Sugar-sweetened drinks in Santa Cruz just dodged a major legal sugar crash.
Last Tuesday, Sacramento Superior Court Judge Stephen Acquisto rejected a legal challenge to Santa Cruz’s voter-approved sugary drink tax, keeping Measure Z firmly in place. The ruling leaves intact a two-cent-per-fluid-ounce excise that voters backed in November 2024 and that took effect on May 1, 2025, and city officials said it preserves local control over public health decisions.
In a press release from the American Heart Association, CEO Nancy Brown called the ruling “a victory for everyone concerned about their health and for the right of communities to put their well-being ahead of corporate profits.” The organization noted that industry groups had gone to court last year to overturn the voter-approved measure.
How Measure Z Works
Measure Z imposes a two-cent-per-fluid-ounce excise on the distribution of sugar-sweetened beverages within the city, according to the City of Santa Cruz. The tax is collected from distributors rather than at the cash register and includes an exemption for businesses with under $500,000 in annual receipts.
The city has framed the policy as a public health tool meant to cut down sugary-drink consumption while also generating general revenue that can be steered toward community services.
Industry Challenge
A coalition led by the California Grocers Association and the American Beverage Association filed suit in Sacramento County Superior Court on May 28, 2025, arguing that the state’s Affordable Groceries Act and related laws preempt local excise taxes, according to CalTax. The plaintiffs asked the court to block enforcement of Measure Z and to order refunds of any amounts already collected under the tax.
What Comes Next
The court issued its final ruling on June 29, 2026, but a formal judgment is expected to follow in the coming days. After that, parties typically have 60 days to file a notice of appeal under California rules, according to the California Courts Self-Help Guide. If the petitioners decide to appeal, the case would shift to the state Court of Appeal, where it could take months before there is a final outcome.
Why It Matters Locally
Officials and advocates have estimated that the tax could bring in roughly $1.3 million a year for local priorities such as parks, youth programs and health services, a figure reported during the Measure Z campaign and early implementation, according to Nasdaq and the city’s budget materials.
Supporters of the ruling are calling it a win for community health and voter choice. Industry groups, on the other hand, continue to argue that the tax raises costs for businesses and shoppers, setting the stage for a potential next round in the courts if they choose to appeal.
