By Jessica Eisenmenger and Open Weaver Banks

The Commonwealth Court of Pennsylvania upheld the Philadelphia Beverage Tax (PBT) against a challenge by the American Beverage Association and other challengers. The PBT imposes a 1.5¢ per fluid ounce tax on sugar-sweetened beverages and is generally payable by the distributor of the beverages. The court decided in favor of the City of Philadelphia, finding that:

  1. The PBT was not impermissibly duplicative of the Commonwealth’s Sales Tax under Pennsylvania’s Sterling Act, which precludes the imposition of a local tax on subjects that are taxed by the state, because the subject matter and the incidence of the PBT are different from those of the Sales Tax;
  2. The PBT was not preempted by the federal Food Stamp Act, its regulations, and Section 204(46) of the Internal Revenue Code, which prohibit the imposition of tax on items purchased at retail with food stamps, because the PBT is imposed on distributors, rather than on end customers;
  3. The PBT does not violate the uniformity clause in the Pennsylvania Constitution because it is not a property tax imposed on a quantity, rather than an ad valorem basis; and
  4. The trial court had reasonable grounds to deny the challengers’ request for a special injunction.

In her dissent, Judge Anne Covey stated her belief that the PBT violates the Sterling Act because it is only triggered when the beverages are held out for retail sale, and therefore it is impermissibly duplicative of the Sales Tax. Williams v. City of Philadelphia, Nos. 2077 and 2078 C.D. 2016 (Pa. Commw. Ct. June 14, 2017) (en banc).