Judge: Oakland’s proposed sugary drink tax is not aimed at grocers

Oakland’s proposed penny-an-ounce tax on sugary drinks got a boost Friday when a judge ruled that the ballot measure — despite the beverage industry’s contentions — is not a tax on grocers, because they can pass the costs along to their customers.

Alameda County Superior Court Judge Thomas Rasch denied a request by opponents of Measure HH on the Nov. 8 ballot to delete a line from the supporters’ ballot argument that declares, “The tax is not paid by your local grocer.” His ruling also gives the supporters a counter to the message on fliers the beverage industry is regularly mailing to Oakland households, showing the faces of worried grocers along with pleas to “Stop the Grocery Tax.”

A tax on soda and other sugared beverages will be on November ballots in Oakland, San Francisco and Albany. Oakland’s Measure HH would raise up to $12 million a year, which city officials plan to use for health and education programs, while seeking to reduce consumption of drinks that contribute to obesity and diabetes. Opponents say the measure would affect all grocery prices and hit hardest at low-income customers.

Foes of the measure challenged several statements in supporters’ ballot arguments, including the assertion that the new tax would not be paid by local grocers. That was untrue, opponents said, because Oakland grocers who buy sugared beverages from a distributor in the city would have to pay the tax on their purchases.

But under those circumstances, Rasch said in his ruling, “local grocers and other retailers will likely pass the tax through the chain of distribution to the ultimate consumer. If the local grocers act as a pass-through entity, then they will suffer no economic harm from the soda tax.”

He also rejected a challenge to a statement in the ballot argument that the new tax would not apply to small businesses. Opponents argued the everyday understanding of “small businesses” is considerably larger than definition in Measure HH, which exempts businesses with annual revenues of less than $100,000. But Rasch said voters can rely on the text of the measure as well as an analysis in the ballot pamphlet by City Attorney Barbara Parker, who cited the $100,000 threshold.

Dan Newman, a spokesman for the campaign supporting Measure HH, said the ruling amounted to a judicial declaration that “Big Soda's entire $10 million ad campaign is based on a fundamental lie.”

Joe Arellano, spokesman for the opposition campaign, said the ruling affects the ballot arguments but doesn’t change the facts.

“ Once voters do their own research and read the fine print, they’ll see that they’re actually voting on a grocery tax that affects distributors like local grocery stores and mom and pop corner stores, not on a soda tax,” he said.

Bob Egelko is a San Francisco Chronicle staff writer. Email: begelko@sfchronicle.com Twitter: @egelko