SANTA CRUZ — The American Beverage Affiliation, alongside a bunch of grocers, retailers and restaurant homeowners, filed a lawsuit Wednesday towards town of Santa Cruz in Sacramento Superior Court docket, difficult town’s lately enacted sugar-sweetened beverage tax.
The plaintiffs argue that town’s tax conflicts with state legislation and violates the California Structure. They’re asking the court docket to declare the tax unenforceable and to require town to refund all cash collected from the tax because it went into impact earlier this month.
The agency Latham and Watkins LLP filed the lawsuit on behalf of the plaintiffs: the American Beverage Affiliation, California Hispanic Chambers of Commerce, California Alliance of Household-Owned Companies, California Chamber of Commerce, California Fuels and Comfort Alliance and the California Grocers Affiliation.
“Through representing the interests of over 950,000 Hispanic-owned businesses in California, we see first-hand the challenges faced by small, community-based businesses that are up against inflation, labor shortages and the extraordinary high cost of doing business in California,” stated Julian Cañete, president of the California Hispanic Chambers of Commerce. “Santa Cruz illegally sidestepped the state legislature’s popular and much-needed preemption of grocery taxes to impose new costs on working families and local Hispanic-owned businesses. It must be overturned.”
The overall tax of two cents per fluid ounce is paid by distributors of sugar-sweetened drinks and is estimated to generate about $1.3 million yearly for town’s normal fund. It features a small enterprise exemption for these with lower than $500,000 in gross annual revenues.
Santa Cruz Vice Mayor Shebreh Kalantari-Johnson, who was a part of the Sure on Measure Z for a Protected and Wholesome Santa Cruz marketing campaign, identified that the tax was authorized by a majority of Santa Cruz voters.
“We still see this as a clear win for public health and our community’s actions through approving this tax have major implications for cities throughout the Country,” stated Kalantari-Johnson. “Measure Z is a reinvestment in the well-being of our community and, not allowing special interests to dictate our local democratic process — we stand with our voters.”
Just like the lawsuit filed Wednesday, the opposition marketing campaign to the tax, Coalition to Hold Santa Cruz Inexpensive, argued that the measure violates the 2018 Hold Groceries Inexpensive Act, which banned cities from enacting native taxes on groceries, together with drinks.
“Grocers operate on razor-thin margins and strive daily to keep prices as low as possible for the communities they serve,” stated California Grocers Affiliation President and CEO Ronald Fong in an announcement. “By passing this illegal tax, Santa Cruz is risking even higher prices while hurting its ability to retain and attract new grocery stores.”
The legislation included a penalty provision that will take away all of a metropolis’s gross sales and use tax income if any constitution metropolis tried to implement a grocery-related tax such because the sugar-sweetened beverage tax. Nevertheless, in March 2023, the California Third District Court docket of Appeals discovered that constitution cities reminiscent of Santa Cruz can’t be financially penalized by the state for lawfully implementing a sugar-sweetened drink or soda tax on residents.
In June 2024, the council authorized the location of a sugar-sweetened beverage tax proposal on the November poll. It turned often called Measure Z, which handed by a slim margin. In keeping with the Santa Cruz County Elections Division, 15,780 votes had been counted in favor of the poll initiative, or about 52%, and 14,364 votes, or roughly 48%, had been counted towards the passage of Measure Z.
Santa Cruz Metropolis Supervisor Matt Huffaker informed the Sentinel that he wasn’t shocked by the lawsuit and stands by the tax and its legality.
“The City has not yet been served with the complaint, but no one is surprised that big soda, after having spent millions to stop the measure unsuccessfully, may be seeking to overturn the tax that the majority of Santa Cruz voters supported. We are confident that charter cities like Santa Cruz have the right to impose and enforce this type of tax.”
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