New food taxes start Tuesday

If you drink bottled water or beer, eat candy or chew gum, this weekend would be a good time to stock up. Those items – or at least some brands – are either being taxed, or taxed more, starting Tuesday.

That’s the day that a series of “temporary” taxes will begin on items the Legislature agreed could become a source of extra money for Washington state’s out-of-balance general fund. The taxes are set to expire June 30, 2013, although voters will be asked in November to extend the bottled water tax indefinitely to pay off bonds for energy retrofits at schools and colleges.

Taxes on cigarettes and other tobacco products went up May 1, and a new tax on soda along with other business tax changes will hit July 1. But some of the most noticeable consumer items, which Gov. Chris Gregoire argues are discretionary, get their taxes raised Tuesday.

Bottled water, candy and gum, which right now are exempt from the sales tax because they are classified as food, lose the food exemption Tuesday. Consumers can expect to pay whatever their local retail sales tax rate is, which in Spokane is 8.7 percent.

Retailers likely will have their scanners reset to add the sales tax to those items when they open Tuesday morning, Mike Gowrylow of the state Department of Revenue said.

The state is using the national retail codes that define candy, so some sweet treats like licorice, Kit Kat bars or Milky Ways remain exempt from the sales tax because they contain flour, which moves them to another category. Treats that require refrigeration also are not considered candy and are exempt from the sales tax.

The beer tax is different and has more caveats. First, the Legislature exempted microbreweries in an effort to protect some local jobs, so the tax hike mainly falls on large national brands, such as Budweiser, Miller and Coors.

The tax – 50 cents a gallon, or 28 cents a six-pack – is collected from brewers or wholesalers and passed on to retailers, who pass it on to consumers. Anne Radford, a spokeswoman for the state Liquor Control Board, said retailers won’t have to pay the tax on beer they have in stock on June 1. Merchants will face the higher prices when they restock, so consumers could see a slight delay in price hikes for beer.

The Legislature spent much of its regular 90-day session and the 30-day special session struggling with the budget and considering tax increases. Gregoire, who helped broker the final budget deal, argues these taxes are fairer than a general increase in the sales or property taxes because people can choose to drink tap water instead of bottled, trade candy for a healthier snack like fruit, or drink less beer.

Republicans, who were united against the taxes, argued the higher taxes won’t change consumption; they will just prompt people in communities like Spokane to stock up in nearby places like Idaho where the taxes are lower.

The taxes prompted a flurry of initiatives aimed at repealing them, but signed petitions must be turned in by July 2. Tim Eyman, who filed 11 initiatives involving various combinations of the taxes, said Friday his organization is still evaluating whether to begin gathering signatures on any of them. Right now they’re concentrating on getting a measure on the ballot restoring the supermajority requirement for tax increases, which the Legislature suspended before raising the taxes.

The Washington Beverage Association also has a pair of initiatives to repeal some taxes that go into effect Tuesday, as well as the soda tax that hits in July. Robert Gara, a spokesman for the association, said the group has not yet begun a signature drive and realizes that gathering more than 250,000 voters’ signatures in a month will be a major undertaking.

“But we believe we will have support for this,” Gara said.