A 1.5 cent per ounce tax on sugar-sweetened beverages sold in Philadelphia took effect on January 1 of this year. As reported on this blog, the American Beverage Association (ABA) together with retailers, distributors and consumers filed a lawsuit in September 2016 challenging Philadelphia’s soda tax. Philadelphia Court of Common Pleas Judge Gary S. Glazer ruled in favor of the tax, but the beverage industry is appealing that decision.

A coalition of 5 state senators and 31 state representatives filed an amicus brief last week in the Commonwealth Court of Pennsylvania opposing Philadelphia’s beverage tax. The legislators argue that the sweetened beverage tax is unlawful since the products it covers are already subject to the state’s sales tax. Noting that the Appellee had argued that the tax is allowed because it is imposed on “the distribution” of the product and not at the sales point, the legislators provided examples of how the beverage was being passed on to consumers and also noted that the tax is not applied equally to all beverages.  Some of examples provided are listed below.

• A Coca-Cola six-pack is taxed at 57% at the Collins Shop Rite.

• A 15-pack Gatorade is taxed at 42%, a 12-pack of Ginger Ale is taxed at 21%, Waist Watcher Diet Tonic Water is taxed at 78 %, and a 4-pack of Red Bull is taxed at 6% at a Fresh Grocer.

Another argument against Philadelphia’s beverage tax is it will result in lost revenue in state tax. Explaining, the brief states, “Allowing this tax to remain not only causes immediate lost revenue to the general fund but will then snowball to make a budget every year become even more of a problem…. It is not unrealistic to expect that next year there will be a “candy tax” based upon volume in Philadelphia, a sweetened beverage tax based upon volume in Harrisburg, and a “snack/cookie tax” based upon volume in another cash-strapped city.”

The outcome of the appeal could impact efforts by other jurisdictions to bridge budget gaps with similar taxes. See our blog entry, Five More U.S. Cities to Tax Soft Drinks.