A Cook County judge has dismissed a lawsuit brought by the Illinois Retail Merchants Association (IRMA) aimed at stopping a 1-cent-per-ounce tax on sugary beverages.
With that action on July 28, the tax will go into effect on Aug. 2, according to a press release from Cook County Board President Toni Preckwinkle.
None of this is sitting well with local retailers charged with collecting a complex tax.
Joe Salamone, owner of Fair Share Finer Foods on Roosevelt Road in Oak Park, said July 31 he is disappointed by the court’s decision.
“It’s not good for business. It’s not practical for the average store to implement.” Salamone said. “It’s gonna drive people to go and shop in the next county.”
Salamone said he’s spent about $6,000 on new software and equipment prepping to comply with the tax.
“It’s not a sales tax,” Salamone said. “You have to implement it by the ounce. We need to upgrade all our computers.”
Mike Nutley, one of the owners of Ed’s Way in Forest Park, was similarly frustrated when reached by phone July 31.
“They are just going to shove it down our throats,” Nutley said, referring to the Cook County Board of Commissioners. “I’m flustered with the whole thing. I’ve really become aggravated.”
Nutley’s store, which does participate in the Supplemental Nutrition Assistance Program (SNAP), can register as a “distributor” and avoid paying the tax upfront. But that option, which Cook County announced in mid-June, ends after one year, in July 2018. It is unclear what stores like Nutley’s will do after.
As reported by the Review at the time, before June 16, retailers like Nutley had worried about cash flow problems. According to the original text of the ordinance, distributors, like PepsiCo. Inc., would have charged independent grocers for the tax at the “back door” when they delivered shipments, even if those products are never bought or if they are bought by a SNAP participant. SNAP purchases are exempt from the tax.
If a customer uses SNAP to buy a sweetened beverage, the grocer must keep track of each individual product purchase, including the vendor, to request a refund on the beverage tax.
This process, Nutley said at the time, would have been cumbersome and would have required significant staff time to tabulate daily sweetened product sales broken down by vendor, just to recoup money paid upfront by retailers
The July 28 ruling comes about a month after the new tax, passed in November 2016, was to be implemented. That decision is the latest twist in a weeks-long legal battle.
The IRMA filed for a temporary restraining order on June 27, arguing the tax violated the Illinois Constitution and was too vague. A Cook County Circuit Court granted the order on June 30. A subsequent appeal by the county was dismissed on July 10.
“We are disappointed with today’s ruling,” Rob Karr, president and CEO of IRMA, said in a press release. “We are exploring all legal options.”
“We believed all along that our ordinance was carefully drafted and met pertinent constitutional tests,” Preckwinkle said in the Cook County press release. “The delay in implementing the tax caused by the merchants’ lawsuit forced us to put into motion cost-saving measures to cope with this revenue loss, which currently is at least $17 million. Until we are able to fully implement and collect revenues from this tax, we will continue to review our financial position and make adjustments accordingly.”
Preckwinkle went on to say retailers should have been prepared for the tax, which passed in November 2016. The statement did not acknowledge the multiple clarifications the county has issued since its passage.
When asked by the Review in an email if IRMA plans to appeal the ruling, Ryan McLaughlin, an IRMA spokesperson, wrote, “Our statement speaks of itself.”