San Francisco Soda Tax: Rates, Exemptions, and Filing

The San Francisco soda tax is a one-cent-per-fluid-ounce excise tax on the distribution of sugar-sweetened beverages into the city. Voters approved it as Proposition V in November 2016 with about 62% support, and it took effect on January 1, 2018.¹ The tax is charged to distributors rather than shoppers, but most of the cost reaches the shelf price anyway. Since 2018 it has brought in roughly $15 to $16 million a year for community health and nutrition programs.

Who Pays the Tax and How Much

Under Article 8 of the San Francisco Business and Tax Regulations Code, the city collects one cent ($0.01) per fluid ounce on the first distribution of sugar-sweetened beverages, syrups, and powders into San Francisco.² The taxable event is that first move into city limits. Once a distributor brings a covered product in for sale, tax is owed on the full volume.

Because the obligation sits with the distributor, you won’t see a soda tax line on your grocery receipt the way you see sales tax. Distributors decide how much of the cost to absorb and how much to build into their wholesale prices. Research across U.S. soda taxes found an average pass-through of about 80%, and a study specific to San Francisco found prices rose by close to the full penny per ounce within four months of implementation.³

What the penny per ounce looks like in practice:

A 12-ounce can of regular soda carries 12 cents in tax.
A two-liter bottle (about 67.6 ounces) carries roughly 68 cents.
For syrup used in fountain drinks, tax is calculated on the total volume of finished beverage the syrup can produce, not the concentrate itself.

Which Drinks Are Taxed

The tax applies to nonalcoholic beverages that contain added caloric sweeteners and have more than 25 calories per 12 fluid ounces.⁴ Caloric sweeteners include sugar, fructose, high fructose corn syrup, and similar ingredients. In practice, that pulls in regular sodas, energy drinks, sweetened iced teas and coffees, and sports drinks.

Syrups and powders are covered too. If a concentrate produces a finished drink that exceeds the 25-calorie threshold when mixed according to the manufacturer’s directions, the distributor owes tax on the full volume of the resulting beverage. A drink at or below 25 calories per 12 ounces is not covered, even if it contains some added sugar.

What’s Exempt

Several categories are carved out of the tax entirely, regardless of sugar content:⁴

Milk products, including dairy milk and plant-based alternatives like soy, rice, and almond milk.
Infant formula and other beverages sold for infant consumption.
Beverages designed for medical use.
Meal replacements and nutritional supplements that include proteins, carbohydrates, and multiple vitamins and minerals. Sports drinks don’t qualify under this category even if they contain some vitamins.
100% natural juice, meaning beverages consisting solely of fruit juice, vegetable juice, or a combination of both.
Alcoholic beverages, which fall outside the ordinance entirely.¹
Diet drinks sweetened with non-caloric sweeteners like aspartame or stevia, which don’t meet the 25-calorie threshold.

The line between added and naturally occurring sugar matters here. A bottle of orange juice with no added sweetener is exempt. A fruit punch that mixes juice with added sugar and exceeds the calorie threshold is not.

What It Means If You Use SNAP

Federal law blocks states and cities from charging tax on purchases made with SNAP benefits, but that protection only reaches taxes charged at the register. San Francisco’s soda tax is an excise tax on distributors, not a sales tax on shoppers, so the higher shelf price that results from the tax is not treated as a point-of-sale tax. SNAP recipients pay the passed-through cost just like anyone else.⁵ Every distributor-level soda tax in the country works this way.

If You Distribute Sugary Drinks: Registration

Any business distributing sugar-sweetened beverages into San Francisco has to register with the city first. The San Francisco Business and Tax Regulations Code requires every person doing business in the city to register within 30 days of starting operations.⁶ That gets you a San Francisco Business Account Number, which identifies you on every filing and in all communications with the Treasurer and Tax Collector.

On top of general business registration, distributors complete a separate registration specifically for the Sugary Drinks Distributor Tax. You’ll provide the business’s legal name, contact information, and a description of your distribution activities. Accurate records of warehouse locations and inventory volumes matter at this stage, because mistakes here cause delays and complicate later audits.

Quarterly Filing and Payment

Distributors file quarterly through the city’s online tax portal. The Treasurer and Tax Collector sets these due dates:²

First quarter (January through March): due April 30.
Second quarter (April through June): due July 31.
Third quarter (July through September): due October 31.
Fourth quarter (October through December): due January 31.

Each return reports the total volume of covered product distributed into the city during the quarter. You can pay electronically or by check payable to the Tax Collector. The system issues a confirmation number after a successful filing. Keep it for audit purposes.

Penalties for Missing a Deadline

Missing a filing or payment deadline adds up fast. The San Francisco Business and Tax Regulations Code sets the following penalty structure:⁷

Late payment penalty of 5% of the unpaid tax for the first month delinquent, plus another 5% for each additional month, capped at 20%.
An additional 20% penalty if the tax stays unpaid for 90 days after the city sends notice.
Interest at 1% per month on unpaid tax from the delinquency date until paid in full.
A 50% penalty on top of everything else if the failure to pay is due to fraud or intentional evasion.

A distributor who sits on a quarterly filing for six months could owe the original tax plus 20% in standard late penalties, another 20% in extended delinquency penalties, and 6% in accumulated interest. That’s close to 50% on top of the tax itself, before any fraud finding.

Where the Money Goes

The tax has brought in roughly $15 to $16 million a year, with more than $50 million collected since 2018. A 16-member Sugary Drinks Distributor Tax Advisory Committee reviews spending data and recommends how the revenue should be used. Those recommendations go to city leadership for inclusion in the annual budget.

In recent fiscal years, the revenue has supported health education and food security work, school-based nutrition programs within SFUSD, oral health task forces and school sealant programs, water access improvements in schools and public spaces, and youth recreation programs run through the San Francisco Recreation and Parks Department. The committee’s recommended funding levels don’t always carry through intact; the mayor’s budget sometimes shifts allocations among categories.

1
Ballotpedia. San Francisco, California, Soda and Sugary Beverages Tax, Proposition V (November 2016)
2
Treasurer & Tax Collector. Sugary Drinks Tax
3
National Center for Biotechnology Information (NCBI). Impact of Soda Tax on Beverage Price, Sale, Purchase, and Consumption in the US
4
American Legal Publishing. San Francisco Business and Tax Regulations Code – Section 552 Definitions
5
National Center for Biotechnology Information (NCBI). Implications of the Supplemental Nutrition Assistance Program Tax Exemption on Sugar-Sweetened Beverage Taxes
6
Treasurer & Tax Collector. Register a Business
7
American Legal Publishing. San Francisco Business and Tax Regulations Code – Section 6.17-1 Penalties and Interest for Failure to Pay