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December 19, 2016

Lawsuit challenging Philadelphia soda tax dismissed in its entirety

A lawsuit challenging Philadelphia's sugary drinks tax has been dismissed.

Common Pleas Court Judge Gary S. Glazer dismissed the lawsuit in a ruling issued Monday, a big victory for proponents of the so-called soda tax.

The new law, signed by Mayor Jim Kenney earlier this year, stands to tax sodas and beverages with added sugar at a rate of 1.5 centers per ounce. The tax will be levied on distributors of the products, not directly on consumers.

The Philadelphia Beverage Tax is scheduled to take effect on Jan. 1.

Several groups filed a lawsuit in September to challenge the tax as unlawful, including the American Beverage Association, the Pennsylvania Beverage Association and the Pennsylvania Food Merchants Association.

Passage of the soda tax marked a significant policy win for Kenney in his first year as mayor. He won support by promoting the tax as a way to fund universal pre-K, community schools, police body cameras and the revitalization of parks.

The tax is expected to generate about $91 million annually.

Kenney praised the ruling as "much more than a simple vindication" of legal principles, calling it a "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," Kenney said in a statement. "The industry has chosen not to challenge beverage taxes in other municipalities and there is no reason to continue pursuing it here."

Glazer rejected the three primary legal arguments brought by the challengers, ruling the tax does not duplicate the Pennsylvania Sales and Use tax, does not violate the uniformity clause of the Pennsylvania Constitution and does not conflict with the Supplemental Nutrition Assistance Program.

"We greatly appreciate the thorough and timely consideration that Judge Glazer gave to this matter," City Solicitor Sozi Pedro Tulante said in a statement. 

The Philadelphians Against the Grocery Tax Coalition — a group of soda tax opponents that rallied against the tax — expressed disappointment at the decision, decrying the tax as discriminatory, regressive and an unsustainable revenue source.

"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," the group said in a statement. "It will also become more expensive to see a movie, eat at a restaurant or attend a ballgame."

Non-alcoholic beverages that list any calorie-based sweetener, like high fructose corn syrup, or any form of artificial substitute, will be taxed. That includes sodas, sports drinks, sweetened teas and flavored waters, among other drinks.

The tax will exempt baby formula and beverages that contain more than 50 percent milk, fresh fruit or vegetables.

The tax does not directly impact consumers. Instead, it taxes the distributors that supply such beverages to retail outlets, restaurants, street vendors and vending machine operators. But distributors could passed the tax to the consumer by raising prices.

City Council passed the tax on June 16, by a 13-4 vote, as part of its budget proceedings. Kenney signed the bill into law four days later. 

Philadelphia became the first major American city to enact a soda tax. Only Berkeley, California had a similar a tax.

Former Mayor Michael Nutter previously pushed for a soda tax, but could not garner the necessary support from City Council. Nutter had pushed the tax as a way to improve public health.