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Below are commonly asked questions regarding the carbonated beverage taxThis tax was effective July 1, 2010 through December 1, 2010. The questions and answers are divided into three categories: 1) those that are of interest to bottlers, distributors, and retailers; 2) those that are of interest to retailers; and 3) those that are of interest to bottlers and retailers.

Unless otherwise stated, all questions and answers presume that a bottler or distributor that sells carbonated beverages in this state has established nexus for purposes of Washington State’s business and occupation (B&O) tax.

Check back frequently as the Department will continue to add additional questions and answers about the carbonated beverage tax.  If you have a question that is not addressed, please email us at dor.wa.gov/Communications.  

Bottlers, distributors, and retailers


What is the carbonated beverage tax?

Washington State imposes the carbonated beverage tax on sales of carbonated beverages at wholesale and retail.  With limited exemptions, the carbonated beverage tax applies to every person, such as a bottler, distributor, wholesaler, or retailer that sells carbonated beverages in Washington.  The carbonated beverage tax is in addition to all other taxes currently imposed on a seller, such as the wholesaling and retailing business and occupation taxes.

Unlike the retail sales tax, the carbonated beverage tax is not imposed on the consumer.  Instead, the tax is imposed on the seller and becomes a part of the cost of goods sold.


How do I know if I owe the tax?

You owe the carbonated beverage tax on your sales of carbonated beverages unless you receive documentation from your supplier that the beverages purchased are exempt because the beverages are exempt under the bottler’s exemption or were previously taxed.

What documentation must my company have to verify that our sales of carbonated beverages are not subject to the carbonated beverage tax because the sale is a successive sale of beverages exempt from the tax under the bottler’s exemption or is a successive sale of previously taxed beverages? 

Any person who claims an exemption for successive sales of previously taxed or bottler-exempt carbonated beverages must keep documentation to support their claim.  Documentation may be in the form of:

  • Information printed on each sales invoice substantially as follows:

    The carbonated beverages listed on this invoice were either previously subject to the carbonated beverage tax or exempt from the carbonated beverage tax under the bottler’s exemption, and [name of seller] will remit to the State of Washington any applicable carbonated beverage tax imposed under Washington law; or
  • Certification from the seller substantially stating:

    The carbonated beverages that [name of seller] sells to you after June 30, 2010 and before December 2, 2010, were either previously subject to the carbonated beverage tax or exempt from the carbonated beverage tax under the bottler’s exemption, and [name of seller] will remit to the State of Washington any applicable carbonated beverage tax imposed under Washington law.

My company purchases carbonated beverages from only in-state companies.  Can I presume that the carbonated beverage tax has been appropriately paid and that my company does not owe the tax?

The Department will presume that the carbonated beverage tax has not been paid unless your company can document its claim of exemption as explained in the previous answer.  Your company must keep the documentation for a minimum of five years (the current year, plus the previous four calendar years).  For further information about recordkeeping records generally, please refer to WAC 458-20-254.

What are carbonated beverages?

"Carbonated beverages" are any packaged nonalcoholic liquids intended for human consumption that contain carbonation by natural or artificial means and any of the following substances:

  • Caffeine;
  • Extracts;
  • Fruit juice or concentrated fruit juice;
  • Herbs;
  • Sweeteners; or
  • Syrup (a concentrated mixture in liquid or powdered form that contains sugar or a sugar substitute).

Carbonated beverages are packaged in cans, bottles, or other similar sealed containers.

Carbonated beverages do not include:

  • Fountain drinks mixed by a retailer and sold in unsealed containers; or
  • Bottled water that is carbonated. 

Does the carbonated beverage tax apply to sales of pre-mix, a ready-mixed, ready-to-drink, soft drink that has usually been packaged in 5-gallon stainless steel tanks?

Persons who sell pre-mixed carbonated beverages in large stainless steel tanks and similar large volume containers, to be used to dispense individual servings to customers, are not subject to the carbonated beverage tax. This is because the carbonated beverage is not sold in a bottle, can, or similar sealed container.


Are “near beer” products subject to the carbonated beverage tax?

“Near beer” products, those containing less than ½ of one percent alcohol by volume as shown on the label, are not administered as alcohol by the Washington State Liquor Control Board.   As nonalcoholic beverages, near beer products are carbonated beverages and are subject to the carbonated beverage tax. 

Does the carbonated beverage tax apply to sales of syrup used to make fountain drinks?

The carbonated beverage tax does not apply to sales of syrup.  Such sales are, however, subject to the syrup tax imposed under chapter 82.64 RCW.  For information about the syrup tax, please refer to WAC 458-20-255


Retailers


Can a retailer make a line item charge to consumers for the carbonated beverage tax?

The carbonated beverage tax is imposed on persons who sell carbonated beverages in this state, unless the beverages are exempt from the tax under the bottler’s exemption or were previously subject to the tax.  Unlike the retail sales tax, the carbonated beverage tax is not a tax on the consumer.  In other words, the carbonated beverage tax, similar to the business and occupation (B&O) tax, is one of the costs of doing business in this state.

The Department takes no position on whether it is appropriate for taxpayers to make a line-item charge to consumers for the carbonated beverage tax.  There is no explicit statutory prohibition against identifying the tax as a line-item charge to consumers.  The Department recommends, however, that sellers who are contemplating a line item charge to consumers for the carbonated beverage tax consider the possible implications associated with the Nelson v. Appleway Chevrolet, Inc. and Johnson v. Camp Automotive, Inc. decisions and seek advice from their legal counsel.

Another consideration is the impact on the B&O and retail sales tax.  The measure of both the B&O tax and retail sales tax will include any line-item charge for the carbonated beverage tax.  For example:

  Line Item Charge
Purchase price 4.99
Carbonated beverage tax .48
Subtotal 5.47
Retail sales tax computation (assumes 8.9% tax rate):
$5.47 X .089
.49
Retailing B&O tax computation:
$5.47 X 0.00471
.03

 

Bottlers & Distributors


Who is a bottler?

A bottler is a person who bottles, cans, or otherwise packages carbonated beverages in beverage containers.


May a business that bottles beverages outside Washington claim the bottler’s exemption for sales that it makes in Washington?

Yes.  A person that bottles carbonated beverages outside this state may claim the $10 million gross sales exemption. 

My company purchased previously taxed carbonated beverages to resell to retailers that are located in Washington State and in other states.  Can my company take a credit or request a refund of the tax that was previously paid on product that it resells to buyers in other states?

No credit or refund of the carbonated beverage tax is available for the tax that was previously paid.  A seller owes the carbonated beverage tax on beverages it sells in this state unless the bottler’s exemption applies or the beverages were previously taxed.  It makes no difference that a subsequent seller sells those beverages to persons outside the state.

My company purchased previously taxed carbonated beverages for resale.  The beverages were later destroyed due to spoilage.  Because my company was unable to sell the beverages, can my company receive a refund or take a credit for the tax that was previously paid?

No credit or refund of the carbonated beverage tax is available for the tax that was previously paid.  A seller owes the carbonated beverage tax on beverages it sells in this state unless the bottler’s exemption applies or the beverages were previously taxed.  It makes no difference that the beverages are destroyed after the sale occurs by the person who paid the tax or any subsequent purchaser of the beverages.

My company donated previously taxed carbonated beverages to a nonprofit organization for a fundraising event.  Because my company did not sell the beverages, can my company receive a refund or take a credit for the tax that was previously paid?

No credit or refund of the carbonated beverage tax is available for the tax that was previously paid.  A seller owes the carbonated beverage tax on beverages it sells in this state unless the bottler’s exemption applies or the beverages were previously taxed.  It makes no difference that a subsequent seller donates the beverages after the sale occurs.

My company purchases previously taxed carbonated beverages from bottlers to resell to our customers.  We repurchase the carbonated beverages that become outdated while in our customer’s possession.  Can my company receive a refund or a take credit for the tax that was previously paid? 

No credit or refund of the carbonated beverage tax is available for the tax that was previously paid.  A seller owes the carbonated beverage tax on beverages it sells in this state unless the bottler’s exemption applies or the beverages were previously taxed.  It makes no difference that the beverages are repurchased from a retailer when the beverages are not sold to consumers.


My company purchases carbonated beverages from a bottler to resell to our customers, including Indian-owned businesses and tribal casinos in Indian country.  Does my company owe the carbonated beverage tax on these sales?

The answer depends on the answers to several questions.  The questions and the resulting liability are identified in the table below.

  Question If yes, then If no, then
1. Does the sale qualify as a successive sale of previously taxed carbonated beverages? Your company does not owe the carbonated beverage tax. Refer to questions two and three.
2. Does the sale qualify as exempt under the bottler’s exemption? Your company does not owe the carbonated beverage tax. Refer to question three.
3. Are the beverages delivered in Indian country to the Indian or Indian tribe that is purchasing the beverage, AND is one of the following conditions present:
    • The beverages are located in Indian country at the time of sale; or
    • The seller has a branch office, outlet, or place of business in Indian country that is used to receive the order or distribute the beverages; or
    • The sale of the beverage is solicited by your company while you or another company representative is in Indian country?
Your company does not owe the carbonated beverage tax. Your company owes the carbonated beverage tax.

Is a credit or refund available when a distributor sells carbonated beverages to Indians and Indian Tribes in Indian country and the tax was previously paid?

No credit or refund of the carbonated beverage tax is available for tax that was previously paid.  A seller owes the carbonated beverage on beverages it sells in this state unless the bottler’s exemption applies or the beverages were previously taxed.  It makes no difference that a subsequent seller sells those beverages to Indians and Indian tribes in Indian Country.