Questions abound over collection of proposed ‘soda tax’ on Richmond businesses

RICHMOND — As the campaign over the tax on businesses that sell sugar-sweetened beverages enters its final days, the focus is shifting from the merits of the proposal to the practicalities of implementing it should the measure pass.

If the penny-per-ounce tax called Measure N is approved by a majority of voters Nov. 6, it could mean more than $3 million in new city revenue annually.

It would also mean new work for the revenue division of the city’s finance department and for hundreds of markets and restaurants that will have to coordinate and calculate the new tax — a penny at a time.

“There will be a lot of work to do (if the tax passes),” said Antonio Banuelos, Richmond’s revenue manager. “We are very aware of that.”

At the same time, businesses like Charles Evans’ local favorite, CJ’s BBQ & Fish, will have new bills and more work.

“It will be a matter of subtraction from my inventory, I guess,” said the gravelly-voiced Evans, a 64-year-old restaurateur who keeps his sales records the old-fashioned way, in a yellow-sheet notebook. “It will be a hassle.”

During an online debate hosted by Bay Area News Group on Oct. 16, Councilman Jeff Ritterman, a retired cardiologist and Measure N’s de facto leader, said concerns over how more than 600 local markets, restaurants, caterers, gas stations and mobile food vendors would calculate and pay the new tax will in part be allayed by software.

“The city will also provide a tool kit which will make compliance easy,” Ritterman said. “A business will input inventory into a Web page which will calculate the tax for them.”

According to Ritterman, finance department officials and third-party contractors have held talks in recent weeks exploring the feasibility of a secure city site that would track inventory records and calculate beverage sales and tax liability. Businesses could enter inventory data at different points in time, using the difference to calculate how much taxable product they have sold.

A restaurant or market that sold 20,000 ounces of sodas and other sugary drinks, for example, would have a tax liability of $200.

“Big Soda is on a misinformation campaign about how it will be impossible to comply and all this nonsense,” Ritterman said. “We are going to work with the business community to make this as seamless and simple as possible.”

Business leaders disagree.

“It’s amazing to me how people who suggest these kinds of taxes have so little understanding of business or business finance,” said Judy Morgan, CEO of the Richmond Chamber of Commerce, which represents more than 400 local businesses. “Ritterman has gotten no input from the business community and hasn’t considered the implications.”

Measure N has drawn national attention as Richmond could become the nation’s first city to impose a tax on businesses that sell sugar-sweetened beverages, encompassing more than 700 products and brands from Pepsi to sweetened teas. Studies show 52 percent of local children are overweight, and new research has linked sugar-added beverage consumption to obesity, diabetes and a host of other maladies.

Ritterman argues that the new tax will curb consumption of soda — which he compares to cigarettes as a public health threat — while raising $3 million annually for recreation and children’s health programs.

Opponents say that businesses are likely to spread the new tax across all groceries, minimizing any effect on beverage sales and making the tax particularly regressive by charging poorer residents in the central part of the city more for basic foodstuffs. Proceeds would go the city’s general fund, with no legal requirement that it be spent on health programs, opponents point out.

Banuelos’ staff of five would be charged with collection of the tax. The city has 6,381 businesses, 629 of which would be subject to the tax. Banuelos said there are no plans to hire more staff.

If Measure N passes, it could mean a big increase in business license fees owed by local stores and restaurants.

The base license fee is $234 per year, Banuelos said, plus $47 per employee for the first 25. Companies pay another $40 for each employee over 25.

For a corner market or liquor store with four employees — common in a city that has just one full-service grocer — that means an annual fee of about $422. Selling fewer than a dozen single-serving drinks per day would bring in nearly $500 in annual tax, more than doubling the current business license fee, due each January.

For the tax to generate the expected $3 million annually, the 629 businesses would have an average new tax contribution of about $4,800.

“The money would come from the pockets of the people who can least afford it,” Morgan said. “And dampen an already sluggish hiring climate.”

Evans, who has four employees at his barbecue joint, estimates he’ll pay $1,000 more in tax if Measure N passes.

“For me, I am just going to charge more for my sodas, because I can’t afford it as it is,” Evans said.

Evans added that he buys his drinks in bulk at wholesalers in town, like Costco or Food Co. “I will have to buy out of town for sure. When you buy in bulk like I do, the tax would add up in a hurry.”

Ritterman said what can’t be calculated is the wave of good will that could follow a victory Nov. 6, which would vault Richmond atop national headlines as a leader in public health policy.

“We’re not going to come down with a sledgehammer on our businesses,” Ritterman said. “After the campaign craziness is over, we expect buy-in and compliance … people are going to understand that we are all in this together to improve the health of our children.”

Contact Robert Rogers at 510-262-2726 or rrogers@bayareanewsgroup.com and follow Twitter.com/roberthrogers.