Pennsylvania Commonwealth Court Upholds Philly Soda Tax
As previously covered, on June 16, 2016, the Philadelphia city council voted 13-4 to approve a 1.5 cent per ounce tax on sugar-sweetened beverages. The tax – which took effect on January 1, 2017 – is levied on distributors and covers a variety of beverages, including soda and diet soda, non-100% fruit drinks; sports drinks; flavored water; energy drinks; pre-sweetened coffee or tea; and non-alcoholic beverages intended to be mixed into alcoholic drinks. Prior to the January 1, 2017 effective date, the American Beverage Association (ABA) together with retailers, distributors and consumers filed a complaint in September 2016 in the Philadelphia Court of Common Pleas challenging Philadelphia’s soda tax (see previous blog coverage here). On December 19, 2016, the Philadelphia County Court of Common Pleas issued a decision upholding the Philadelphia Beverage Tax and dismissing the complaint challenging the tax in its entirety. The decision was subsequently appealed.
Yesterday, the Pennsylvania Commonwealth Court upheld Philadelphia’s beverage tax, dismissing contentions from the American Beverage Association and local retailers that the levy is unlawful. Against this backdrop, it is notable that whereas Philadelphia’s mayor previously indicated that the goal of the tax is revenue generation, the 1.5-cent per ounce tax is predicted to fall short of a projected $46.2 million for fiscal year 2017 (which ends June 30) – bringing in just $25.6 million.
Looking ahead, it remains to be seen what, if any, impact the outcome of this lawsuit will have on the appetite of other U.S. jurisdictions to pursue such legislation, particularly in light of the noted shortfalls in earnings from the Philadelphia tax.