Four months into collecting its tax on sweetened beverages, the city of Philadelphia was in court Wednesday battling the beverage industry over whether it has the right to do so. Meanwhile, thousands of kids await pre-K slots and aging rec centers continue to crumble as the city holds off investing $300 million leveraged by the tax until the judges rule.
The hearing in Pittsburgh before the Commonwealth Court, a statewide appellate court responsible for cases involving local governments, lasted about an hour. (Even as the hearing was under way, Philly residents were having a field day razzing Pepsi for it’s ill-conceived Kendall Jenner ad and cheap-shot tactics against their soda tax.)
Much of the debate centered on whether the city’s taxing sweetened beverages at the distributor, before they reached store shelves, amounted to a second sales tax on top of an existing state sales tax, which would not be allowed under Pennsylvania law.
“Distribution is its own business and transactions are not immune to taxation,” argued the city’s attorney, Mark Aronchik. Beverage industry lawyers argued that, regardless of where the tax is applied it amounted to they city taxing a product already taxed by the state.
The American Beverage Association, joined by local businesses, filed suit against the tax in September. After the Common Pleas Court rejected their arguments and upheld the tax in December industry representatives appealed to Commonwealth Court. There was no indication Wednesday when the panel might rule, though one remarked afterward that it was a “difficult case”.
If the court upholds the tax, it will not only be a big victory for the people of Philadelphia, but also another stinging rebuke to industry, showing that despite throwing its money and muscle around, it continues to end up on the losing side. If the court voids the tax, it will not set a precedent for taxes in other states.
Meanwhile, despite beverage industry claims of a calamitous drop in soda sales that would mean huge deficits in the city’s expected revenue, the city reported higher-than-projected tax receipts in both January and February. This suggests that sales may not be dropping as much industry is claiming.