Beverage Groups Challenge Legal Basis for Philadelphia’s Tax on SSBs

The American Beverage Association, other industry groups, retailers and
distributors have filed a lawsuit against the city of Philadelphia challenging
its tax on sugar-sweetened beverages (SSBs), arguing the statute
unlawfully attempts to circumvent Pennsylvania’s taxation supremacy.
Williams v. City of Philadelphia, No. 160901452 (Penn. Ct. C.P., Philadelphia
Cty., filed September 14, 2016).

The plaintiffs assert the statute creates “a roadmap for every local
government in the Commonwealth [of Pennsylvania] to evade the
Commonwealth’s supreme taxation structure on thousands of products—
from over-the-counter pharmaceuticals to cars—merely by imposing a
duplicative tax at a different level in the distribution chain than a tax
already imposed by the Commonwealth.” Because the beverages subject
to the Philadelphia tax are also subject to Pennsylvania tax, the city tax
duplicates the state tax, the plaintiffs argue, which amounts to “seizing
the taxing authority expressly reserved to the Commonwealth in contravention
of the Sterling Act’s prohibition on local taxation of a ‘privilege,
transaction, subject or occupation, or on personal property, which is now
or may hereafter become subject to a State tax or license fee.’”

The plaintiffs seek an injunction preventing enforcement of the soda tax,
which was enacted and became effective in June 2016, as well as declaratory
judgment holding the tax as invalid and without legal effect.

Issue 617