Beverage Tax Upheld by Commonwealth Court

A panel of judges has upheld Philadelphia’s beverage tax, dismissing complaints from the American Beverage Association and local retailers who argued that the levy is unlawful.
The legal victory is the second for the city, which fended off a challenge in December.
Mayor Kenney welcomed the news on Wednesday morning.
“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,” Kenney said in a  statement. “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.  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.”

Shanin Specter, an attorney for the appellants, said they will appeal the decision to the state Supreme Court.
“We are deeply disappointed in today’s ruling,” said Anthony Campisi, a spokesman for the Ax the Beverage Tax campaign, backed by the American Beverage Association. “But no ruling can obscure the pain Philadelphia’s beverage tax continues to inflict on families and local businesses.”
In April, seven justices of Commonwealth Court in Pittsburgh heard arguments on whether the city’s 1.5-per-ounce tax duplicates the state sales tax, rendering it illegal. 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.

Attorneys representing the appellants argued that because the cost is passed on to consumers at the register where they also pay sales tax, they are taxed twice. The attorneys argued the city is simply shifting the tax up the distribution chain to make it appear different.
Commonwealth Court Judge Michael Wojcik, who wrote the opinion affirming the lower court’s order, rejected the appellant’s argument.
“The PBT is not imposed on the ownership of the sugar-sweetened beverages or on their sale; rather, it is only imposed if the beverages are supplied, acquired, delivered, or transported for purposes of holding them out for retail sale in the City,” Wojcik wrote. He said the legal reading of the tax does not concern “the post-tax economic actions. … in sum, the trial court did not err in determining that the City was empowered to enact the [Philadelphia Beverage Tax].”
In a minority opinion, Judge Anne E. Covey said the tax should be looked at as a whole. While it’s levied on distributors, it’s passed through to people buying at the register, she said.
“While I acknowledge that the PBT does not appear to be duplicative of the Sales Tax because it is not explicitly labeled a retail sales tax, the Majority ignores that the PBT is only triggered when there is a retail sale involved,” Covey wrote.
The 1.5-cent-per-ounce tax will fund Mayor Kenney’s pre-K program and community schools, and help pay to rebuild parks and recreation centers citywide.
Staff writers Claudia Vargas and Tricia L. Nadolny contributed tot his article.