Appellate Panel Upholds Philly Soda Tax

PHILADELPHIA — A judicial panel upheld Philadelphia’s beverage tax during a hearing before the Commonwealth Court June 14, dismissing complaints from the American Beverage Association and local retailers that the levy is unlawful.

The legal victory is the second for the city, which fended off a challenge in December. In April, seven Commonwealth Court justices heard arguments in Pittsburgh on whether the city’s 1.5-per-ounce tax duplicates the state sales tax, which would render it illegal, reported Philly.com.

On Wednesday, the panel published a 5-2 decision affirming the lower court’s ruling.

Arguments centered on whether the levy amounted to a double tax. State law prohibits Philadelphia from enacting taxes on items or transactions the commonwealth already taxes. The beverage tax is levied on distributors who sell and transport beverages to dealers for retail sale.

According to the news outlet, attorneys representing the appellants argued that because the cost is passed on to consumers at the register where they also pay sales tax, that consumers are taxed twice. The attorneys argued the city is simply shifting the tax up the distribution chain to make it appear different.

Shanin Specter, an attorney for the appellants, said they would appeal the decision to the state Supreme Court.

The 1.5-cent-per-ounce tax will fund Philadelphia Mayor Jim Kenney’s pre-K program and community schools, and help pay to rebuild parks and recreation centers citywide. While the tax is in litigation, the city has said it will not expand its pre-K program beyond 2,000 seats, and will delay taking out a bond to help rebuild parks, Philly.com reported.

“I’m happy [the judges] understand how important this revenue is to getting our kids educated and getting our kids out of poverty and changing the poverty narrative in the city,” Kenney stated.  

In a statement, he urged the coalition fighting the tax, which pays for city programs, not to appeal.

“Two courts have now considered the arguments of the beverage industry and both are certain that the Philadelphia Beverage Tax stands on solid legal grounds. As I stated when the beverage tax was upheld in Common Pleas Court, the children of Philadelphia are waiting for the opportunities that the tax can provide,” Kenney said. “Our entire city desperately needs us to be able to move forward with the programs funded by the tax and we will be unable to do that in full until full legal action is resolved.”

In September, 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, as CSNews Online previously reported.

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.

The victory for the city comes five months into the tax’s implementation. The city said this week the tax will bring in less than anticipated in its first six months. The levy has already raised $25 million, though, and city officials said they expect to bring in the $92 million needed for the programs in fiscal year 2018.