THE LOOP — There's good news for Chicagoans with a sparkling water habit: it's about to get cheaper.
The city will reach out to businesses that have incorrectly taxed customers for sparkling water — possibly for years — to prevent future problems. The announcement comes after DNAinfo found carbonated and mineral water being taxed as soda or bottled water at stores across the city.
Walgreens, which was misapplying the Chicago Bottled Water Tax to seltzer and sparkling water, has since corrected the issue, a spokesman said. Walgreens did not say how many stores were affected or for how long the 5-cents-a bottle tax was misapplied.
On Monday, DNAinfo Chicago conducted additional checks at other stores and found an extra tax being added to sparkling water purchases at stores other than Walgreens.
“The Chicago Department of Finance will contact the businesses involved to determine next steps regarding the misapplication of the Bottled Water Tax to try to help prevent this from happening again," said Molly Poppe, a spokeswoman for the city's department of finance, in an emailed statement Monday night. "As with all taxes, at the federal, state and local levels, there are established administrative procedures in place for dealing with these types of situations.”
This receipt from 7-Eleven, dated Monday, shows a "soda tax" being applied to sparkling water. [DNAinfo]
At 7-Eleven, Chicago's "soda tax" was applied to a sale of sparkling water, DNAinfo Chicago found. The city has a 3 percent tax on soft drink bottles and cans that include sweeteners, but this tax doesn't apply to unsweetened seltzers and sparkling water, according to the state's tax guidelines.
At Whole Foods, different taxes were added at different stores. On October 25, the 3 percent soda tax was added to a DNAinfo editor's LaCroix purchase. On Monday, a 9.25 percent unspecified tax was added to a sparkling water purchase. Whole Foods spokeswoman Allison Phelps said the grocery chain is "looking into" if it misapplied taxes and did not know of the potential issue until Monday.
A Whole Foods receipt from November 9 (left) and October 25. [DNAinfo]
Under the Chicago Bottled Water Tax, which took effect in January 2008, retailers are supposed to apply the tax — 5 cents per bottle — to all brands of non-carbonated water intended for human consumption, according to the city's tax guide.
But the tax guide explicitly states that enhanced water products like Gatorade, Vitamin Water, Sobe Life Water, Perrier, Seltzer Water, Club Soda and other similar products, as well as any drink that qualifies as a soft drink, are exempt from the tax. Sweetened beverages face the 3 percent soda tax, but none of the items purchased by DNAinfo contained any natural or artificial sweeteners.
Customers who want refunds will have to contact the stores where they were incorrectly taxed. The store will then have to prove to the Department of Finance that it incorrectly collected the tax and refunded the customer, Poppe said.
A Lincoln Square woman said she reviewed several months worth of receipts from Whole Foods and found she has been overtaxed for sparkling, mineral and distilled water. She plans to ask for a refund of the money she paid in taxes.
“I actually am sympathetic to the retailers … I really don’t think they were trying to take advantage," the woman said. "I think it was probably a confusing tax. ... It’s a totally cumbersome tax to enforce for a retailer. So, I’m really sympathetic in that case.
"I think it is a really poor way to nickel and dime Chicagoans for tax dollars."
Poppe said Chicago made $10 million in revenue from the bottled water tax in 2014. The Department of Finance takes "several measures" to collect and remit taxes correctly, and it sends out bulletins to explain new taxes to taxpayers and tax collectors like stores.
"The Department conducts regular audits and investigations throughout the year to determine compliance with our tax codes, including the Bottled Water Tax," Poppe said in her emailed statement. "In these instances, the department plans to reach out directly to any parties involved to determine next steps and work to prevent this from happening again."
Critics say these taxes were a bad move from the start.
"This situation highlights the fact that this tax was misguided to begin with, and it is an example of how specific product taxes can be mishandled," said Chris Hogan, a spokesman for the International Bottled Water Association. The group sued the city in 2007 over the bottled water tax.
According to the Tribune, sales of Perrier, San Pellegrino and other fizzy waters have more than doubled over the last five years. The $1.5 billion industry has outpaced bottled water and Vitaminwater, the paper reports.
DNAinfo checks at Mariano's, CVS and Target showed neither the bottled water tax nor soda tax were applied to sales of flavored and non-flavored sparkling water on Monday.
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