September 2017 September 2017 POINT OF SALE Updates from Benesch’s Retail, Hospitality & Consumer Products Industry Group Welcome to Point of Sale , Benesch’s newest newsletter from our Retail, Hospitality & Consumer Products Industry Group. Our Group has firsthand knowledge of the retail, hospitality and consumer products industries, and has deep experience working with a wide variety of industry leaders. Our Benesch is proud to clients range from large department stores to specialty product chains, to online be a sponsor of the retailers, hotel and hospitality companies, franchise systems, quick-service restaurants, as well as consumer products manufacturers and other retailers. 2017 RILA Conference October 10-12 Chicago We provide the following services to clients in these industries: • Advertising and Promotions • Intellectual Property Please click here for more information and to register! • Antitrust • Joint Ventures and other Strategic Business Relationships, Transactions and Alliances • Corporate Finance and Secured Transactions • Labor and Employment Advice and Join Us Litigation (including ADA Title III disability/ • Creditors’ Rights & Bankruptcy access and traditional labor/union) • Data Privacy and Security Counseling, • Land Use Including Breach Response • Licensing and Distribution • Direct Marketing Counseling (advice on structuring compelling and legally • Litigation and Dispute Resolution (Including compliant direct marketing campaigns Class Action Defense) as well as on the collection, use, storage • Merchandising and sharing of consumers’ personal • Mergers and Acquisitions information) Benesch will be hosting a private dinner • Private Equity • E-Commerce in connection with the RILA Conference on • Real Estate Development and Leasing October 9 at 6:00 p.m . at • Employee Benefits • Stock and Equity transactions Cindy’s Rooftop Restaurant at the • Factoring and Financing Chicago Athletic Association Hotel. • Tax • Franchise Protection • Transportation and Logistics • Import, Export and Customs Matters To join us, please contact JULIE GURNEY at jgurney@beneschlaw.com or 216-363-4438. www.beneschlaw.com
September 2017 | Point of Sale Bittersweet: The Chicago Sweetened Beverage Tax Sparks Class Action Litigation David S. Almeida Courtney C. Booth Mark S. Eisen After a protracted legal fight, Cook County’s included in the taxable subtotal, meaning that what kind of drink they want before charging much maligned Sweetened Beverage Tax went consumers would pay sales tax on the Soda Tax the tax. While this is not full-proof, having this into effect on August 2, 2017. See County of constituting effectively a double-tax. A lawsuit policy in place will greatly curtail if not prevent Cook, § 74-850, et seq. 1 In relevant part, the was also filed against Albertson’s for charging a class action lawsuit. Further, redesigning or tax requires retailers of sweetened beverages to the Sweetened Beverage Tax on consumers restructuring is likely unnecessary in light of the tax $.01 per ounce of sweetened beverage. For using the federal Supplemental Nutrition fact that the Illinois state legislature is presently bottled beverages, calculating the tax is fairly Assistance Program (“SNAP”), which is exempt working to repeal the tax and prevent the straightforward (though, as noted below, putative under the ordinance. imposition of any similar taxes. class action lawsuits over the taxation of bottled The second theory—which has been used Finally, while these cases are obviously a water have been filed against companies like in lawsuits against Subway and PepsiCo— concern and come with attendant costs, it is PepsiCo and Walgreens). For fountain drinks— stems from charging the tax on unsweetened important to keep in mind that we are talking which have caused the biggest litigation beverages. The case being pursued against about cents; these are low-dollar cases that headache—the tax is calculated by the number Subway (which is particularly troubling for are brought in hopes of a cost-of-defense of ounces the cup can hold. QSR’s) involves charging the tax on fountain settlement. Further, they are going to be difficult A sweetened beverage is defined as any drinks where the consumers pay for a cup for plaintiffs to prevail upon on a class basis, non-alcoholic beverage that includes sucrose, and have the option to serve themselves an as numerous obstacles stand in the way of a fructose, glucose and/or sugars, as well as the unsweetened beverage (i.e., unsweetened tea). plaintiff succeeding at the class certification gamut of artificial sweeteners (i.e., aspartame The case against PepsiCo involves the taxing level, including ascertainability, commonality, and saccharin). In essence, the tax impacts all of bottled drinks at vending machines, which adequacy and predominance. By way of non-alcoholic beverages with the exception charge the tax regardless of whether a soda or example, plaintiffs’ lawyers will face an uphill of water, unsweetened tea, unsweetened water is purchased. battle when trying to identify which individuals coffee and the like. The tax does not impact purchased a fountain drink only to later fill it with While it is simply enough to avoid taxing bottled beverages to which a consumer can separately an unsweetened beverage, as receipts do not water, it is crucial for QSR’s to be cognizant of add sweetener or request that the retailer add identify the type of drink obtained. Additionally, how the tax is being charged on fountain drinks sweetener (i.e., coffee). because many class representatives may have where consumers can serve themselves an intentionally chosen an unsweetened beverage Despite the nascent nature of the tax, class unsweetened beverage. If the tax is charged as in order to bring a lawsuit, issues of whether action lawsuits regarding the soda tax have a matter of course on all fountain drinks along they have the same interests as the class already arrived. The fundamental premise with the purchase of a cup before the consumer members abound. underlying these cases is that the retailer is selects a drink, there is risk that consumers miscalculating or improperly imposing the tax, looking to file a lawsuit will intentionally use the For more information forcing consumers to overpay or to pay a tax cup for unsweetened drinks, even water. We will continue to monitor the developments when they should not. It does not matter that the in both the legislation and case law. Should In light of these opportunistic lawsuits (plaintiffs’ tax is simply remitted to the County or State; the you have any questions, please contact lawyers and their most litigious clients are consumer (plaintiff) is purportedly damaged in DAVID S. ALMEIDA at dalmeida@beneschlaw. unquestionably going restaurant to restaurant the amount overtaxed. com or 312.212.4954 to discuss compliance looking for claims), it is crucial to ensure that measures. The first theory—which has been utilized to the tax is not being included within the taxable sue companies like Albertson’s, McDonald’s subtotal or being charged on unsweetened 1 More information regarding the tax, as well as and Circle K—stems from the alleged improper beverages or water. Further, as it pertains to links to the ordinance itself, can be found here: calculation of the tax. For example, lawsuits fountain drinks, rather than re-design fountain www.cookcountyil.gov/content/frequently-asked- have been filed against McDonald’s and Circle K machines or restructure their placement, we questions-faqs . alleging that the Sweetened Beverage Tax was would recommend simply asking consumers www.beneschlaw.com
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