BUSINESS - Fast-food restaurants and even many family-owned diners went to an open soda fountain system years ago. You know the routine: When you buy a soft drink, the clerk hands you a paper cup and you fill it yourself.
As a customer, I love that little innovation. I like to mix diet cola with regular cola in about a 60-40 split and I don’t want much ice. It’s easier to do it myself than explain all that to a clerk behind the counter.
And restaurant owners like open fountains, too. Oh, sure, some customers abuse the free-refill policy that most restaurants have. But the owners enjoy greater operating efficiencies and lower labor costs because their employees aren’t filling drink cups all day long.
Everyone’s happy. The customer gets exactly the drink he wants and free refills, too. The owner gets a more efficient operation and lower costs, which can help him keep prices low.
But now you have to wonder if that happy arrangement is about to end, thanks to sales taxes on sugary drinks that are starting to pop up. If those taxes take hold and spread – and you can almost bet that that’s going to happen – then open soda fountains might soon go the way of plastic grocery bags.
Take the proposed tax that will go before voters in the San Gabriel Valley city of El Monte this November. It calls for a tax of one cent per ounce on sugary drinks. If voters approve it, restaurant owners must start assessing that tax. But it’s not simple. The tax will be imposed on regular Coca-Cola but not Diet Coke, on lemonade but not iced tea, on Gatorade but not real fruit juice.
If you were the owner, how would you handle that? Maybe you could ask each patron what drink they intend to get at the open fountain and tax them accordingly. But what would stop customers from saying they will get a Diet Coke when in fact they get the real Coke?
And how would you handle refills? Those who get diet drinks are free to get refills but those who want sugary drinks must return to the counter and stand in line to pay an additional 16 cents to refill their 16-ounce cup?
What’s more, what would you say to the customer who wants an Arnold Palmer, only half of which should get taxed? Or, for that matter, me? Since I only want 40 percent of my cup filled with a sugary cola, should I pay only 40 percent of the tax? For a 16 ounce drink, that comes to 6.4 cents in extra tax for me.
Maybe there’s a simpler solution and it’s this: Everyone who gets a drink should pay the extra tax. On second thought, maybe not. The whole idea behind the sugary soda tax, besides raising money for local governments, is to punish consumers of sugary drinks by singling them out and making them pay more. So it might be unlikely that El Monte (which hasn’t yet written the rules for the tax) or other cities would even allow a restaurant to impose a levy on all soft drinks since that would negate the social engineering behind the tax.
I tell you what I would do if I were the restaurant owner. I’d move the open fountain back behind the counter. Of course, it would cost me to move it, and then I’d have to pay employees to pour drinks into cups all day long. That would mean greater costs, which would mean higher prices to customers and maybe longer waits for them. But it would allow me to properly collect the 16 cent tax on a typical soft drink.
This, of course, is the big problem with a tax like this. City Council members can dreamily wish everyone were slimmer and healthier and they can pat each other on the back for passing a tax aimed at encouraging better habits.
But they give nary a thought to the destruction they’re causing: the higher costs they’re imposing on their businesses and the choices they’re robbing from all customers, including the slim ones.
(Charles Crumpley is editor of the Los Angeles Business Journal. He can be reached at [email protected]. This column appeared first at foxandhoundsdaily.com) –cw
CityWatch
Vol 10 Issue 66
Pub: Aug 17, 2012
