Soda Distributors Complain About Berkeley's Follow-Through on Soda Tax

As the co-owner of San Francisco-based Waterloo Beverages, Camilo Malaver enjoyed doing business in Berkeley. But he did not want anything to do with Berkeley after voters adopted a soda tax in November.

In January, when the tax was implemented, Malaver decided to stop restocking his supply of craft sodas and naturally sweetened beverages in Berkeley because he says the city has done a poor job of relaying information on how to comply with the tax. He’s keen to restock in Berkeley again, but for now he is waiting to see how the tax will develop.

“Berkeley is a good city to do business with the university, but now it’s tough,” Malaver said. “We’re in limbo. Everybody’s lost and [we] don’t know what to do.”

Two months have passed since the soda tax, the first of its kind in the United States, went into effect. The tax, which levies 1 cent per fluid ounce, is applied to all distributors providing sugar-sweetened beverages to businesses in Berkeley. Beverages distributed by UC Berkeley to places on campus are exempt from the tax ,as the university is not bound by municipal laws.

Several local distributors of sodas and sugary drinks — the sole group responsible for paying the tax — share Malaver’s sentiments, arguing that the city has delivered little to no guidance.

All but one of the distributors who spoke to Berkeleyside were small-to medium-size local distributors that sell craft sodas, sweetened teas and energy drinks.

Last month, the Dollar Tree discount retail chain pulled its soda supply from its two stores in Berkeley to avoid the tax entirely. While other small soda distributors plan to continue doing business in Berkeley, they said they feel they were left in the dark by the city and MuniServices, a private firm the city hired to administer the tax.

“I feel their communication has been really lacking,” said Jeanine Pichotto, the human resources office manager at Bay Area Distributing, based in Richmond. “There has not been much information from the city to help us out.”

City officials have asked for patience and cooperation as the tax continues to be rolled out.

“We don’t want to burden anybody,” said Berkeley City Councilman Laurie Capitelli. “We want to make the tax as simple as possible for everyone.”

Since its passage in the November election, the soda tax has seen some setbacks. Although the tax technically went into effect Jan. 1, the city postponed collecting the taxes until March to give it time to further develop the ordinance, according to its frequently asked questions document. The first remittance deadline for the tax, to be collected monthly, is set for April 30.

On Jan. 27, soda distributors, the city and MuniServices met for the first time to educate distributors on the tax and to answer questions.

The meeting went well, and no distributors voiced complaints, according to Capitelli.

But some soda distributors who attended the meeting expressed frustration at the lack of guidance they received at the meeting.

“All they did was hand us out a FAQ fact sheet, that’s it,” said Eric Lynch, director of regional accounts at Dr. Pepper Snapple Group, located in Walnut Creek. “A fact sheet is not a regulation. When you write a law, you would expect to have it more buttoned-up.”

City officials told Berkeleyside they had provided written material on the tax to distributors via email and postal mail. On Feb. 18, the city mailed out a packet that included the tax-remittance return form, the FAQ sheet and a one-page introductory letter from MuniServices to local distributors.

Other facets of the city’s communication efforts fell short, however. Berkeleyside found, for example, that the email address for MuniServices listed in the FAQ sheet was unreachable.

The strongest complaints for some distributors focus on how they can follow the numerous exemptions on the tax — notably that retailers who make less than $100,000 in annual gross receipts in the most recent year are exempt from the tax — without assistance from the city.

For distributors, figuring out which retailers in Berkeley make less than $100,000 in annual gross receipts would require conducting a census of their own clients — an additional step that would take time and money.

“All of the work for the tax is put on distributors,” Lynch said. “The city can provide that list — if they want to share it.”

The city advised distributors to work directly with their retailers to determine which businesses make less than $100,000. The city will audit retailers to check if they fall under the exemption requirements — a standard operating procedure for Berkeley retailers, according to Capitelli.

Capitelli stressed the current problems are growing pains for both the city and distributors, and that the practicalities of implementing the tax will continue to be fleshed out.

“There are more procedural steps we need to do to make the tax as user-friendly as possible,” Capitelli said.

But distributors argue the tax will have trouble achieving its original goal of improving public health, while consumers and retailers suffer from the financial burden levied solely against distributors.

“Everyone in the chain of consumption will ultimately have to deal with the tax,” said one manager at a local distributor, who asked that his name and his company be kept anonymous. “We want to comply, but we don’t have a guideline to comply.”

KQED News Associate Berkeleyside is an independently owned news website based in Berkeley, Calif. Click here if you would you like to receive the latest Berkeley news in your inbox once a day for free with Berkeleyside's Daily Briefing email.