Soda distributors frustrated at city of Berkeley’s lack of guidance on soda tax

As the co-owner of the San Francisco-based Waterloo Beverages company, 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 to avoid further confusion.

His gripe was not against the tax itself; his frustration was aimed primarily at the city for what he saw as a poor job 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 1-cent-per-ounce tax — share Malaver’s sentiments, arguing that the city has delivered little to no guidance since the passage of the tax.

All but one of the distributors who spoke to Berkeleyside were small- to medium-sized 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 hired by the city to administer the tax.

The city has hired MuniServices for two years, until Dec. 31, 2016. MuniServices, a company that helps municipalities collect taxes and revenues, will receive 2% of all proceeds from the tax, according to city spokesman Matthai Chakko.

“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 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 soda tax, which will be collected monthly, is set for April 30.

The city has made few efforts to talk to distributors, they said. 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.

After Berkeleyside informed the city of the issue, Chakko said he brought the issue to MuniService’s attention and said the issue would be addressed.

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.”

This article has been updated to clarify how the tax applies to UC Berkeley. Distributors who deliver soda and sugary beverages to campus have to pay taxes. (The original article, due to an editing error, suggested that soda was not taxed.) But if the university transfers soda among its cafeterias and dining rooms, no taxes apply.