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Judge cans soda tax for now with temporary restraining order

soda bottles in a store cooler

AP file photo

A Cook County judge on Friday put a temporary halt on the county’s sweetened beverage tax.

The tax – an additional penny-per-ounce on sweetened beverages – was to have gone into effect on Saturday.

The Illinois Retail Merchants Association filed a temporary restraining order and preliminary injunction on behalf of Cook County retailers on Tuesday. Judge Daniel Kubasiak granted the restraining order.

The matter is back up in court on July 12.

“We appreciate the court’s decision to hit the pause button on this matter,” Rob Karr, president and CEO of the association, said in a statement. “We are now asking for the court to rule on a preliminary injunction that will continue the status quo until we have a final decision on the legality of the ordinance.”

Beyond the next hearing, the association has 28 days to file a brief to the judge arguing why the county’s motion to dismiss should be thrown out. The county then has 14 days to respond to the retailers’ brief.

The county will file a notice of appeal before the Appellate Court seeking to vacate the restraining order, according to a statement from Cook County Board President Toni Preckwinkle.

Cook County Board President Toni Preckwinkle. | Rich Hein / Sun-Times file photo

The decision to grant the restraining order means the county’s finance department will now have to look at “holdbacks, efficiencies and – because 87 percent of General Fund expenditures are personnel-related – a substantial number of position reductions each month that collection of the tax is delayed,” according to Preckwinkle’s statement.

County officials have projected that the tax will bring in about $200 million a year.

“Revenue from the tax is critical to both balancing our FY2017 budget and development of our FY2018 budget,” Preckwinkle’s statement said. “As the litigation proceeds, we will continue to aggressively defend our ordinance.”

The tax creates classifications between sweetened beverages that violates the uniformity clause of the Illinois Constitution and is unconstitutionally vague, attorneys representing the retailers say. For example, a store-bought Frappuccino would be taxed, but one created by a barista would not be.

Those who buy sweetened drinks would bear the brunt of the tax, but if retailers don’t include it in purchases they could be subject to a fine of $1,000 for the first offense, and $2,000 for the second and each subsequent offense. Beyond potentially paying fines, there are also concerns that businesses will lose revenue from customers opting to drive to Will or other collar counties or Indiana to avoid paying more.

During arguments Thursday, attorneys for the retailers also argued that the tax would cause irreparable harm because there is no refund mechanism in place. If the tax is struck down later, consumers, the attorneys argued, won’t be able to get their money back.