Appellate Panel Hears Philadelphia Soda Tax Arguments

PHILADELPHIA — A judicial panel in Pittsburgh convened on April 5 to hear arguments from both sides of the Philadelphia sweetened beverage tax debate. 

The hearing before the Commonwealth Court in Pittsburgh centered on whether Philadelphia's new tax duplicates the state sales tax, which would then make it illegal, according to Philly.com.

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 tax went into effect Jan. 1.

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

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, Philadelphia Judge Gary S. Glazer dismissed the lawsuit in mid-December. He said the city's sugary beverage tax does not duplicate 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, as CSNews Online previously reported.

Attorney Chip Becker of Kline & Specter, representing the appellants, argued that the beverage tax is in effect a double tax on consumers because the cost is passed to them at the register, where they also pay sales tax. He said the city is simply shifting the tax up the distribution chain to make it appear different, according to Philly.com.

The city has argued that distribution is its own untaxed business, and in a line of questioning from Judge Michael H. Wojcik, Becker conceded that the state does not tax the distribution of sweetened beverages, the report added.

The Philadelphia City Council approved the levy by a 13-4 vote in June. The city, which became the first major city to institute a so-called soda tax, plans to spend much of the estimated $90 million in new tax revenue next year on pre-kindergarten programs, community schools and recreation centers.

Retailers and distributors have been feeling the negative impact since the levy went into effect, as CSNews Online previously reported.