One alleged infraction has led to a complaint that rose to the federal government.

Boulder’s tax on sugary drinks is confusing customers and retailers alike, who are unsure of when the tax is really a tax, and when it’s a price hike.

Violations are rare, the city contends, but at least one alleged infraction led to a complaint that worked its way up to the federal government.

Michael Raposo last month purchased a single 20ounce bottle of Coke from a King Soopers in Boulder. There on the receipt was an item he didn’t expect: beverage tax, 40 cents.

He knew of the tax, passed by voters in November 2016 to levy a two centsperfluid ounce tax on distributors of soda and other beverages with added sugar. But he was surprised it was being charged to him, a recipient of federal benefits under the Supplemental Nutrition Assistance Program, or SNAP, colloquially referred to as food stamps.

Under federal law, SNAP recipients are not required to pay taxes on food items; soda is considered food under SNAP guidelines. A similar soda tax in Chicago ran into trouble with the U.S. Department of Agriculture, which oversees SNAP, for allowing smaller stores to charge the tax and then issue a refund. The loophole was closed after an official warning from the USDA.

The charge led Raposo to contact the city of Boulder, officials at King Soopers and the USDA.

“I was supposed to walk into that store

and buy that for $1.99, not a penny more,” he said. “You cannot tax food stamps.”

Boulder contends that Raposo wasn’t actually paying a tax; nor were any of the city’s 4,532 resident SNAP recipients who might have happened to be charged the same way at King Soopers or other stores.

“The tax is levied directly on the distribution of taxable beverages in the city,” Curt Osborne, a tax audit manager for Boulder, wrote in an email to the Daily Camera. “In other words, the distribution is the only taxable event, not the point ofsale at retail.”

Distributors have by and large passed on the cost of the tax to stores and restaurants, which can then pass it on to customers in the form of higher prices. But the additional charge is required, via a February update to Boulder’s law, to be represented as a price increase — not a tax, Osborne said.

“It is now a violation of city code to include on receipts phrases/items such as ‘sugarsweetened beverage tax’ or ‘sugary drink tax’ or other wording that would lead a consumer to believe that the city’s sugarsweetened beverage tax is imposed directly on the retail sale,” he said.

Osborne said there has been one known breach of the law thus far. He declined to say if that rulebreaker was King Soopers; the city does not disclose the name or information of businesses that might be in violation.

Adam Williamson, a spokesman for King Soopers, said the store’s process was developed in partnership with Boulder officials and should not be a violation.

“We set this up with the city; we’re following the laws the city wrote and we’ve been doing it since July 1, 2017,” Williamson said. “We never were charging an extra tax to anybody.”

He also said the increased price of a soda “shouldn’t show as a breakout on the receipt,” before referring additional questions to another company spokesperson. That individual did not respond to a request for comment.

The USDA weighed in too, deciding after internal discussion that King Soopers’ charge was not a violation of federal law, because it was, in fact, never a tax — the retailer collected any additional revenue, not a government entity.

It’s not clear how many other stores or restaurants might be representing the price hike as a tax to consumers. Osborne said he was “chasing down three or four other potential violations,” but because of the age of the claims or the doubling of complaints at one particular store, the number of actual violations might turn out to be fewer.

“The scale of this receipt issue is unknown to the city at this point,” he said.

Critics of the tax have continued to allege that Boulder’s soda drinkers are being improperly charged on unsweetened iced teas or diet beverages, which have no added sugar. Restaurant and store owners have spoken out against the added expense and their perception that it discourages customers from coming to Boulder. Still others contend the higherthanexpected revenue shows the tax’s stated goal — of discouraging consumption — has not been met.

“There needs to be an audit conducted,” Raposo said. “This is going on under everybody’s noses.”

Boulderites in November will get another chance to weigh the merits of the tax.

The city’s estimates for how much would be raised by the tax — $3.8 million — turned out to be low. Staff now expects that $5.2 million will be brought in for the first full year of the tax. Because of Colorado’s Taxpayer Bill of Rights, revenues in excess of the original, voterapproved amount must be refunded, unless voters OK letting the city keep the extra money and continue funneling it to health equity causes.

The other choice? Refunding it to distributors and permanently lowering the tax to the amount collected in the first year, which would lower it to 1.46 cents per ounce.