Seattle Sweetened Beverage Tax Exemptions

The City of Seattle passed Seattle Rule 5-953 in 2017, creating the Sweetened Beverage Tax (SBT). Effective January 1, 2018, the SBT is an excise tax imposed on distributers delivering sweetened beverages within Seattle city limits, taxing them at a rate of $0.0175 per fluid ounce of sweetened beverage.

The rule broadly defines sweetened beverage  as “any beverage intended for human consumption which contains one or more caloric sweeteners.” However, several exemptions to the tax apply. 

Exemptions

Many common beverages are exempt from the SBT based on certain characteristics, including beverage type, the size of the manufacturer, and the nature of the transaction.

Beverage Types

The following beverage categories are exempt from the SBT: 

  • Milk-based
  • Medical use
  • Meal replacement and weight loss
  • Infant formula
  • Alcoholic
  • Diet and low calorie
  • 100% juice

Manufacturers

The SBT also provides relief to distributers that do business with small beverage manufacturers. Beverages produced by manufacturers with less than $2 million in gross receipts are generally exempt from SBT. Manufacturers with gross receipts between $2 million and $5 million often qualify for a preferential rate.

Transactions

The SBT is levied on distributers who make sales to persons selling at retail. Sales made directly to consumers are generally exempt from SBT.

Some transactions may also qualify for a redistribution exemption if the distributer delivers beverages to a customer in Seattle, but that customer redistributes the beverages back outside of Seattle. For this exemption to apply, a redistribution certificate must be obtained by the distributer.

Other Considerations

The SBT prescribes special rules for the calculation of tax on beverage concentrates. Some concentrates are exempt if the end customer must mix them with other ingredients. However, other concentrates are taxable based on the volume they’ll produce, not the volume of the concentrate at the time of sale.

We’re Here to Help

If you’d like to learn more about how Seattle’s Sweetened Beverage Tax will impact your business, or how to qualify for and document exemptions and preference items, contact your Moss Adams professional or email statetax@mossadams.com.