A move by Florida to tax orange juice from California and other states is threatening to touch off a citrus war.
Florida lawmakers recently voted to institute a tax on juice from other citrus-producing states after importers of frozen orange juice from Brazil and elsewhere complained that Florida's 32-year-old "equalization tax" was discriminatory by taxing only foreign producers, a violation of the Commerce Clause.
Florida lawmakers recently resolved the dispute by voting to tax all out-of-state producers as well as imports.
Florida is far and away the leading U.S. orange-juice-producing state; most California oranges are produced for consumption as fresh fruit.
About 6 million gallons of frozen concentrate from California, Arizona, Texas and elsewhere is used each year by Florida processors to improve their juice's color and give it the tart, tangy flavor that consumers have come to expect.
It's not a huge business for California producers--and much smaller than the 32 million gallons shipped in from foreign producers--but it provides Southern California's struggling Valencia orange growers a second market for their product, and a home for navel oranges that fail to pass muster for the supermarket produce aisle, said Scott Mabs, director of grower relations for California Citrus Mutual, a trade association.
Florida Gov. Jeb Bush is expected to sign the bill, which has been approved by both houses of the Legislature. It would take affect this summer.
California citrus processors say the tax is both punishing and unfair, given that most of the $3 million to $4 million in revenue from the tax is used to market "100% Florida orange juice."
Indeed, it's that point that originally touched off the trade war with foreign producers.
"It's just going to depress the value of our products and that will affect what we can pay growers," said Bill Borgers of Ventura Coastal Corp., which ships concentrate to Florida.
Executives at Sherman Oaks-based Sunkist Growers say it could cost its 6,000 growers in California and Arizona up to $1 million a year.
Some industry officials are even hinting at a retaliatory tax on Florida juice moving into California plants--a move that could hurt Florida more, industry officials say.
"They have five times the juice headed this way," said Sunkist spokesman Mike Wootton.
A California tax, if adopted, would raise money for marketing--aiding California growers and processors--but it also could lead to slightly higher prices.
But it could be considered discriminatory as well, Florida officials say, unless the state's own producers are taxed.
California citrus industry officials have not met with California lawmakers to discuss this idea.
Florida Department of Citrus officials tried to head off this kind of action by making a trip to California this week.
Sunkist officials said they did not talk about a repeal of the tax, but rather ways that both states could benefit from the funds.
The five importers that sued Florida are now seeking an injunction to block future collection of the tax, now that a Polk County Circuit Court judge has found it unconstitutional.
The importers also are seeking a refund of the $10 million in tax they paid over the last three years.
"Eighty-five percent of what my clients paid in equalization taxes is used to promote their competitor's products," said Kristen Gunter, a Florida attorney representing the import firms.
These firms also are pursuing a 1st Amendment challenge to the tax on this basis.
A ruling is expected in the next week on the injunction request, and the refund may be decided in July.
Meanwhile, Brazil--the world's largest orange grower and juice- concentrate maker--has taken a complaint over these funds to the World Trade Organization.
Florida citrus officials insist that they are only trying to level the playing field for producers--because Florida growers are taxed on their oranges by the box. They say they are not trying to gain an edge over their out-of-state and foreign competitors.
With its advertising, said Mia McKown, general counsel for the Florida Department of Citrus, "our mission is just to increase consumption of orange juice."