Judge Tosses Challenge to Philadelphia's Soda Tax

PHILADELPHIA — A Philadelphia judge has shot down a lawsuit challenging the city's beverage tax, though attorneys for the plaintiffs said they intend to appeal. 

The 1.5-cent-per-ounce levy equals 18 cents on a 12-ounce can of soda or $1.44 on a six-pack of 16-ounce bottles. This includes "diet" beverages as well as syrups and concentrates that make sweetened beverages.

The beverage industry had argued that the tax duplicates the state sales tax already imposed on soda and unfairly taxes drinks based on their size, not price.

However, Judge Gary S. Glazer dismissed the complaint "in its entirety," according to the Philadelphia Business Journal. Glazer said the city's sugary beverage tax does not duplicate the Pennsylvania's sales and use tax, violate the state Constitution's Uniformity Clause, nor force SNAP beneficiaries to spend the program's funds on the sales tax.

Associations representing dozens of beverage distributors, including the American Beverage Association, and thousands of retailers challenged the levy, filing suit against filed suit against the city of Philadelphia and the commissioner of the city's Revenue Department, Frank Breslin, in September. 

Calling the ruling a victory for Philadelphians, Mayor Jim Kenney said, "I urge the soda industry to accept the judge's ruling and do the right thing for the children of Philadelphia, many of whom struggle in the chilling grip of pervasive poverty. The industry has chosen not to challenge beverage taxes in other municipalities and there is no reason to continue pursuing it here."

However, he added, "regardless of their decision, the city will not stop pursuing what those kids need most — quality pre-K, community schools, and better parks, libraries and rec centers."

"We greatly appreciate the thorough and timely consideration that Judge Glazer gave to this matter," said City Solicitor Sozi Pedro Tulante. "The judge upheld the key points of our argument: the Philadelphia Beverage Tax cannot be considered a sales tax, and neither does it violate the uniformity clause of the Pennsylvania Constitution."

Philadelphia became the first major city to approve a soda tax when the city council voted for the measure six months ago. The tax passed in 13-4 vote on June 16. The city plans to spend much of the estimated $90 million in new tax revenue next year on prekindergarten programs, community schools and recreation centers, as CSNews Online previously reported.

The tax applies to distributors and not retailers, who are required to purchase from distributors specifically licensed to sell sugar-sweetened beverages. Beverages excluded from the tax include those that contain 50 percent or more fruits or vegetables and those that contain 50 percent or more of milk-based ingredients.

With the dismissal of the legal challenge, the Philadelphia Revenue Department reminded distributors and dealers sweetened beverages that the new levy goes into effect Jan.1 and distributors are encouraged to register no later than Dec. 31 to avoid any disruptions or additional costs.

Dealers also need to notify their distributors that they are in Philadelphia before this date.

"The most important thing to remember is that distributors who sell to dealers in Philadelphia need to register," said Revenue Commissioner Frank Breslin. "It's a simple process, and it is online at phillybevtax.com. The site also has a lot of vital information for distributors and dealers."

The first beverage tax payment is due Feb. 20