2022 -- H 7553

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LC004929

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2022

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A N   A C T

RELATING TO TAXATION

     

     Introduced By: Representatives Barros, Alzate, Kazarian, Casimiro, Kislak, Cassar,
Morales, and Potter

     Date Introduced: February 18, 2022

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Legislative findings.

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     The General Assembly hereby finds and declares the following:

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     (1) Over seventy-nine thousand (79,000) Rhode Island adults report that they have been

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diagnosed with Type 2 diabetes. An additional three hundred eleven thousand two hundred

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(311,200) Rhode Island adults are at risk for developing diabetes.

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     (2) According to the Centers for Disease Control and Prevention, diabetes is the seventh

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leading cause of death in Rhode Island.

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     (3) Hispanics and African Americans in Rhode Island have a higher prevalence of Type 2

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diabetes than non-Hispanic Whites.

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     (4) The prevalence of obesity in the United States has increased over the past thirty (30)

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years. In Rhode Island, obesity rates have increased from eleven and 10/100 percent (11.1 %) in

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1990 to thirty percent (30 %) in 2019. Low-income populations and communities of color in Rhode

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Island report higher rates of obesity than non-Hispanic white communities.

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     (5) There is overwhelming evidence of the link between obesity and diabetes with the

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consumption of sugary drinks. Rates of other conditions such as hypertension, arthritis, and kidney

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failure are higher in adults diagnosed with diabetes and obesity.

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     (6) According to nutritional experts, sugary drinks provide little to no nutritional value, but

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contain massive quantities of added sugars. A twenty ounce (20 oz.) bottle of soda contains

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approximately sixteen (16) teaspoons of sugar, yet the American Heart Association recommends

 

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that Americans consume no more than six (6) to nine (9) teaspoons of sugar per day.

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     (7) Sugary drinks are a unique contributor to excess caloric consumption. Research

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indicates that approximately fifty percent (50 %) of excess calories consumed by Americans comes

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from sugary drinks, with the average American consuming nearly fifty (50) gallons of sugary drinks

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per year.

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     (8) Studies on the taxation of sugary drinks have estimated a fifty-five to one (55-1) return

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on investment in health care savings. In Seattle, WA, a one and seventy-five hundredths cent

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($01.75) per ounce tax has generated twenty-four million dollars ($24,000,000) in revenues

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annually. Revenues from sugary drink taxes have been invested in low-income communities and

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communities of color to increase access to healthy foods by funding fruit and vegetable vouchers.

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     (9) One in seven (7) Rhode Island citizens lack reliable access to nutritious, affordable

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food. Communities of color and low-income communities are more likely to be affected by food

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insecurity.

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     (10) Research indicates that improving the affordability of healthy foods can reduce food

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insecurity and equitably improve the health of affected communities.

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     SECTION 2. Title 44 of the General Laws entitled "TAXATION" is hereby amended by

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adding thereto the following chapter:

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CHAPTER 70

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SUGARY DRINKS TAX

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     44-70-1. Short title.

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     This chapter shall be known and may be cited as the "Sugary Drinks Tax".

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     44-70-2. Legislative intent.

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     It is the intent of the general assembly, by adopting the sugary drinks tax, to:

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     (1) Increase access to and promote consumption of fresh fruits and vegetables among

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Rhode Island’s most vulnerable populations whose health is adversely impacted by the health

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conditions associated with sugary drinks;

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     (2) Improve the overall health and wellness of Rhode Island families, children and

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residents; and

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     (3) Reduce the burden of chronic disease in the Rhode Island.

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     44-70-3. Definitions.

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     For the purposes of this chapter, the following words shall have the following meanings:

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     (1) "Beverage for medical use" means a beverage suitable for human consumption and

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manufactured for use as an oral nutritional therapy for persons who cannot absorb or metabolize

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dietary nutrients from food or beverages, or for use as an oral rehydration electrolyte solution for

 

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infants and children formulated to prevent or treat dehydration due to illness. "Beverage for medical

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use" shall also mean a “medical food” as defined in section (b)(3) of the Orphan Drug Act (21

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U.S.C. 360ee(b)(3)); this act defines medical food as "a food which is formulated to be consumed

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or administered externally under the supervision of a physician and which is intended for the

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specific dietary management of a disease or condition for which distinctive nutritional

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requirements, based on recognized scientific principles, are established by medical evaluation."

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“Beverage for medical use” shall not include drinks commonly referred to as “sports drinks” or any

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other common names that are derivations thereof.

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     (2) “Bottle" means any closed or sealed container regardless of size or shape, including,

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without limitation, a container made of glass, metal, paper, plastic, or any other material or

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combination of materials.

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     (3) "Bottled sugary drink" means any sugary drink contained in a bottle that is ready for

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consumption without further processing such as, without limitation, dilution or carbonation.

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     (4) "Caloric sweetener" means any caloric substance suitable for human consumption that

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humans perceive as sweet and includes, without limitation: sugar, sucrose, dextrose, fructose,

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glucose, and other monosaccharides and disaccharides; corn syrup or high fructose corn syrup;

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honey; and any other substance designated by the department. "Caloric sweetener" excludes non-

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caloric sweeteners. For purposes of this definition, "caloric" means a substance which adds calories

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to the diet of a person who consumes that substance.

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     (5) "Concentrate" means a syrup, powder, frozen or gel mixture, or other product

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containing one or more sweeteners as an ingredient, intended to be used in making, mixing, or

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compounding a sweetened beverage by combining the concentrate with one or more other

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ingredients.

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     (6) "Consumer" means a person who purchases a sugary drink for consumption and not for

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sale to another.

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     (7) "Department" means the Rhode Island department of human services (DHS).

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     (8) "Director" means the director of the Rhode Island department of revenue and his or her

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authorized agents and employees.

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     (9) "Distribution" or "distribute" means to supply to a distributor or retailer, deliver to a

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retailer, facilitate acquisition by a retailer, or transport into the state for the purpose of selling any

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sugary drink product in the state, or any combination of these activities.

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     (10) "Distributor" means any person, including manufacturers, bottlers, and wholesale

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dealers, who receives, stores, manufactures, bottles, and/or distributes bottled sugary drinks,

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syrups, or powders, for sale to retailers doing business in the state, whether or not that person also

 

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sells such products to consumers.

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     (11) "Division" means the Rhode Island division of taxation

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     (12) "Milk" means natural liquid milk regardless of animal or plant source or butterfat

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content; natural milk concentrate, whether or not reconstituted; or dehydrated natural milk, whether

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or not reconstituted.

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     (13) "Natural fruit juice" means the original liquid resulting from the pressing of fruits, or

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the liquid resulting from the dilution with water of dehydrated natural fruit juice.

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     (14) "Natural vegetable juice" means the original liquid resulting from the pressing of

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vegetables, or the liquid resulting from the dilution with water of dehydrated natural vegetable

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juice.

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     (15) "Non-caloric sweetener" means any non-caloric substance suitable for human

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consumption that humans perceive as sweet and includes, without limitation, aspartame,

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acesulfame-K, neotame, saccharin, sucralose, and stevia. "Non-caloric sweetener" excludes caloric

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sweeteners. For purposes of this definition, "non-caloric" means a substance that contains fewer

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than five (5) calories per serving

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     (16) "Person" means any natural person, partnership, cooperative association, limited

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liability company, corporation, personal representative, receiver, trustee, assignee, or any other

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legal entity.

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     (17) "Place of business" means any place where sugary drinks, syrups, or powders are

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manufactured or received for sale in the state.

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     (18) "Powder" means any solid mixture of ingredients used in making, mixing, or

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compounding sugary drinks by mixing the powder with any one or more other ingredients,

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including without limitation water, ice, syrup, simple syrup, fruits, vegetables, fruit juice, vegetable

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juice, carbonation, or other gas.

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     (19) "Retailer" means any person who sells or otherwise dispenses in the state a sugary

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drink to a consumer whether or not that person is also a distributor as defined in this section.

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     (20) "Sale" means the transfer of title or possession for valuable consideration regardless

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of the manner by which the transfer is completed.

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     (21) "State" means the state of Rhode Island

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     (22) "Sugary drink" means any nonalcoholic beverage, carbonated or noncarbonated,

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which is intended for human consumption and contains any added caloric sweetener, whether in

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bottles, prepared from concentrates, served as a fountain beverage, or in any form. “Sugary drink”

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includes, without limitation, all drinks and beverages commonly referred to as soda, pop, cola, soft

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drinks, sports drinks, energy drinks, fruit drinks, sweetened iced teas and coffees, and other

 

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products with added caloric sweetener, flavored water with added caloric sweetener, and non-

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alcoholic beverages that may or may not be mixed with alcohol or any other common names that

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are derivations thereof. As used in this definition, "nonalcoholic beverage" means any beverage

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that contains less than one-half (1/2) of one percent (1%) alcohol per volume.

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     (23) "Syrup" means a liquid mixture of ingredients used in making, mixing, or

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compounding sugary drinks using one or more other ingredients including, without limitation,

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water, ice, a powder, simple syrup, fruits, vegetables, fruit juice, vegetable juice, carbonation, or

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other gas.

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      (24) "Water" means plain (non-flavored) or flavored with "natural fruit essence" (with no

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calories), or "natural flavor". The source of the water may be: artesian, mineral, spring, or well.

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The type may also include carbonated (sparkling, club, seltzer), still, distilled, or purified (distilled,

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demineralized, deionized, reverse osmosis).

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     44-70-4. Tax imposed.

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     (a) Effective January 1, 2023, there is hereby levied and imposed, in addition to all other

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taxes and fees now imposed by law, a sugary drinks tax on every distributor for the privilege of

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selling bottled sugary drinks, syrups or powders in the state of Rhode Island, calculated as follows:

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     (1) One and fifty hundredths (1.50) cents per ounce for bottled sugary drinks;

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     (2) The tax on syrups or powders offered for sale, either as syrup or powder or as a sugary

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drink derived from that syrup or powder, is equal to one and fifty hundredths (1.50) cents per each

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ounce of sugary drink produced from that syrup or powder. For purposes of calculating the tax, the

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volume of sugary drink produced from syrups or powders shall be the larger of:

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     (i) The largest volume resulting from use of the syrups or powders according to any

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manufacturer’s instructions; or

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     (ii) The volume actually produced by the retailer, as reasonably determined by the tax

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administrator;

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     (3) The tax shall be paid upon the first nonexempt distribution of a sugary drink product in

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the state. However, if a distributor or a retailer receives taxable products on which the tax has not

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been paid, the distributor or retailer shall be liable for the tax. The amount of tax with respect to

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such business is equal to the volume of sugary drinks the distributor distributes in the state

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multiplied by the applicable tax rate in subsection (a)(1) or (a)(2) of this section.

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     (b) The tax shall be administered in such a way to be reflected in the retail cost of the

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sugary drink.

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     (c) Sums received by the division of taxation under this section shall be distributed at least

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quarterly, credited and paid by the state treasurer to the department of human services to fund the

 

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retail SNAP incentive program to increase access to and promote consumption of fresh fruits and

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vegetables as outlined in § 44-70-15(a).

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     44-70-5. Permit required.

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     (a) Every distributor doing business in the state shall file with the division an application

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for a permit to engage in such business, for each place of business owned and operated by the

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distributor before January 1, 2023 or a distributor’s first acts which constitute the doing of business

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in the state, whichever is first to occur. An application for a permit shall be filed on forms to be

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furnished by the division for that purpose. An application must be subscribed and sworn to by a

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person with legal authority to bind the business. The application shall identify the owners of the

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applicant, the applicant’s mailing address, the place of business to which the permit shall apply,

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and the nature of the business in which engaged, and any other information the division may require

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for the enforcement of this chapter.

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     (b) Upon receipt of an application and any permit fee pursuant to this chapter, the division

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may issue to the applicant, for the place of business designated, a non-assignable permit,

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authorizing the sale of sugary drinks, syrups, and powders in the state. No distributor shall sell any

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sugary drink, syrup or powder without first obtaining a permit to do so under this chapter. Permits

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issued pursuant to this section shall expire on January 31 of each year and may be renewed annually.

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     (c) A permit cannot be transferred from one person or entity to another, and a permit shall

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at all times be prominently displayed in a distributor’s place of business. The division may refuse

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to issue a permit to any person previously convicted of violations of this chapter under such

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procedures as the division may establish by regulation.

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     44-70-6. Report of sales and tax remittances.

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     Any distributor or retailer liable for the tax imposed by this chapter shall, on or before the

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twentieth day of every month, return to the director under oath of a person with legal authority to

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bind the distributor or retailer, a statement containing his or her name and place of business, the

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quantity of sugary drinks, syrups, and powders subject to the excise tax imposed by this chapter

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sold or offered for sale in the preceding month, and any other information required by the tax

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administrator, along with the tax due.

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     44-70-7. Records of distributors.

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     Every distributor, and every retailer subject to this chapter, shall maintain for not less than

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two (2) years accurate records, showing all transactions that gave rise, or may have given rise, to

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tax liability under this chapter. Such records are subject to inspection by the tax administrator at all

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reasonable times during normal business hours.

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     44-70-8. Exemptions.

 

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     The following shall be exempt from the tax imposed by this chapter:

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     (1) Bottled sugary drinks, syrups, and powders sold to the United States government and

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American Indian tribal governments;

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     (2) Bottled sugary drinks, syrups, and powders sold by a distributor to another distributor

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that holds a permit issued pursuant to this chapter, if the sales invoice clearly indicates that the sale

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is exempt. If the sale is to a person or entity who is both a distributor and a retailer, the sale shall

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also be tax exempt and the tax shall be paid when the purchasing distributor/retailer resells the

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product to a retailer or a consumer. This exemption does not apply to any other sale to a retailer;

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     (3) Bottled sugary drinks, syrups, and powders that the division has certified to have been

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manufactured by a manufacturer with worldwide gross income of less than two million dollars

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($2,000,000) in the prior calendar year. In order for a bottled sugary drink, syrup, or powder to be

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eligible for exemption under this subsection, the manufacturer must apply to the division for

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certification according to rules established by the director of the division.

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     (4) Bottled sugary drinks, syrups, and powders sold directly by a manufacturer to a

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consumer without the involvement of a third party to transport or distribute the bottled sugary

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drinks, syrups, or powders;

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     (5) Beverages sweetened solely with non-caloric sweeteners;

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     (6) Beverages consisting of one hundred percent (100%) natural fruit or vegetable juice

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with no added caloric sweetener;

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     (7) Beverages in which milk, or soy, rice, or similar milk substitute, is the primary

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ingredient or the first listed ingredient on the label of the beverage;

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     (8) Coffee or tea without added caloric sweetener;

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     (9) Infant formula;

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     (10) Beverages for medical use; or

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     (11) Water without any caloric sweeteners.

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     44-70-9. Penalties.

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     (a) Any person subject to the provisions of this chapter who fails to pay the entire amount

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of tax imposed by this chapter by the date that payment is due, fails to submit a report or maintain

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records required by this chapter, or violates any other provision of this chapter, or rules and

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regulations promulgated by the division for the enforcement of this chapter, shall be guilty of a

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misdemeanor and shall also be liable for the amount of the tax that may be due and a penalty equal

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to fifty percent (50%) of the tax due. The division, or its duly authorized representative, may

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determine the amount due in the event of any payment or underpayment that may come to its

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attention and demand payment of all such taxes and penalties. Interest shall accrue on non- or

 

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under-payment of tax at a rate of twelve percent (12%) per year from the date the tax was due until

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paid. For good reason shown the division may waive all or any part of the penalties imposed, but

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shall have no power to waive interest.

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     (b) All administrative provisions of chapter 18 of title 44 including those which provide

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for the apportionment of economic activity between that within the tax jurisdiction of the state and

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such activity outside that jurisdiction, which fix damages, penalties and interest for nonpayment of

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taxes and for noncompliance with the provisions of said chapter, and all other requirements and

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duties imposed upon taxpayers, shall apply to all persons liable for taxes under the provisions of

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this chapter, and the division shall exercise all the power and authority and perform all the duties

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with respect to taxpayers under this chapter as are provided in chapter 18 of title 44, except where

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there is conflict, and then the provisions of this chapter shall control.

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     44-70-10. Unpaid taxes.

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     All taxes and penalties imposed under the provisions of this chapter remaining due and

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unpaid shall constitute a debt to the state, which may be collected from the person owing the same

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by suit or any other legal remedy available.

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     44-70-11. Records of the division of taxation.

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     At the end of each month, the state auditor shall carefully check the books and records of

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the director and his or her accounts with any bank or banks, and shall verify the amounts collected

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pursuant to this chapter and paid to the department of human services. Any duty herein required of

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the state auditor may be performed by any duly trained clerk in his or her office, designated by the

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state auditor for that purpose.

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     44-70-12. Exercise of powers and duties.

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     Whenever in this chapter any reference is made to any power or duty of the director the

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reference is construed to mean that the power or duty shall be exercised by the director, under the

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supervision and direction of the director of administration.

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     44-70-13. Rules and regulations.

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     The director is hereby empowered to make such rules and regulations, and provide such

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procedural measures, in cooperation with the state auditor, as may be reasonably necessary to

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accomplish the purposes of this chapter.

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     44-70-14. Establishment of the retail SNAP incentives program fund.

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     (a) There shall be established a separate fund to be known as the retail SNAP incentives

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program (RSIP) fund. The department of human services shall administer the fund. The fund shall

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consist of revenues from the state generated by the tax imposed by § 44-70-4. The fund shall be

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expended first for the implementation and administration of a retail SNAP incentives program to

 

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promote healthy food access and nutrition among Rhode Island SNAP recipients.

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     (b) SNAP recipients will receive a minimum fifty cent ($0.50) credit on their electronic

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benefit transfer (EBT) card for each one dollar ($1.00) spent on eligible fruits and vegetables at

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participating RSIP retailers, up to a monthly limit as defined by the department. These credits shall

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be funded via the RSIP fund established in subsection (a) of this section.

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     44-70-15. Public reporting and evaluation.

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     (a) The department shall provide annually, and no later than three (3) months after the end

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of the fiscal year, information about tax revenues received and the programs and initiatives funded

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by these revenues, and any unspent funds to the general assembly and general public. The

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department shall develop an Internet website and post the annual report and additional materials to

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inform distributors, retailers, and the general public about the tax, its intent, its scope, and operation.

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     (b) The department shall contract with academic researchers to complete an evaluation of

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the following:

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     (1) The effects of the tax on sugary drink prices, sales and consumption one and three (3)

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years after tax implementation;

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     (2) The economic impacts of the tax including employment and business revenues in

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affected business sectors one and three (3) years after tax implementation; and

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     (3) Impacts of programs and initiatives funded by the tax.

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     (c) The evaluations set forth in subsection (b) of this section should specifically address

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the equity impacts of the tax. Evaluators should develop partnerships with community members to

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ensure community participation in the evaluation.

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     44-70-16. Severability.

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     If any provision of this chapter, any rule or regulation made under this chapter, or the

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application of this chapter to any person or circumstance is held invalid by any court of competent

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jurisdiction, the remainder of the chapter, rule, or regulation, and the application of the provision

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to other persons or circumstances shall not be affected. The invalidity of any section or sections or

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parts of any section of this chapter shall not affect the validity of the remainder of the chapter.

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     SECTION 3. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION

***

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     This act would create a tax on sugary drinks with the intent of discouraging excessive

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consumption of those beverages and would create a dedicated revenue source for programs

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designed to benefit public health in addition to the ultimate goal of reducing the health and

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economic costs of obesity in the state.

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     This act would take effect upon passage.

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