Illinois judge halts sugary drink tax hours before implementation

CHICAGO (Reuters) - An Illinois judge on Friday halted implementation of a measure that would have made Chicago the latest U.S. city to tax sweetened drinks, saying a lawsuit filed by retailers to block it must run its course.

Cook County Circuit Court Judge Daniel Kubasiak granted the group of retailers a temporary restraining order on the penny-per-ounce county tax, which was to take effect on Saturday. The county gave notice it would appeal the judge’s order and “aggressively defend” the tax, according to a statement from Cook County Board President Toni Preckwinkle.

The grocers filed the lawsuit on Tuesday, arguing the ordinance is “unconstitutionally vague,” difficult to implement and unlawful because it would tax similar beverages differently.

“I believe that it’s necessary to maintain the status quo in order to protect the interest of all consumers, all taxpayers and the affected merchants,” Kubasiak said.

Cook County, which includes Chicago, joined a growing number of localities that have adopted measures to cut consumption of sugary drinks for health reasons, including Seattle, Philadelphia and San Francisco.

The Cook County Board of Commissioners passed the tax last November, lauding it as a benefit to public health and a way to boost revenue. It applies to bottled sweetened beverages including soda, sports drinks and energy drinks.

The temporary restraining order was necessary because if the tax was implemented and then rescinded, it would be impossible for consumers to be refunded, David Ruskin, attorney for the Illinois Retail Merchants Association, said on Thursday.

He also argued that failure to comply with an unlawfully vague tax could leave retailers vulnerable to “monumental” penalties.

Cook County attorney Sisavanh Baker said Thursday the tax need not be perfect to be reasonable, and the county would lose about $17 million per month if the tax was shelved.

Preckwinkle said in the statement that she has asked officials to consider ways of making up for the lost revenue, including potential personnel reductions.

The lawsuit also argued that the tax could make retailers ineligible for participation in the federal Supplemental Nutrition Assistance Program, or SNAP, which prohibits purchasing food that has a state or local sales tax.

Attorney James Beligrates, who represents the county, said the lawsuit’s assertion about SNAP, which helps millions of U.S. low-income individuals and families buy food, is a “red herring” because the county agreed retailers should not collect the sweetened beverage tax on SNAP products.

A hearing for the preliminary injunction was scheduled for July 12.

Editing by Matthew Lewis