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Philadelphia Beverage Tax Now Law As Judge Dismisses Industry Suit

The Philadelphia Sweetened Beverage Tax (PBT) is now law, making the city the largest municipality in the nation whose residents will now have to pay a tax on sweetened soft drinks. Any hope for a delay or dismissal of the controversial law abruptly ended on December 19 when Philadelphia County Court of Common Pleas Judge Gary S. Glazer dismissed a lawsuit filed by the American Beverage Association (ABA) and other industry affiliates against the City of Philadelphia earlier this year.

The soda tax now adds 1.5 cents per ounce to the cost of most sugary and diet beverages. More than 1,000 products found in grocery stores would fall under the proposed tax including teas, coffee drinks, lemonade, juice drinks, sports drinks, enhanced water, mixers and energy drinks. Also included would be all artificially sweetened drinks.

However, the plaintiffs, Philadelphians Against Grocery Tax Coalition, claimed in that the tax was illegal because of an existing Pennsylvania sales tax that imposes a 6 percent sales tax on many of the same soft drinks that would also be affected by the PBT. The group led by the ABA also said that the PBT violated a federal mandate targeting Supplemental Nutrition Assistance Program (SNAP) funds that could impact the state’s ability to distribute and collect SNAP funds.

Dismissing the complaint in its entirety, Judge Glazer’s 14-page decision noted that the PBT did not violate the state Constitution’s Uniformity clause and did not duplicate the current Pennsylvania sales and use tax or affect the state’s ability to collect and distribute SNAP funds. Philadelphia Mayor Jim Kenney, the primary driver of the PBT, said in a statement following Judge Glazer’s ruling: “This is much more than a simple vindication of the legal principles on which the tax is based. It is victory for Philadelphians, who have waited far too long for investment in their education system and in their neighborhoods. 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. 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.”

The City Council and Mayor Kenney approved the bill last June and the plaintiffs’ original lawsuit was filed last September against the city of Philadelphia and Frank Breslin, commissioner of the city’s revenue department. The city said it hopes to raise $91 million from the soda tax.

The Philadelphians Against Grocery Tax Coalition also released a statement after the decision: “We are disappointed with today’s decision. More than 30,000 Philadelphians and more than 1,600 businesses and local organizations have joined together to say that this tax unfairly targets working families and small businesses. Families will face an additional tax burden even as the city has demonstrated that it has the resources to move forward with pre-K without this tax. We will continue to oppose this discriminatory and regressive tax, which is not a sustainable revenue source to support important initiatives like pre-K programs. Philadelphia families will be shocked in January when prices jump on more than 1,000 common beverages, including teas, soft drinks, juice drinks and no-calorie and low-calorie options. It will also become more expensive to see a movie, eat at a restaurant or attend a ballgame.”

Attorneys for the group vowed to appeal Judge Glazer’s ruling. And shortly after the new tax became law on January 1, the Philadelphians Against Grocery Tax Coalition website (nophillygrocerytax.com) was flooded with links to news stories about the tax, many of which were critical of the new law.

One example was a January 4 Philadelphia Inquirer story which noted that a case of Gatorade increased from $20 to $30 at Nicoletti Beverage Center in the Tacony area of the city. Michael Nicoletti, co-owner of the distributor, which also sells beer, said that given the store’s proximity to Bensalem in adjacent Bucks County, he would likely stop selling sodas and sweetened beverages.

“People can just go up the street,” Nicoletti said in the story. “It’s just a nightmare. I don’t know if they realize what they’ve done.”