Appeals Court Upholds Philadelphia SSB Tax
A Pennsylvania appeals court has upheld Philadelphia’s tax on the
distribution of sugar-sweetened beverages (SSBs), rejecting
arguments that it is a duplicate sales tax or is preempted by state
tax laws. Williams v. City of Philadelphia, Nos. 2077, 2078 (Pa.
Commonwealth Ct., order entered June 14, 2017). The court held
that the subject matter of the tax—the non-retail distribution of
SSBs—is “distinct” from the sales tax collected when the beverages
are sold to a retail purchaser, and thus the distribution tax is not
duplicative of an existing tax. In addition, the court said, the tax is
not preempted under state law because Pennsylvania cities have
the right to tax transactions that are not already subject to state
tax or license fees. Nor is it preempted by the federal Food Stamp
Act or related tax laws because the tax is levied on the distributors
of SSBs and “no recipient of program benefits is ever liable for the
payment” of the tax, the court said. “The fact that the [tax] may be
passed on to recipients through higher retail prices does not alter”
the nature of the tax itself.
Finally, the court rejected arguments that the tax violates the
uniformity clause of the state’s constitution because it is a
property tax based on SSB inventory of distributors and dealers.
The court applied the language of the regulation, finding the tax is
imposed only when SSBs are “supplied, acquired, delivered or
transported” for retail sale, not upon ownership. Additional
details about the Philadelphia tax appear in Issues 607, 617, 621
and 622 of this Update.