes and for noncompliance with the provisions of said chapter, and all other

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requirements and duties imposed upon taxpayers, shall apply to all persons liable for taxes under

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the provisions of this chapter, and the division of taxation shall exercise all the power and

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authority and perform all the duties with respect to taxpayers under this chapter as are provided in

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chapter 18 of title 44, except in the event of a conflict, and then the provisions of this chapter

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shall control.

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     44-70-11. Unpaid Taxes a Debt.

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     All taxes and penalties imposed under the provisions of this chapter remaining due and

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unpaid shall constitute a debt to the state, which may be collected from the person owing same by

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suit or otherwise.

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     44-70-12. Records of the division of taxation.

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     At the end of each month, the state auditor shall carefully check the books and records of

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the tax administrator and their accounts with any bank or banks, and shall verify the amounts

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collected pursuant to this chapter and paid into the children's health promotion fund. Any duty

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herein required of the state auditor may be performed by any duly trained clerk in that office,

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designated by the state auditor for that purpose.

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     44-70-13. Exercise of Powers and Duties.

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     Whenever in this chapter any reference is made to any power or duty of the tax

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administrator the reference is construed to mean that the power or duty shall be exercised by the

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tax administrator, under the supervision and direction of the director of revenue.

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     44-70-14. Rules and Regulations.

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     The tax administrator is hereby empowered to make such rules and regulations, and

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provide such procedural measures, in cooperation with the state auditor, as may be reasonably

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necessary to accomplish the purposes of this chapter.

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     44-70-15. Severability.

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     If any provision of this chapter, any rule or regulation made under this chapter, or the

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application of this chapter to any person or circumstance is held invalid by any court of

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competent jurisdiction, the remainder of the chapter, rule, or regulation, and the application of the

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provision to other persons or circumstances shall not be affected. The invalidity of any section or

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sections or parts of any section of this chapter shall not affect the validity of the remainder of the

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chapter.

 

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     SECTION 2. This act shall take effect on January 1, 2018.

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LC001591

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION - SUGARY DRINKS

***

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     This act would create a tax on sugary drinks with the intent of discouraging excessive

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consumption of those beverages, would create a dedicated revenue source for programs designed

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to benefit public health in addition to the ultimate goal of reducing the health and economic costs

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of obesity in the state.

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     This act would take effect January 1, 2018.

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LC001591

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