Did you know that sweetened iced tea is considered a soft drink in Vermont? The state of Vermont passed Legislation effective July 1, 2015, imposing its sales and use tax on soft drinks. House Bill 489 (H.489) revised the definition of food and food ingredients found in 32 V.S.A. § 9701(31) by indicating that “food and food ingredients” does not include soft drinks, in addition to alcoholic beverages and tobacco, which were already excluded. In order to facilitate the taxation of soft drinks, Vermont revised the definition of soft drinks which is now defined as “nonalcoholic beverages that contain natural or artificial sweeteners. ‘Soft drinks’ do not include beverages that contain milk or milk products, soy, rice, or similar milk substitutes, or greater than 50 percent of vegetable or fruit juice by volume.’
Examples of Taxable Soft Drinks
Retailers need to know what types of nonalcoholic beverages are considered “soft drinks” in Vermont for taxability purposes. The Vermont Department of Taxation published a Fact Sheet in June 2015 in order to provide general guidelines to retailers to determine whether a beverage is taxable or not taxable under the definition of soft drinks in the state of Vermont. Some examples of taxable drinks include:
- Bottled or canned water that contains sweeteners
- Coffee or tea drinks that contain sweeteners
- Fruitades, drinks, or nectars with sweeteners that have 50% or less vegetable or fruit juice shown on the label
- Nonalcoholic beer or near beer, such as O’Doul’s and Sharps
- Pedialyte
- Energy drinks, such as Red Bull and Monster
- Sports drinks, such as Gatorade and Powerade
- Soda, such as Coca-Cola and Sprite
- Sparkling nonalcoholic cider or grape juice with 50% or less fruit juice
Beware! Products Containing Sweetener
Determining what types of sweeteners make a drink taxable can be difficult for retailers. The following are examples of sweeteners that would make a beverage a taxable soft drink:
- Sugar
- Agave
- Aspartame
- Barley malt
- Corn syrup
- Dextrose
- Erythritol
- Evaporated cane juice
- Fructose
- Honey
- Molasses
- Stevia
- Sucrose
- Other natural or artificial sweeteners
Examples of Exempt Beverages
Finally, retailers should also be aware of which beverages are are not taxable under this legislation. Some of the non-taxable drinks include:
- Beverage powders or concentrates, such as Kool-Aid or frozen orange juice concentrate
- Liquid water enhancers, such as MiO
- Bottled or canned water with no sweeteners
- Nutritional drinks that contain milk or milk substitutes, such as Ensure and Slim-Fast
- Dietary supplements, such as 5-hour Energy
- Sparkling nonalcoholic cider or grape juice with more than 50% fruit juice
To learn more about what is taxable and what is not in Vermont and other jurisdictions, sign up to the Sovos blog. We are here to make compliance easier. Special thanks to Linda Epstein from the Sovos Tax Department expert research team for this post.
