Colorado Group Sues to Overturn New Candy Taxes

October 25, 2013
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The lawsuit contends that levying the taxes without voter approval is unconstitutional

The lawsuit contends that levying the taxes without voter approval is unconstitutional

DENVER – A group that defends taxpayers’ rights filed a lawsuit Tuesday against a bill signed into law by Gov. John Hickenlooper in May, which will levy new sales and use taxes on candy, soft drinks, cigarettes, advertising materials and food containers.

The lawsuit contends that levying the taxes without voter approval is unconstitutional under Colorado’s Taxpayer’s Bill of Rights (TABOR).

“In clear violation of TABOR, the General Assembly enacted a scheme to levy taxes and raise revenues without a vote of the people of Colorado,” said William Perry Pendley of Mountain States Legal Foundation (MSLF).

MSLF filed the lawsuit in the Jefferson County District Court on behalf of The TABOR Foundation which alleges that its members were denied the right to vote on new taxes as required under the TABOR Amendment passed by statewide voters.

“That is unconstitutional,” declared Pendley.

House Bill 1272, sponsored by House Minority Leader Dickey Lee Hullinghorst (D-Longmont) and Sen. Pat Steadman (D-Denver), was passed by the Democrat-controlled legislature. Republican lawmakers voted against the bill with the exception of Rep. Kevin Priola (R-Henderson).

Democrats defended the measure as a way to help businesses by simplifying tax collection. Republicans argued that it’s an unconstitutional tax increase to generate more than $2.7 million for the Regional Transportation District (RTD) and the Scientific and Cultural Facilities District (SCFD) in metro Denver counties.

“Consider that RTD’s FasTracks project is now billions of dollars over budget and decades behind schedule,” contended Rep. Spencer Swalm (R-Centennial). “Basically what RTD is doing with this bill is rummaging through the couch cushions and looking for spare change to try and bailout FasTracks.”

The special districts were created by state statute and granted the right to tax industrial tools and machinery, vending machine sales of food such as potato chips and crackers – but not tax soft drinks and candy.

HB 1272 proponents asserted that the Department of Revenue had failed to collect those taxes and award them to the special districts. The problem, they said, would be corrected by suspending those taxes and instead levy the state’s so-called “candy” taxes – part of the Dirty Dozen” taxes signed into law by Gov. Bill Ritter to generate more state revenue.

The bill “is about simplifying the taxes and reporting for businesses,” said Steadman.

In a press release, MSLF cited the bill’s definition of the new taxes which apply to “candy,” or “a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruit, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces. ‘ Candy’’ shall not include any preparation containing flour and shall require no refrigeration.”

The beverage tax applies to “soft drinks,” or “nonalcoholic beverages that contain natural or artificial sweeteners,” but not “beverages that contain milk or milk products, soy, rice, or similar milk substitutes, or greater than fifty percent of vegetable or fruit juice by volume.”

The cigarette tax includes items “likely to be offered to, or purchased by, consumers as a cigarette.”  The advertising tax applies to “advertising materials that are distributed in Colorado by any person engaged solely and exclusively in the business of providing cooperative direct mail advertising.”

The food container tax applies to “nonessential” food and beverage items, such as utensils, napkins, grocery bags, bags for bulk produce, carryout containers for leftover food, straws, toothpicks, stirring sticks, cup sleeves.

Though SCFD and RTD lobbied for the bill, not all of RTD board members sanctioned the proposed tax increases which go into effect in January.

“I am speaking on my behalf and the citizens who are seeing TABOR ignored,” said RTD Board Director Natalie Menten of Lakewood. “No matter what it is called, it’s a tax increase.”

Instead of the bill’s premise of helping businesses collect taxes in the special districts, Menten said it would have the opposite effect.

“I think that raising taxes on businesses in this economy right now is counterproductive,” declared Swalm. “We need to be talking about creating jobs, helping businesses prosper.”

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One Response to Colorado Group Sues to Overturn New Candy Taxes

  1. October 25, 2013 at 1:10 pm

    This expansion of the candy tax to RTD (“merely an expansion of the till”) is a constitutional violation piled on another constitutional violation (since the 2010 elimination of the tax exemption in general was a TABOR violation in the first place)
    http://www.clearthebenchcolorado.org/2010/05/18/candy-and-soda-tax-enabled-by-colorado-supreme-court-harms-consumers-and-businesses/

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