We should not impose on our Michigan citizens a burdensome new tax increase that is regressive, discriminatory, unconstitutional and targets a made in Michigan product.

Whether in the form of a new excise tax on water, or a sales tax on soft drinks, proposals to levy a special new tax on beverages are often originate from a special interest organization seeking to find revenues to fund a new state program. More often than not, the new government program will also be a worthwhile or benevolent sounding cause, such as, for example, a catastrophic health program.

We are adamantly opposed to targeted new taxes on our products. This does not necessarily mean we would oppose a catastrophic health plan or other appropriate program-only that we feel if the state wants to finance such a program, it should look to general, broad-based taxes on businesses and individuals, instead of targeting certain industries or products to bear the entire tax burden.

People tend to forget that the beverage industry in Michigan already shoulders a financial burden that no other business group in the state has to bear. We already spend tens of millions of dollars annually to implement a statewide recycling program for Michigan citizens (called the deposit law).

Special taxes on targeted products have two characteristics universally regarded as constituting very poor tax policy. First, by selecting out a certain product or business for special taxation, the state is actually being very discriminatory in its imposition of financial burden. Second, such a tax on refreshment beverages is also harshly regressive, hurting our very low income residents some 10 times harder than the middle class.

By imposing a tax on water or soft drinks, the state is picking winners and losers, which amounts to the very few (in this case the beverage industry and economically disadvantaged citizens) having to bear the costs to provide for the many.

Such a tax also sets a dangerous precedent. Over 30 years ago, Michigan citizens voted overwhelmingly to remove the sales tax on food and drugs. The message was: do not tax our food and drugs. Now, by re-imposing a tax on beverages, the legislature is opening the door to a potential host of new taxes on virtually any food product. What product will be next, when another government program is looking for a source of special funding?

Finally, not only would it be disturbing that the legislature might impose a new tax that is well known to be discriminatory and regressive, but such a tax would also inappropriately target Made in Michigan Products. Probably 99 percent of the major brand soft drinks sold by our members are prepared and bottled here in Michigan, by Michigan Employees, in our Michigan Bottling Facilities, and delivered to your local grocery store by our Michigan Drivers. Such a proposed new tax would only hurt jobs and products made in Michigan! Bad judgment call.

The Michigan Constitution of 1963 was amended in 1974 to prohibit the levy of a sales tax on prescription drugs and food for human consumption. The only exceptions to this prohibition were "prepared food intended for immediate consumption" and "alcoholic beverages." 

Soft drinks are a food. Their manufacture and sale are regulated as a food under both federal and Michigan law. The courts have unanimously concurred that soft drinks are a food. The scientific community also recognizes soft drinks as a food, because they contain two (or three, when counting sugars) of the seven basic nutrients considered essential to sustaining life.

The Michigan Constitution is very specific. In order for any food to be subject to the sales tax, the food sold must either be an alcoholic beverage, or it must meet both of two criteria: 

  • It must be "intended for immediate consumption;" and 
  • It must also be "prepared food."


Michigan has joined with other states in the Streamlined Sales Tax Program’s (SSTP), in order to implement what will eventually result in the collection of hundreds of millions of new sales and use tax dollars for the state. Our participation meant we also adopted legislation to bring ourselves in compliance with the SSTP’s uniform definitions, including the definition for "prepared food."

Under SSTP, and our current sales tax act, "prepared food" means:

  • Food sold in a heated state or heated by the seller; or
  • Two or more food ingredients mixed or combined by the seller for sale as single item; or
  • Food sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws. A plate does not include a container or packaging used to transport the food. 


This definition would permit food sold in a heated state from a vending machine to be subject to the sales tax. For the state to levy a sales tax on food sold from a cooled or unheated vending machine, however, it would first have to revise its adopted SSTP definition of "prepared food" as it applies to vending machine sales to add that circumstance. But then we would fall out of compliance with the SSTP definitions and potentially jeopardize many more tax revenues from the SSTP program. 


While the SSTP specifically states that it makes no attempt to regulate vending machine sales, we can’t have two definitions of "prepared food" in our Sales Tax Act– one for vending machines and a different one for all other food sales. Michigan is unique, in that its "prepared food" requirement is constitutionally mandated.

If Michigan is to maintain its conformity with the SSTP, it cannot expand its definition of "prepared food" to add cooled or unheated food.

Soft drinks and/or nacho chips sold from a vending machine are not prepared food:

  • They are not in a heated condition;
  • There is no act of combining food ingredients (like what would happen in a soft drink fountain dispenser); and
  • We haven’t yet started selling our soft drinks with napkins.

Taxes on Beverages:

Legislative proposals to impose a special new tax on soft drinks are inappropriate and unjustified for several sound public policy reasons.


  • Tax Increase:  It would represent a real, hidden tax increase on Michigan consumers. Tax increases on consumers are counterproductive to rebuilding this state's economy and fostering job growth. 


  • Discriminatory:  A tax on soft drinks works to select out a particular category of foods, and impose a burdensome new tax. Not only is this discriminatory, but it also sets the stage for discriminating against other food or beverages also found at the local grocery store-or anywhere for that matter.          


  • Regressive:  The young and low income consumers must use a much greater portion of their after tax income when purchasing soft drinks than consumers with higher incomes. A tax on top of those purchases would hit the very low income consumer about 10 times harder than the upper middle income family making $50,000 per year.


  • Where Would It Stop? If  the legislature goes after soft drinks today, what will be next? This could be the beginning of a host of special new food taxes to fund special programs.


  • Loss of Sales:  Everyone knows how the price of soft drinks is not much different today than 10 to 15 years ago. The competition in this market category is so fierce that even a very small increase in price has a significant negative impact on sales. It is estimated that soft drinks have an economic elasticity of demand in the range of -0.4 to -2.37. This means that the imposition of a 6 percent increase in price would cause sales to drop anywhere from 2.4 percent to 14 percent. This would translate to a loss of jobs and income not only for those employed in the soft drink industry, but also in the retail sector.


  • Made in Michigan Products: Our soft drinks are Made in Michigan products. Virtually all of our members' soft drinks sold in Michigan, probably 99 percent, are assembled and bottled right here in Michigan, by Michigan workers, in Michigan bottling facilities and then distributed by Michigan drivers to our local stores. Why put a special tax on a Made in Michigan Product? We should not impose on our Michigan citizens a burdensome new tax increase that is regressive, discriminatory, unconstitutional and targets a made in Michigan product.

Public Policy Considerations Recommend Against Taxes

Discriminatory, Regressive Tax on a Made in Michigan Product

It is Unconstitutional to Impose Michigan Sales Tax on Most Vending Machine Foods

© 2017 |The Michigan Soft Drink Association