Grocery Bag Fee is Not a Tax, Colorado Supreme Court Holds

The Colorado Supreme Court has upheld a municipal ordinance charging a $0.20 “waste reduction fee” for paper grocery bags and prohibiting disposable plastic bags, ruling the charge is part of a regulatory program of waste management and not a tax. Colo. Union of Taxpayers Found. v. City of Aspen, No. 16SC377 (Colo., entered May 21, 2018). After two members of the plaintiff advocacy group paid the bag charge in Aspen, the group sued the city and members of the city council alleging the charge was a tax subject to voter approval under the state’s Taxpayer Bill of Rights. The trial court and the Colorado Court of Appeals ruled in the city’s favor.

The court noted that grocers are permitted to retain a portion of the $0.20 charge to provide information to customers, train staff and improve collection and administration, while the remainder is submitted to the city on a form separate from the sales tax form. The funds are deposited into a “Waste Reduction and Recycling Account” and cannot supplant funds from the annual budget or revert to the city’s general fund. The court held that because the charge’s primary purpose is “not to raise revenue for general governmental use,” it is “not a tax of any kind. Instead of raising revenue with this ordinance, Aspen sought to regulate the use of plastic and paper bags as part of its waste management efforts . . . the amount of the charge imposed for the right to use a paper bag bears a reasonable relationship to Aspen’s cost of permitting that use.”