In November, 2014; Berkeley became the first city in the U.S. to pass a soft drink tax. The tax is 1 cent an ounce, a high rate as a percent of the wholesale price of the product The Berkeley soda tax is collected in an unusual way. It is not paid like sales tax. Instead, the tax is paid by wholesale soft drink distributors. I think that method of collecting this tax will become a problem for Berkeley.
Costco. A lot of stores and restaurants in Berkeley were already buying their soft drinks at Costco even before this tax was passed. Now, more of them are driving to Costco for their soft drinks. Costco does not and will not pay the Berkeley soft drink tax because they are not located in Berkeley.
Dollar Tree. Other stores in Berkeley have just stop selling soft drinks. Dollar Tree stores in Berkeley used to sell a lot of soft drinks. Now as a result of this tax, Dollar Tree has stopped selling soft drinks. They are not alone. A number of other stores in Berkeley have also stopped selling soft drinks. This soft drink tax was supposed to raise money for the city of Berkeley, but if enough retailers decide to stop selling soft drinks, the city could wind up with a net loss of revenue instead.
The University. However, the big question is this – will the university pay the tax? U.C. Berkeley is, by far, the largest vendor of soft drinks in Berkeley. There are over 200 soft drink vending machines on campus, plus there are self-serve soft drink dispensers in nearly all the dining halls, and bottled soft drinks are sold in stores around campus. The university says that according to the state constitution, a city cannot force a state agency to pay a city tax and that the university will not pay the Berkeley soda tax. The people who wrote this law claim that the city can make the university pay the tax. I don’t know how that will play out, but in the past, whenever the city of Berkeley tried to tax the university, the city of Berkeley lost in court.