Federal government warns Cook County on soda tax collection

Aug 10, 2017

CHICAGO (AP) — The federal government is threatening to withhold about $87 million in food stamp funds from the state of Illinois if Cook County doesn’t alter the manner in which the penny-an-ounce tax on sweetened beverages has been implemented, officials said Thursday.

The U.S. Department of Agriculture is objecting to how the tax is applied to purchases using food stamps, known as the Supplemental Nutrition Assistance Program. It says the county must take “immediate steps” to become compliant, adding no taxes can be collected until the problem is solved.

Cook County officials told retailers that purchases made with food stamp benefits are exempt from the soda tax under federal law. However, it allows retailers to tax those purchases and provide refunds as a workaround for stores that haven’t been able to properly update their point-of-sale systems.

The Agriculture Department on Monday warned the Illinois Department of Human Services in a letter that the refund system violates federal law and money could be withheld.

“It is (Food and Nutrition Services’) strict interpretation that retailers may not charge the tax to SNAP recipients at any time and that providing an immediate subsequent refund at a customer service desk does not cure the problem or the violation of the law,” said DHS official James Dimas in a memo to Cook County President Toni Preckwinkle on Wednesday.

A spokesman for Cook County Board President Toni Preckwinkle on Thursday had little to say about the issue.

“We received the letter last night, and our attorneys are reviewing it,” a spokesman said. “We had been in touch with state and federal agencies on this issue. We’ll have more to say on it later.”

The penny-per-ounce tax imposed by Cook County went into effect last week. It was originally slated to begin July 1, but was delayed by a lawsuit filed by the Illinois Retail Merchants Association that was later dismissed by a Cook County judge. The merchants are appealing the judge’s decision.

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 aren’t subject to the tax.

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