Sugar-Sweetened Beverage

It is a two cent ($0.02) per fluid ounce excise tax, approved by City of Santa Cruz voters in November 2024, on the distribution of sweetened beverage products. This tax is on non-alcoholic beverages prepared in any form intended for human consumption to which one or more caloric sweeteners has been added and that contains 40 or more calories per 12 fluid ounces of beverage including, but not limited to, drinks and beverages commonly referred to as “soda”, “pop”, “cola”, “soft drinks”, “sports drinks”, “energy drinks,” “slushies,” “sweetened ice teas and coffees,” or any other common names that are derivations thereof. Concentrates are taxed, except for concentrates purchased directly by consumers.  Various exemptions to the tax apply, as set out in Santa Cruz Municipal Code section 3.38.025.   

This FAQ was last updated on May 1, 2025. 

Four California cities (Berkeley, Oakland, San Francisco & Albany) and several cities in other states have already instituted sugar-sweetened beverage taxes, with revenues commonly going to programs and facilities that support community health and wellness.

Studies have linked a daily sugary drink habit to a higher risk of type 2 diabetes, an increased risk of adult obesity, and a greater risk of childhood obesity, as well as higher incidences of heart disease, liver disease and metabolic disorder. Santa Cruz County health data indicates that although Santa Cruz is doing relatively better than other jurisdictions in the state, a rise in diabetes and other harmful health impacts has been observed. In addition to these health risk factors, the following are some key facts about sugar-sweetened beverages:

• Infants who drink sugary drinks have an 83% chance of cavities at age 6.
• A 20-ounce bottle of soda is equivalent to 16 packets of sugar.
• A single can of soda provides 1.5-times the amount of sugar that the American Heart Association recommends for children.
• 2 in 3 California teenagers drink at least one soda or other sugary drink each day.
• When sugar is delivered in a liquid form, it bypasses the body's defense against consuming too many calories.
• Beverage companies spend hundreds of millions annually marketing directly to youth, bypassing parents, and market more heavily to youth of color.
• 46% of Hispanic children aged 2-8 have cavities in their baby teeth.
• 40% of all children will develop Type 2 diabetes in their lifetimes; the projected rate for Latino and African American children is even greater, at 50%.

The City of Santa Cruz has invested for many years in promoting community health through its parks and beaches, public facilities, senior programs, recreation programs, public safety and youth development initiatives, and partnerships with schools, public and non-profit organizations delivering a broad spectrum of health and wellness services for residents of all ages. During times of severe fiscal constraints, these investments have often been among the first to be eliminated, decreased, or delayed.

The City's sugar-sweetened beverage tax is anticipated to yield a two-fold benefit of healthier consumer choices and additional revenue to sustain and support community health investments.

Typical taxable distributions would be:

• Delivery of syrup to establishments that sell fountain drinks, including fast food and other restaurants.
• Delivery of bottled sweetened beverages with added caloric sweeteners to retail outlets and restaurants.

This is not an exclusive list of taxable distributions

"Distributors" of sweetened beverages are responsible for paying the tax. A "distributor" is defined as "any person who engages in the business of distribution of sugar-sweetened beverage product(s) within the City". The term "distribution" refers to the "transfer of title, ownership, or possession other than by a common carrier: (a) from one business entity to another for consideration; or (b) within a single business entity, such as by a wholesale or warehousing unit to a retail outlet or between two or more employees or contractors of said business entity." "Distribution" does not mean the retail sale to a consumer.

While it is generally not a retailer's responsibility to collect and remit the tax, retailers who purchase sugar-sweetened beverages outside of the City of Santa Cruz and resell them inside the City will need to collect and remit the tax, given that "[t]he tax shall be paid upon the first nonexempt distribution of a sugar-sweetened beverage product in the City." (SCMC 3.38.030(3).)

The Santa Cruz measure includes a small business exemption, which provides that the tax does not apply to the distribution of sugar-sweetened beverage products to any business that has less than $500,000 in gross annual receipts.

Sugar Sweetened Beverage Tax Small Business Exemption list(PDF, 140KB)

Typical taxable distributions would be:

• Delivery of syrup to fast food or other restaurants;
• Delivery of syrup to stores that sell fountain drinks;
• Delivery of bottled sweetened beverages with added caloric sweeteners to retail outlets and restaurants;
• Purchase of bottled sweetened beverage or powders/syrups with added caloric sweeteners from unregistered distributors (self-distribution).

This is not an exclusive list of taxable distributions.

What kinds of products are excluded from the tax?

• Any beverage that contains less than 40 calories per 12 fluid ounces of beverage;
• Any beverage sold for consumption by infants, which is commonly referred to as "infant formula" or "baby formula" or oral rehydration fluids for children;
• Any beverage for medical use;
• Any beverage designed as supplemental, meal replacement, or sole-source nutrition that includes proteins, carbohydrates, and multiple vitamins and minerals;
• Milk Products;
• 100 percent natural fruit or vegetable juice or combination thereof with no added caloric sweetener (e.g., sugar, corn syrup);
• Any Concentrate that the Consumer directly purchases as a Concentrate and then may combine with other ingredients to create a Sugar Sweetened Beverage;
• Sweetened medication such as cough syrup, liquid pain relievers, fever reducers, and similar products;
• Natural or Common Sweeteners; or
• Any alcoholic beverage.

When does the tax go into effect?

This excise tax goes into effect on May 1, 2025.

What is the tax rate?

For sugar-sweetened beverages, the tax rate is 2 cents per fluid ounce. Total fluid ounces is calculated as follows:

1. For a sugar-sweetened beverage, the volume, in fluid ounces, of sugar-sweetened beverages distributed to any person in the course of business in the City.
2. For sugar-sweetened beverage products that are concentrates, the tax shall be calculated using the largest volume, in fluid ounces, of sugar-sweetened beverage that could be produced from the concentrate. In accordance with rules and regulations promulgated by the City pursuant to Section 3.38.040, the largest volume, in fluid ounces, that would typically be produced from the concentrates shall be determined based on the manufacturer's instructions or, if the distributor uses that concentrate to produce a sugar-sweetened beverage, the regular practice of the distributor.

Example: On May 1, 2025 Beverage Distributor X delivered 600 12-ounce cans of cola to Retailer Z. Distributor X also delivered three 5-gallon bag-in-a-box ("BiB") concentrates for Retailer Z' soda fountain. The BiB instructions provide that there are 2 ounces of syrup for each 12-ounce serving of soda.

For this distribution, Distributor X will determine the sweetened beverage tax as follows:

Tax due on cans of soda:

12 ounces X 600 cans = 7,200 total ounces X 0.02 tax rate = $144 sweetened beverage tax

Tax due on bag-in-a-box (BiB):

1 BiB = 640 ounces of syrup. That will produce 3,840 ounces of sweetened beverage based on 2 ounces of syrup per 12-ounce beverage (640 / 2 x 12).

3 BiBs = 11,520 ounces of sweetened beverage

11,520 ounces X 0.02 tax rate = $230.40 sweetened beverage tax

Total sweetened beverage tax due from this distribution is $374.40 ($144 + $230.40)

Payments can be remitted online through the SSB tax payment portal

Businesses or persons engaged as a distributor in the City will need to register with the City within 30 days after the tax becomes effective on May 1, 2025.

To mail in your payment, please use the SSB Tax Remittance Form.

City of Santa Cruz SSB Tax Remittance Form(PDF, 292KB)

City of Santa Cruz SSB Tax Distributor Registration Form(PDF, 635KB)

Caloric sweetener means any substance or combination of substances that contains calories, is suitable for human consumption and that humans perceive as sweet. This includes, but is not limited to, sugar, sucrose, dextrose, fructose, glucose and other monosaccharides and disaccharides; corn syrup or high fructose syrup; and honey.

No, it is not a sales tax or use tax or other excise tax on the sale, consumption, use or gross receipts of sweetened beverages. The tax imposed is a general excise tax on the privilege of conducting certain business within the City. The tax is imposed on the act of distributing sweetened beverages in the City of Santa Cruz.

Call the City of Santa Cruz at 831-420-5075 or email ssbt@santacruzca.gov

The ordinance does not prohibit distributors from increasing prices; that is a private business decision. The ordinance does not prohibit a business from passing on the expense of this tax however the business deems appropriate.

No. Inventory distributed to a retailer before May 1, 2025, is not subject to the sweetened beverage tax. These sales should not be included in the 2025 tax filing(s).

Retailers will be required to identify their distributors if requested by the City.

While it is generally not a retailer's responsibility to collect and remit this tax, retailers who purchase sugar-sweetened beverages outside of the City of Santa Cruz and resell them inside the City will need to collect and remit the tax, given that "[t]he tax shall be paid upon the first nonexempt distribution of a sugar-sweetened beverage product in the city." (SCMC 3.38.030(3).)

Future proceeds from this general tax could generate up to $1.3 million in additional general revenue in the first full year.

These funds could be used to:

• Maintain parks and facilities that are accessible, vibrant, and safe.
• Support programs that provide positive opportunities for children and youth.
• Maintain active recreation programs and facilities for seniors, children, and people of all ages.
• Support community-based organizations that contribute to community health and wellness.

Yes. The ordinance specifies there will be a seven-member panel. "The parks and recreation commission may select one person to be a part of the community oversight panel, and the council may select one city councilmember to be a part of the community oversight panel. The remaining members shall be recommended by the city manager's office and ratified by the city council, and shall, to the greatest extent possible, be comprised of community members representing categories that include: healthcare, dental, and/or wellness professional(s); representative(s) from the education industry; and representative(s) from youth organization(s)." The Community Oversight Committee will report annually on the impact of this tax and include recommendations on the use of future revenues.

The Committee has not yet been created and the City is working with other jurisdictions to learn about which processes worked best to create the Community Oversight Committee. All meetings held by the Oversight Committee will be open to the public.

https://www.codepublishing.com/CA/SantaCruz/#!/SantaCruz03/SantaCruz0338.html#3.38