The tax was introduced in January 2017, imposing 1.5c per ounce on the distribution of sweetened beverages (including regular and diet sodas and energy drinks).
In a 4-2 majority opinion, the Supreme Court found the City of Philadelphia had not violated state law by taxing the distribution of beverages. Made yesterday, its ruling upholds that of the lower and appellate courts, both of which had also ruled in favor of the City.
The Supreme Court’s decisions ends nearly two years of litigation, allowing the City of Philadelphia to move ahead with its plans for the revenue from the tax.
City’s ability to address local issues
The challenge to the beverage tax – driven by retailers and representatives of the beverage industry such as the American Beverage Association, Pennsylvania Beverage Association, Philadelphia Beverage Association and Pennsylvania Food Merchants Association - had focused around whether Philadelphia’s tax created a double tax on top of state tax and thus violated state law.
But the Supreme Court ruling says the ‘legal incidences of the Philadelphia tax and Commonwealth’s [state] sales and use tax are different, and, accordingly, Sterling Act pre-emption does not apply’.
The City of Philadelphia says the Supreme Court ruling in favor of the tax emphasizes the city’s ability to address local needs and issues.
Marcel Pratt, city solicitor for the City of Philadelphia, said: “The highest court in our Commonwealth [has] affirmed the legality of the Philadelphia Beverage Tax.
“As we have stated since passing the Philadelphia Beverage Tax, the City of Philadelphia possessed the legal authority to enact the Philadelphia Beverage Tax because of the broad taxing authority granted by the Sterling Act.
"As the Pennsylvania Supreme Court recognized, the Sterling Act is an embodiment of Depression-era legislation intended to enhance the City of Philadelphia’s ability to address essential local needs and issues—which is precisely why the City of Philadelphia enacted the Philadelphia Beverage Tax to fund programs and initiatives that our City needs.
“Once and for all, it is now beyond question that the Philadelphia Beverage Tax is not duplicative of the state retail sales tax. I am thankful to the Pennsylvania Supreme Court for its careful consideration of this matter.
"We are now at the point where we can move forward with the programs that this tax funds with full assurance that the Commonwealth’s highest Court has agreed with the City’s position.”
Full steam ahead for community programs
Money raised by the tax goes towards Pre-K, community schools, parks, recreational centers and libraries. While many of these plans have been on hold during the legal challenge, Mayor Jim Kenney says the legal resolution means plans can go ahead.
“The City of Philadelphia will now proceed expeditiously with our original plans – delayed in whole or part by nearly two years of litigation — to fully ramp up these programs now that the legal challenge has been resolved,” he said.
Ax the Bev Tax, a coalition of business owners, restaurants and other parties, says local businesses are losing revenue as a result of the tax.
“We are clearly disappointed that the Pennsylvania Supreme Court ruled against local businesses and consumers in upholding Philadelphia’s wildly unpopular beverage tax, which is opposed by 60% of Philadelphia voters and has cost nearly 1,200 jobs," it said in a statement yesterday.
"It is now up to our elected officials to listen to the concerns of their constituents and provide Philadelphians much needed relief by reversing this tax.”
US soda taxes
Soda taxes have become a battleground in the US as various cities and jurisdictions fight for and against their introduction. Proponents – such as health organizations and local government - highlight the need to address the obesity epidemic alongside issues such as diabetes and tooth decay, seeking to curb sugar and calorie consumption. But not all consumers are on board with being priced out of their favorite soft drinks, while the beverage industry questions the effectiveness and fairness of such taxes.
Boulder, Albany, Berkeley, Oakland, Seattle and San Francisco are all places that have introduced some form of tax on sugar-sweetened beverages.
But last month California agreed to ban all new local soda taxes until 2031, although the California Medical Association and California Dental Association have filed a new ballot measure for the 2020 US election, calling for a statewide tax on sugar-sweetened drinks.
Cook County (Illinois) introduced a soda tax in August 2017, only for the measure to be repealed in October, while Santa Fe (New Mexico) rejected a soda tax in May last year.