State lawmakers join in legal battle over Philadelphia soda tax

State lawmakers join in legal battle over Philadelphia soda tax

Author: Jason Gottesman/Tuesday, February 14, 2017/Categories: News and Views, Philadelphia

A bipartisan group of state lawmakers recently filed an amicus brief in Commonwealth Court arguing against the legality of Philadelphia soda tax.


The group of 36 members from the state House of Representatives and state Senate hailing from 28 counties, encompassing nearly every corner of Pennsylvania say they are directly impacted by the implementation of the tax "because the tax is not Constitutional, violates the law, and will result in lost sales tax revenue collection into the Commonwealth’s general fund, directly impacting the budget and jeopardizing the ability to pass a timely budget and the funding of important services."


Signed into law in late-June 2016, Philadelphia became the first major city in the United States to levy a tax on sweetened beverages.


The tax, which officially went into effect on January 1, 2017, calls for a levy of 1.5 cents per ounce on distributors of sweetened beverages.


The first payment of the beverage tax is due February 20, 2017.


The tax is anticipated to bring in $410 million over the next five years and will go toward 6,500 additional pre-K seats and 25 community schools. Some funding from the tax will also go toward servicing $300 million in new debt taken out by the city for improvements to existing parks, libraries, and recreation centers.


Monday, the State Supreme Court declined to take jurisdiction away from Commonwealth Court and hear the case directly.


In December, the Philadelphia Court of Common Pleas dismissed the challenge to the tax, leading to the current appeal.


The legal argument being put forward by the state lawmakers in their brief says the so-called soda tax is an impermissible sales tax “no matter how it is couched” and violates numerous clauses of the Pennsylvania Constitution including the uniformity clause, the Sterling Act—a law prohibiting Philadelphia from taxing any area already taxed by the Commonwealth—as well as public policy.


While the city has argued that the tax is not violative of current Pennsylvania law since it taxes the distribution of the sweetened beverages, the amicus brief argues that is a distinction without a practical difference.


"The tax is not being imposed at 'the distribution point,' but is really being imposed on Amici’s constituents at the sales point," the brief states.


Arguing the tax violates the uniformity clause, the lawmakers posit the amount of the tax is not levied on products equally since it is imposed on the volume and not the value of the beverages, leaving the tax so it can be at a rate as high as 78 percent in one case and as low as six percent in another case.


Finally, arguing the tax violates public policy, the lawmakers say that the tax impinges on the ability of the General Assembly to pass a budget by June 30 every year.


"Allowing the tax to stand would create a road map for the Appellee, and every other local governmental entity in the Commonwealth, to avoid the Sterling Act’s taxation structure," they write. "Local governments will place a sales tax on items already subject to the state’s sales and use tax."


"Each year more and more money will be lost in sales tax collections by the Commonwealth when people drive to other states to purchase the products to avoid paying the tax, or they simply stop buying the product altogether because of the expense. When money is not collected by sales tax, the state loses money to fund the general fund which in turn jeopardizes Amici’s ability to meet the June 30 mandate."


The case is expected to be argued in April, when the Commonwealth Court is expected to be in Pittsburgh.