Restaurateur thinks he’s found a loophole in Seattle soda tax

Facing yet another hike to his costs, one restaurant owner believes he has found a loophole in the Seattle tax targeting sweetened beverages.

Curtis owns two restaurants in Seattle and one in Kirkland.

“I just literally thought about it this morning,” Curtis told KIRO Radio’s Dave Ross. “For the high fructose corn syrup, for example, the cost for the Seattle restaurants is just under $86 a case; that has gone up with this new tax. So for the two restaurants in Seattle, we are just going to have everything they need ordered to the Kirkland location and … deliver it ourselves to the Seattle ones.”

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“It’s either that or we pass it on to the customers,” he said. “There’s been too much of that. It’s no different from transferring any other product that we have to. That’s how I see it. I haven’t seen anything in the law that says you can’t do it and so that’s what we’ve got to do.”

Glancing at the tax legislation, it is unclear if this interpretation of the law is accurate (Section K “Delivery”). The law does say that it is a violation to “aid or abet any person in any attempt to evade payment of a license fee or tax.” The Seattle tax targets distributors in the city, which pay up to 1.75 cents per fluid ounce. That cost will then be passed onto stores and restaurants — such as Curtis’ — which will then pass it on to customers. So having a distributor deliver the products outside Seattle will avoid the tax — in theory.

But according to the Seattle Restaurant Alliance, Curtis’ plan to smuggle sweetened beverages into Seattle via his location just across Lake Washington still runs afoul of the tax law. A representative of the alliance tells KIRO Radio that if a person obtains a sweetened beverage outside Seattle, then brings it into the city to sell, they become a self-distributor and subject to the tax.

He says that his three restaurants don’t add up to a large company, so the nearly $19,000 that one location will pay annually due to the Seattle tax is a considerable hit.

Seattle tax and other costs

The city is currently studying the sweetened beverage tax to determine how it affects small businesses.

For Curtis, the Seattle tax is yet another push from the city that is making it difficult to be a business in town. He points to the minimum wage hikes as an example. Seattle is still making its move to bring all wages up to $15 an hour. That raise has also hit small businesses like Curtis’. He says he openly talks about it with his employees; many work two jobs as he is now giving them fewer hours.

“I just did some quick math and the comparison between last year and this year for one of our restaurants, it’s a 4.5 percent increase in labor,” Curtis said. “The scary thing is we’ve actually had less hours worked. The hourly employee that was getting 35 hours last year is getting below 30 this year. At the end of the day, the business has to be profitable. If we aren’t profitable, we can’t employ anybody.”

“And we’re not the only ones out there in the restaurant community shaking our heads thinking it doesn’t seem to be working the way others thought it would be working,” he said.

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He says that he also hasn’t given out raises over the past few years. Not to mention that rents are also on the rise in Seattle.

“With rent, it’s just another thing that is so hard for a business to keep up with,” he said. “A booming economy – normally that doesn’t bring cheaper rents. It’s not going to get any cheaper.”

“Things have just really changed a lot in the last 4 or 5 years and right now it’s just in a phase of keeping pace or you are going to get trampled,” Curtis said. “When is it going to turn around? Who knows? But it’s little things like this. This soda tax, for us, one restaurant is $20,000. Where is that money going to come from? If it means I have to bring stuff over from another restaurant outside of Seattle, so be it.”

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