Sticky Taxes Levy On Soda Syrup Called Unfair By Restaurant Industry

Lurking in every cup of soda is an issue that has Washington’s restaurant owners seething.

Mixed with the ice and fizzy water is pop syrup, and it’s the dollar-a-gallon tax that Washington levies on the syrup that riles restaurateurs, who can end up paying 16 percent of the cost of syrup in taxes.

“It’s totally unfair,” said Chuck Thomas, owner of Gatto’s Pizza in Cheney and president of the Spokane Restaurant and Hospitality Association. “It’s a tax no other industry has.”

And it can be costly.

Mark Ray, owner of two dozen local McDonald’s franchises, estimates that the tax costs fast food restaurants $4,000 to $7,000 a year.

The tax generates $14 million a year and is dedicated to fighting youth violence and drug abuse.

The latest version of the syrup tax was approved by Washington voters in 1994. Referendum 43, which was designed to raise $115 million a year from taxes on cigarettes and alcohol, as well as pop, also shifted the tax on pop from soda cans to syrup.

Ray said he doesn’t object to the goal, just the means of funding it.

“This tax is for a good cause, but they should tax the entire population,” he said. “It’s unfair taxation. That’s why our forefathers went to battle with England.”

The fact that pop was grouped with alcohol and cigarettes infuriates Thomas.

“It was put on a drug-tax deal, and pop has nothing to do with drugs,” he said. “It was just one of those midnight sleazeball deals they do over there.”

According to Rep. Hans Dunshee, D-Snohomish, there may be a kernel of truth to that.

When the tax was first proposed in the late 1980s, it happened that the soda pop lobbyist was out of town, said Dunshee, recalling the story told to him.

At the time, the reasoning held that there was a connection between the tax and what it was being used for. “This is for kids, and kids drink pop,” Dunshee said.

Recently, the restaurant lobbyists have come up with proposals to overturn or modify the tax. The first, a complete repeal, was vetoed by Gov. Gary Locke in 1997. The second calling for a 50 percent reduction, with funds for drugs shifted from the general fund, also was vetoed last year.

Besides the problems of cutting taxes in a year when there might be a budget shortfall, Dunshee said there’s a philosophical issue of whether to overturn voters who passed the tax in 1994.

“The people made the judgment that this was a good use of their money,” said Dunshee, who added that he voted against the first repeal and for the second one. “That’s a legitimate question: Do we second-guess the voters?”

Thomas said restaurant owners will probably try again this year.

“We try every year,” he said. “I think we still have the interest in the House and Senate, but I think we have a governor who doesn’t want to give up anything.”

Transformation of the Schade Brewery into Schade Towers is closer to reality.

On hold for about eight months due to a dispute with the city, the project at 528 E. Trent was given a shot in the arm last month when the City Council overturned a previous denial by the Landmark’s Commission.

Now, the 1902 brewery building has been outfitted with elevators, and potential tenants are starting to look at the place.

“We’re basically open for business as far as showing tenants,” said owner and developer Mark Leonard. “It’s been a long time coming.”

Leonard, who bought the building in 1997, said the refurbished Schade Towers will open to the public in six to eight months with Arecelia’s Mexican Restaurant, a longtime tenant, a micro-brewery and about four floors of office space.

Margins: Malt-O-Meal, the Minnesota breakfast cereal producer, reportedly is backing away from plans to build a 100,000-square-foot distribution warehouse at the Spokane Industrial Park. The plant is apparently on hold for six months, due to a downturn in the cereal business. … John L. Scott Inc. real estate is unveiling a new Internet service in which each listed property will have its own URL, or Web address. The addresses will be listed with photos of the homes in ads and fliers. … Lotions & Potions, a locally owned chain of three bath shops, is celebrating its 25th anniversary this year. The store, owned by Lara Hollingshead, opened in the Flour Mill during Expo ‘74.