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June 14, 2017

Philadelphia's soda tax remains legal after Commonwealth Court ruling

A panel of Commonwealth Court judges ruled that the Philadelphia Beverage Tax is lawful on Wednesday, upholding a lower court's decision. 

The so-called soda tax, which taxes a variety of sugary beverages, went into effect in January after the Court of Common Pleas dismissed a complaint challenging its legality.

The soda lobby appealed the ruling, leading to Wednesday's decision that again upheld the tax. The panel ruled, 5-2, in favor of the city.

Mayor Jim Kenney called on the soda lobby to end its legal fight, saying the city's children are waiting to reap the benefits of the tax – free pre-K programs, community schools and park improvements.

"The beverage industry needs to see this ruling for what it is – a clear statement Philadelphia has the right to try to provide for its own – and cease the legal and public relations battle to which it has devoted millions," Kenney said. "The beverage industry should not ask our children to wait another minute."

Philadelphia became the first major American city to adopt a soda tax last summer. 

It levies a 1.5-cents-per-ounce on sweetened beverages, including sodas, fruit drinks, sports drinks, energy drinks, flavored water and pre-sweetened coffee and teas.

The soda lobby has fought the tax, claiming it is unconstitutional. So far, the courts have ruled against them.

"We appreciate the judges' exhaustive examination of the matter, and urge plaintiffs to set aside a legal action that now has been soundly rejected by two counts," City Solicitor Sozi Pedro Tulante said in a statement.

The judges upheld the findings of Common Pleas Court Judge Gary S. Glazer, who ruled that the tax was not duplicative of the sales tax, does not conflict with the Supplemental Nutrition Assistance Program and does not violate the state's uniformity clause.

"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," Judge Michael H. Wojcik wrote in the majority opinion.

Ax the Philly Bev Tax Coalition, which has fought to end the tax, released a statement saying its members were "deeply disappointed" in the ruling. The coalition said the tax has resulted in job losses – with more at stake. 

"Philadelphia grocers are also being forced to reduce employee hours and lay off workers," the statement said. "Some are in danger of closing, threatening the city's efforts to increase access in food deserts. This tax has also caused prices to skyrocket on thousands of beverages, which in turn has forced hard-working families to pay drastically higher prices."

The ruling came one day after outgoing Controller Alan Butkovitz warned that early revenue shortfalls could be creating "a multi-million dollar burden."

Through its first four months, the soda tax generated $25.6 million in revenue – a figure that is $5.2 million below its initial projection.

Hitting the city's original projection of $46 million by June 30 would require the collection of more than $20 million in May and June.

The soda lobby has argued that the tax is costing jobs, increasing prices and hurting local businesses. The city claims such revenue fluctuations are common for a new tax.