Stakeholder Implementation Meeting May 26, 2010 Washington State Department of Revenue Olympia, Washington

1. Carbonated Beverage Tax Stakeholder Implementation Meeting May 26, 2010 Washington State Department of Revenue Olympia, Washington

2. What is the carbonated beverage tax? • Imposed on bottlers, distributors, and retailers selling carbonated beverages in this state • Tax rate equals 2 cents per 12-ounce can – 48 cents per 24/12 ounce can case • Imposed from July 1, 2010, through June 30, 2013

3. What is a “carbonated beverage?” • Any packaged nonalcoholic liquid intended for human consumption that contains carbonation – natural or artificial – and: • Caffeine • Extracts • Fruit juice or concentrated fruit juice • Herbs • Sweeteners • Syrup – containing sugar or sugar substitutes • A carbonated beverage doesnot include carbonated bottled water

4. For bottlers only Who is a bottler? The carbonated beverage tax does not apply to the first $10 million of sales of carbonated beverages by a bottler • A person who bottles, cans, or otherwise packages carbonated beverages in beverage containers • A bottler is not a person who contracts with a processor for hire for the bottling activity

5. Does the $10 million exemption for sales apply to out-of-state bottlers? • An out-of-state bottler that has established nexus in Washington may claim the exemption • An out-of-state bottler that does not have nexus is not making sales of carbonated beverages in this state and is not subject to the tax. The exemption for successive sales of previously exempt carbonated beverages does not apply to purchases of product from such an out-of-state bottler

6. Exemptions – Bottlers, distributors, and retailers • Successive sales of previously exempt product (documentation of exempt status necessary) • Successive sales of previously taxed product (documentation of exempt status necessary)

7. Examples – Bottlers, distributors, and retailers Bottler has exemption available Bottler Exempt Distributor Exempt Retailer Exempt Consumer Assumes unrelated entities

8. Examples – Bottlers, distributors, and retailers Bottler has no exemption available Bottler Taxable Distributor Exempt Retailer Exempt Consumer Assumes unrelated entities 8

9. Examples – Bottlers, distributors, and retailers Bottler has exemption available Bottler Not applicable Distributor Not applicable Retailer Exempt Consumer Assumes same legal entity 9

10. Examples – Bottlers, distributors, and retailers Bottler has no exemption available Bottler Not applicable Distributor Not applicable Retailer Taxable Consumer Assumes same legal entity 10

11. Examples – Bottlers, distributors, and retailers Out-of-state bottler Bottler Out-of-State Exempt Distributor Taxable Retailer Exempt Consumer Assumes out-of-state bottler does not have nexus

12. Examples – Bottlers, distributors, and retailers Out-of-state bottler and distributor Bottler Out-of-State Exempt Distributor Out-of-State Exempt Retailer Taxable Consumer Assumes both out-of-state bottler and distributor do not have nexus 12

13. Examples – Bottlers, distributors, and retailers Inventory on July 1, 2010 Distributor Inventory Taxable Retailer Exempt Consumer Assumes inventory acquired before July 1, 2010 is sold on July 1st and after. 13

14. Examples – Bottlers, distributors, and retailers Inventory on July 1, 2010 Retailer Inventory Taxable Consumer Assumes inventory acquired before July 1, 2010 is sold on July 1st and after. 14

15. Reporting the carbonated beverage tax • Report using the Excise Tax Return or E-file • Report using line for carbonated beverage tax • Report based on case equivalent • Case equivalent equal to 24 – 12 ounce cans • Tax rate for case equivalent equals $0.48 per case

16. Can bottlers, distributors, and retailers add the tax as a line-item charge? • Any person who sells carbonated beverages at wholesale or retail is subject to the tax, unless a specific exemption applies. The tax is a cost of doing business. • There is no statutory prohibition for identifying the tax as a line- item charge • Consider: • Impact on B&O tax • Nelson v. Appleway

17. Education efforts • Special Notice • Question & Answers • Speakers’ Bureau

18. For further information • Contact JoAnne GordonDepartment of RevenueLegislation and Policyjoanneg@dor.wa.gov or call 360-570-6121 • Check out the link on the new legislation pagehttp://dor.wa.gov/NewLegislation • http://dor.wa.gov/ConsumerProducts (coming soon) • Or call the Telephone Information Center 1-800-647-7706