MISSISSIPPI LEGISLATURE

2011 Regular Session

To: Ways and Means

By: Representative Mayo

House Bill 414

AN ACT TO BE KNOWN AS THE "SWEETENED BEVERAGES AND SYRUPS TAX LAW"; TO PROVIDE THAT DISTRIBUTORS WHO RECEIVE, STORE, MANUFACTURE, BOTTLE OR DISTRIBUTE CERTAIN SWEETENED BEVERAGE PRODUCTS FOR SALE TO RETAILERS IN THIS STATE MUST OBTAIN FROM THE DEPARTMENT OF REVENUE A PERMIT TO ENGAGE IN SUCH BUSINESS; TO IMPOSE AN EXCISE TAX ON EVERY DISTRIBUTOR FOR THE PRIVILEGE OF SELLING CERTAIN SWEETENED BEVERAGE PRODUCTS; TO CREATE THE CHILDREN'S HEALTH PROMOTION FUND; TO PROVIDE THAT REVENUE FROM THE EXCISE TAX IMPOSED BY THIS ACT SHALL BE DEPOSITED TO THE CREDIT OF THE CHILDREN'S HEALTH PROMOTION FUND; TO PROVIDE FOR THE ALLOCATION OF THE MONEY IN SUCH FUND; TO PROVIDE CERTAIN EXEMPTIONS FROM THE TAX LEVIED BY THIS ACT; TO PROVIDE PENALTIES FOR VIOLATIONS OF THIS ACT; AND FOR RELATED PURPOSES.

WHEREAS, the Legislature finds that over the past thirty (30) years, the obesity rate in the United States has increased substantially. The prevalence of adult obesity has more than doubled during that time, and for children, the increase has been even more dramatic, with the obesity rate among children ages six (6) through eleven (11) quadrupling over the last four (4) decades. According to statistics compiled by the Centers for Disease Control, in 2008, the State of Mississippi had the highest rate of obesity in the United States, with thirty-three and four-tenths percent (33.4%) of our state's adult residents considered obese (body mass index (BMI) of thirty (30) and above) and even higher rates forty-one and three-tenths percent (41.3%) among African-American residents; and

WHEREAS, the Legislature further finds that the prevalence of obesity among children in our state is also one (1) of the nation's highest, with seventeen and nine-tenths percent (17.9%) of Mississippi school-age children being obese in 2007 based on BMI-for-age standards versus the national average of thirteen percent (13%); and

WHEREAS, the Legislature further finds that obese children are at least twice as likely as nonobese children to become obese adults. Research indicates that the likelihood of an obese child becoming an obese adult increases with age; adolescents who are obese have a greater likelihood of being obese in adulthood, as compared to younger children; and

WHEREAS, the Legislature further finds that the obesity epidemic has led to a dramatic increase in obesity-related health conditions, such as Type 2 diabetes, asthma and heart disease. These health conditions cost each of the states billions of dollars in health care costs and lost productivity. Overweight and obesity account for One Hundred Forty-seven Billion Dollars ($147,000,000,000.00) in health care costs nationally, or nine percent (9%) of all medical spending, per year. Obesity-related annual medical expenditures in the State of Mississippi are estimated at Seven Hundred Fifty-seven Million Dollars ($757,000,000.00) in 2003 dollars, which translates into Nine Hundred Eighty-two Million Dollars ($982,000,000.00) in 2009 dollars. Almost sixty percent (60%) of these costs are paid by public funds through Medicare and Medicaid (Two Hundred Twenty-three Million Dollars ($223,000,000.00) and Two Hundred Twenty-one Million Dollars ($221,000,000.00), respectively, in 2003 dollars); and

WHEREAS, the Legislature further finds that numerous studies strongly support a link between obesity and consumption of sweetened beverages such as soft drinks, energy drinks, sweet teas and sports drinks. A study of a five-year period between 1999 and 2004 showed that children and adolescents consumed ten percent (10%) to fifteen percent (15%) of their daily caloric intake from sweetened beverages, which offer little or no nutritional value and massive quantities of added sugars. For example, a 12-ounce can of soda contains the equivalent of approximately ten (10) teaspoons of sugar. The U.S. Department of Agriculture recommends that a person eating a 2,200-calorie diet should eat no more than twelve (12) teaspoons of refined sugar in a day; and

WHEREAS, the Legislature further finds that Mississippi is suffering a budget shortfall of unprecedented proportions, threatening core state functions including transportation, economic development, education and other vital services: NOW, THEREFORE,

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. This act shall be known and may be cited as the "Sweetened Beverages and Syrups Tax Law."

SECTION 2. It is the intent of the Legislature, by enacting the Sweetened Beverages and Syrups Tax Law and creating the Children's Health Promotion Fund, to diminish the human and economic costs of obesity in the State of Mississippi. This act is intended to discourage excessive consumption of sweetened beverages by increasing the price of these products and by creating a dedicated revenue source for programs designed to prevent and treat childhood obesity and reduce the burden of attendant health conditions.

SECTION 3. As used in this act, the following words and phrases have the meanings ascribed in this section unless the context clearly indicates otherwise:

(a) "Bottle" means any closed or sealed container, regardless of size or shape, including those made of glass, metal, paper or plastic or any other material or combination of materials.

(b) "Bottled sweetened beverage" means any sweetened beverage contained in a bottle which is ready for consumption without further processing such as dilution or carbonation.

(c) "Caloric sweetener" means any caloric substance suitable for human consumption which humans perceive as sweet, including, but not limited to, sucrose, fructose, glucose, other sugars and fruit juice concentrates, and which adds calories to the diet of a person who consumes that substance. "Caloric sweetener" excludes noncaloric sweeteners.

(d) "Commissioner" means the Commissioner of Revenue of the State of Mississippi and his authorized agents and employees. 

(e) "Consumer" means a person who purchases a sweetened beverage for consumption and not for sale to another.

(f) "Distributor" means any person, including manufacturers and wholesale dealers, who receives, stores, manufactures, bottles or distributes bottled sweetened beverages, syrup or powder or base product for sale to retailers doing business in the State of Mississippi, whether or not that person also sells such products to consumers.

(g) "Fund" means the Children's Health Promotion Fund established under Section 8 of this act.

(h) "Noncaloric sweetener" means any noncaloric substance suitable for human consumption which humans perceive as sweet, including, but not limited to, aspartame, saccharin and sucralose, and which does not add calories to the diet of a person who consumes that substance. "Noncaloric sweetener" excludes caloric sweeteners.

(i) "Person" means any natural person, partnership, cooperative association, limited liability company, corporation, personal representative, receiver, trustee, assignee or any other legal entity.

(j) "Place of business" means any place where sweetened beverages, syrups or powder or base product are manufactured or received for sale in the State of Mississippi.

(k) "Powder or base product" means a solid mixture of ingredients used in making, mixing or compounding sweetened beverages by mixing the powder or base product with any one or more other ingredients, including, but not limited to, water, ice, syrup, simple syrup, fruits, vegetables, fruit juice, vegetable juice, carbonation or other gas.

(l) "Retailer" means any person who sells or otherwise dispenses in the State of Mississippi a sweetened beverage to a consumer, whether or not that person is also a distributor.

(m) "Sale" means the transfer of title or possession for valuable consideration, regardless of the manner by which the transfer is completed.

(n) "Sweetened beverage" means any nonalcoholic beverage, carbonated or noncarbonated, which is intended for human consumption and contains any added caloric sweetener. As used in this definition, "nonalcoholic beverage" means any beverage that contains less than one-half percent (1/2%) alcohol per volume. The term "sweetened beverage" does not include:

(i) Beverages sweetened with noncaloric sweeteners.

(ii) Beverages consisting of one hundred percent (100%) natural fruit juice or natural vegetable juice with no added caloric sweetener. As used in this definition, "natural fruit juice" and "natural vegetable juice" mean the original liquid resulting from the pressing of fruits or vegetables, or the liquid resulting from the dilution of dehydrated natural fruit juice or natural vegetable juice.

(iii) "Milk" without any added caloric sweetener, which means, regardless of animal source or butterfat content: natural liquid milk; natural milk concentrate, whether or not reconstituted; or dehydrated natural milk, whether or not reconstituted.

(iv) Coffee or tea without added caloric sweetener.

(v) Infant formula.

(vi) Water to which neither carbonation nor any other substance has been added, except for minerals and noncaloric flavoring agents.

(o) "Syrup" means any liquid mixture of ingredients used in making, mixing or compounding sweetened beverages using one or more other ingredients including, but not limited to, water, ice, a powder or base product, simple syrup, fruits, vegetables, fruit juice, vegetable juice, carbonation or other gas.

SECTION 4. (1) Every distributor doing business in the State of Mississippi shall file with the commissioner an application for a permit to engage in that business, for each place of business owned and operated by the distributor before the sooner of July 1, 2011, or a distributor's first acts that constitute doing business in the State of Mississippi. An application for a permit must be filed on forms furnished by the commissioner for that purpose. An application must be subscribed and sworn to by a person with legal authority to bind the business. The application must identify the owners of the applicant, the applicant's mailing address, the place of business to which the permit shall apply, the nature of the business in which engaged, and any other information the commissioner may require for the enforcement of this act.

(2) Upon receipt of an application and any permit fee provided for in this act, the commissioner may issue to the applicant, for the place of business designated, a nonassignable permit, authorizing the sale of sweetened beverages, syrups and powder or base product in the State of Mississippi. A distributor may not sell any sweetened beverage, syrup or powder or base product without first obtaining a permit to do so under this act. Permits issued under this section shall expire on January 31 of each year and may be renewed annually.

(3) A permit may not be transferred from one (1) person to another, and at all times, a permit must be displayed prominently in a distributor's place of business. The commissioner may refuse to issue a permit to any person previously convicted of violations of this act under such procedures as the commissioner may establish by regulation. 

SECTION 5. (1) There is imposed an excise tax on every distributor for the privilege of selling the products governed by this act in the State of Mississippi, calculated as follows:

(a) The tax on syrup sold or offered for sale to a retailer for sale in the State of Mississippi to a consumer shall be Two Dollars and Fifty-six Cents ($2.56) for each gallon of sweetened beverage produced from that syrup, or Two Cents (2) per ounce. For purposes of calculating the tax, the volume of sweetened beverage produced from the syrup shall be the largest of:

(i) The largest volume resulting from use of the syrup according to any manufacturer's instructions;

(ii) The volume actually produced by the retailer; or

(iii) The volume typically produced by retailers doing business in the State of Mississippi, as reasonably determined by the commissioner.

(b) The tax on bottled sweetened beverages shall be Two Dollars and Fifty-six Cents ($2.56) per gallon, or Two Cents (2) per ounce sold or offered for sale in the State of Mississippi to a consumer.

(c) The tax on powder or base product sold or offered for sale to a retailer for sale in the State of Mississippi to a consumer, either as powder or base product or as a sweetened beverage derived from that powder or base product, shall be Two Dollars and Fifty-six Cents ($2.56) for each gallon of sweetened beverage produced from that powder or base product, or Two Cents (2) per ounce. For purposes of calculating the tax, the volume of sweetened beverage produced from powder or base product shall be the largest of:

(i) The largest volume resulting from use of the powder or base product according to any manufacturer's instructions;

(ii) The volume actually produced by the retailer; or

(iii) The volume typically produced by retailers doing business in the State of Mississippi, as reasonably determined by the commissioner.

(2) The tax amounts set forth in this section shall be adjusted annually by the commissioner by the rate of change in the Consumer Price Index for all urban consumers, as reported by the United States Department of Labor, Bureau of Labor Statistics.

(3) A retailer who sells bottled sweetened beverages, syrup or powder or base product in the State of Mississippi to a consumer on which the tax imposed by this section has not been paid by a distributor is liable for the tax imposed in this section at the time of sale to a consumer.

(4) The taxes imposed by this section are in addition to any other taxes that may apply to persons or products subject to this act.

SECTION 6. (1) Any distributor or retailer liable for the tax imposed by this act shall return, on or before the fifteenth day of every month, to the commissioner under oath of a person with legal authority to bind the distributor or retailer, a statement containing its name and place of business, the quantity of sweetened beverages, syrup and powder or base product subject to the excise tax imposed by this act sold or offered for sale in the preceding month and any other information required by the commissioner, along with the tax due.

(2) The revenue collected from the excise tax imposed by this act shall be deposited into the Children's Health Promotion Fund, created under Section 8 of this act.

SECTION 7. Every distributor and every retailer subject to this act shall maintain for not less than two (2) years accurate records showing all transactions that gave rise, or may have given rise, to tax liability under this act. These records shall be subject to inspection by the commissioner at all reasonable times during normal business hours.

SECTION 8. (1) There is created a fund in the State Treasury to be known as the Children's Health Promotion Fund, into which shall be deposited the revenue required under Section 6 of this act and such other money from any source designated for deposit into the fund. All costs to implement this act shall be paid from the Children's Health Promotion Fund. Unexpended amounts remaining in the fund at the end of a fiscal year shall not lapse into the State General Fund, and any interest earned on amounts in the fund shall be deposited to the credit of the fund.

(2) Upon appropriation by the Legislature, all monies in the Children's Health Promotion Fund shall be allocated as follows:

(a) Twenty percent (20%) to the Department of Health to coordinate statewide childhood obesity prevention activities and to fund state-level childhood obesity prevention programs. This funding shall support programs that use educational, environmental and policy approaches that achieve the following goals:

(i) Improve access to and consumption of healthy, safe and affordable foods;

(ii) Reduce access to and consumption of calorie-dense, nutrient-poor foods;

(iii) Encourage physical activity;

(iv) Decrease sedentary behavior; and

(v) Raise awareness about the importance of nutrition and physical activity to childhood obesity prevention.

(b) Thirty-five percent (35%) for community-based childhood obesity prevention programs. This funding shall support programs that use educational, environmental and policy approaches that achieve the following goals:

(i) Improve access to and consumption of healthy, safe and affordable foods;

(ii) Reduce access to and consumption of calorie-dense, nutrient-poor foods;

(iii) Encourage physical activity;

(iv) Decrease sedentary behavior; and

(v) Raise awareness about the importance of nutrition and physical activity to childhood obesity prevention. The State Health Officer shall be responsible for the distribution of these funds to local health departments.

(c) Ten percent (10%) to evidence-based prevention, early recognition, monitoring and weight management intervention activities in the medical setting. The State Health Officer shall be responsible for identifying activities and allocating these funds.

(d) Thirty-five percent (35%) to elementary and secondary schools for educational, environmental and policy approaches that promote nutrition and physical activity. These approaches should include:

(i) Improving or building school recreational facilities that are used for recess and physical education;

(ii) Providing continuing education training for physical education teachers;

(iii) Hiring qualified physical education teachers;

(iv) Implementing safe routes to schools programs;

(v) Improving the quality and nutrition of school breakfasts, lunches and snacks; and

(vi) Incorporating practical nutrition education into the curriculum.

The State Superintendent of Public Education is responsible for the allocation and distribution of these funds.

(3) All monies in the Children's Health Promotion Fund shall be expended only for the purposes expressed in this act and may be used only to supplement existing levels of service and not to supplant current federal, state or local funding for existing levels of service.

(4) The State Health Officer and the State Superintendent of Public Education may establish rules and regulations and procedural measures necessary to effectuate the purposes of this section. The rules and regulations may provide for specific programs to be funded consistent with the allocation of funds set forth above.

SECTION 9. The following shall be exempt from the tax imposed by Section 5 of this act:

(a) Bottled sweetened beverages, syrups and powder or base products sold to the United States government and American Indian Tribal governments;

(b) Bottled sweetened beverages, syrups and powder or base products sold by a distributor or a retailer for resale or consumption outside the State of Mississippi; and

(c) Bottled sweetened beverages, syrups and powder or base products sold by a distributor to another distributor that holds a permit issued under this act if the sales invoice clearly indicates that the sale is exempt. If the sale is to a person who is both a distributor and a retailer, the sale also shall be tax exempt, and the tax shall be paid when the purchaser distributor/retailer resells the product to a retailer or a consumer. This exemption does not apply to any other sale to a retailer.

SECTION 10. (1) Any person subject to the requirements of this act who fails to pay the entire amount of tax imposed by this act by the date that payment is due, fails to submit a report or maintain records required by this act, does business in the State of Mississippi without first obtaining a permit as required by this act, or violates any other provision of this act or rules and regulations promulgated by the commissioner for the enforcement of this act shall be guilty of a misdemeanor and liable for the amount of the tax that is due plus a penalty equal to fifty percent (50%) of the tax due. The commissioner shall determine the amount due in the event of any payment or underpayment that may come to his attention and demand payment of all such taxes and penalties. Interest shall accrue on nonpayment or underpayment of the tax at a rate of twelve percent (12%) per year from the date the tax was due until paid. For good reason shown, the commissioner may waive all or any part of the penalty but may not waive interest.

(2) All administrative provisions of the Mississippi Sales Tax Law, including those which fix damages, penalties and interest for nonpayment of taxes and for noncompliance with that chapter, and all other requirements and duties imposed upon taxpayers shall apply to all persons liable for taxes under this act. The commissioner shall exercise all the power and authority and perform all the duties with respect to taxpayers under this act as are provided in the Sales Tax Law; however, if there is a conflict between any provisions, then the provisions of this act shall control.

SECTION 11. All taxes and penalties imposed under this act remaining due and unpaid shall constitute a debt to the State of Mississippi, which may be collected from the person owing the taxes and penalties by suit or otherwise.

SECTION 12. At the end of each month, the State Auditor shall check carefully the books and records of the commissioner and shall verify the amounts paid into the Children's Health Promotion Fund.

SECTION 13. The commissioner may establish such rules and regulations, and provide such procedural measures, in cooperation with the State Auditor, as he may reasonably think necessary to accomplish the purposes of this act. 

SECTION 14. This act shall take effect and be in force from and after July 1, 2011.