{"id":11470,"date":"2017-05-09T23:16:37","date_gmt":"2017-05-10T04:16:37","guid":{"rendered":"https:\/\/wordpress-554711-3878790.cloudwaysapps.com\/insights\/phillys-soda-tax-the-final-straw\/"},"modified":"2024-01-31T19:33:50","modified_gmt":"2024-01-31T19:33:50","slug":"phillys-soda-tax-the-final-straw","status":"publish","type":"post","link":"https:\/\/hbkcpa.com\/phillys-soda-tax-the-final-straw\/","title":{"rendered":"Philly\u2019s Soda Tax: The Final Straw?"},"content":{"rendered":"
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Philadelphia\u2019s infamous Beverage Tax (commonly referred to as the \u201cSoda Tax\u201d or the \u201cPBT\u201d)\u00a0went into effect on January 1, 2017. Despite much controversy prior to it being enacted, the\u00a0PBT remains in effect today.<\/p>\n\n

Initially, the most problematic issue was the failure of retail stores to properly comply with\u00a0the PBT due to a lack of clarity and guidance on the items subject to the tax. In one report,\u00a0a large grocery store chain detailed the arduous process that it undertook, reviewing each\u00a0product in order to identify every item that fell under the PBT. Even though this store went\u00a0through this process, some customers encountered mislabeled items and were mischarged\u00a0the PBT. Stores are blaming the mistakes on a perplexing law and the City of Philadelphia\u2019s\u00a0failure to properly educate everyone on the PBT. Recently, the City indicated that it is working\u00a0on a list of products that are exempt from the tax to help clear up some of this confusion.<\/p>\n\n

WHAT IS THE PBT?<\/strong>
\nSimply put, the PBT is a 1.5 cents-per-ounce tax on sweetened beverages. The PBT defines\u00a0sweetened beverages as any non-alcoholic beverage, syrup, or other concentrate used to\u00a0prepare a beverage that has any ingredient that is a caloric sugar-based sweetener (such\u00a0as sucrose, glucose, or high fructose corn syrup) or an artificial sweetener (such as stevia,\u00a0aspartame, sucralose, neotame, acesulfame potassium, saccharin, or advantame).<\/p>\n\n

WHO IS TAXED?<\/strong>
\nContrary to popular belief, the PBT is not a sales tax and not imposed on consumers, but\u00a0rather it is a tax on the distributor who sells sweetened beverages to the retailer dealer.\u00a0This means that the PBT is paid by the soda distributor, for example, who sells sweetened\u00a0beverages to a convenience store.<\/p>\n\n

In the situation of the major grocery store chain mentioned above, there were reports of items\u00a0being taxed that were not sweetened or not even a beverage, such as mineral water, 100%\u00a0juice, marinade, and hot sauce. Aside from taxing the wrong items, a larger issue here is that\u00a0the consumer should not have been charged the PBT at all, even if the items were sweetened\u00a0beverages, since the distributor is the party responsible for paying the PBT.<\/p>\n\n

REPERCUSSIONS OF THE PBT<\/strong>
\nAdversaries of the PBT have argued that it will be passed from distributors to the retail\u00a0dealers, and then to the consumer. This has already happened in many stores across the city,\u00a0where consumers have noticed higher beverage prices. As a result, the sale of sweetened\u00a0beverages has decreased significantly across the city, while sales in surrounding areas not\u00a0subject to the PBT have increased. This shift also affects the sale of other grocery store items,\u00a0and has resulted in reduced hours and layoffs of employees by soda companies, grocery\u00a0stores, and trucking companies. Soda companies are also responding by pulling larger\u00a0products off the shelf and offering smaller can and bottle options.<\/p>\n\n

Another example of the consumer bearing the brunt of the PBT is Temple University\u2019s\u00a0recently proposed 6 percent increase to board rates. While the increase was explained as a\u00a0way to cover the cost of the PBT, Temple has since put the increase board rates on hold.<\/p>\n\n

BENEFITS OF THE PBT<\/strong>
\nOn the flip side, while sales of sweetened beverages are down, the PBT brought in a total\u00a0of $5,900,000 in January of 2017 and an additional $6,400,000 in February of 2017.\u00a0Proponents of the PBT have emphasized the positive impact that the spending of these tax\u00a0dollars will have on the city\u2019s pre-K program, community schools, recreation centers, libraries,\u00a0and parks citywide.<\/p>\n\n

The new pre-K program also started in January of 2017, with over 2,000 toddlers enrolled\u00a0across more than 90 locations. While the program is not limited to certain income levels, it\u00a0targets those families living in lower income neighborhoods. The average household income\u00a0for families applying to the program is below $35,000 per year.<\/p>\n\n

Not only does the PBT allow more children, particularly those with a high need, to attend\u00a0pre-K, but it has created over 250 additional jobs within the pre-K program. The additional\u00a0funding has provided centers with the capability to increase salaries for the childcare\u00a0providers and teachers and has connected centers to financial literacy training and workforce\u00a0development.\n<\/p>\n

PENDING LITIGATION<\/strong>
\nThe fight between both sides is once again in court. The lawsuit that was filed by various\u00a0plaintiffs, including the American Beverage Association and the Pennsylvania Food\u00a0Merchants Association, is now being decided at the appellate level. On April 5, both sides\u00a0argued before a panel of Commonwealth Court judges in Pittsburgh.<\/p>\n\n

As a result of the ongoing litigation, the City has halted further spending of the PBT revenues.\u00a0Many organizations have filed amicus briefs with the Commonwealth Court regarding the\u00a0health impacts of the tax. However, the legal issues being argued are limited to economic\u00a0issues and whether the PBT violates the Sterling Act. This state law granted the City its own\u00a0taxing authority, but also precluded the City from taxing anything that is already taxed by the\u00a0state.<\/p>\n\n

Not soon after the PBT was enacted, other cities, such as San Francisco and Oakland,\u00a0passed similar beverage taxes. So as local residents eagerly await a decision from the Court,\u00a0Philadelphia is on the national stage as people all over the country are waiting for the final\u00a0decision which will have national ramifications. Depending on the outcome of the case, the\u00a0stage will be set for lawsuits in other cities and a possible increase in the enactment of similar taxes nationwide.<\/p>\n\n

Stay tuned for an update once the Commonwealth Court issues its decision. If you have additional questions or would like more information regarding the PBT, please contact Shane M. Finn (sfinn@hbkcpa.com), Kayci D. Petenko (kpetenko@hbkcpa.com), or Michael R. Wolf (mrwolf@hbkcpa.com) by calling (215) 628-8080.<\/b><\/p>\n\n

Download Article<\/a><\/div>\n
This is an HBK Tax Advisory Group publication.<\/div>\r\n<\/div><\/div>","protected":false},"excerpt":{"rendered":"

Philadelphia\u2019s infamous Beverage Tax (commonly referred to as the \u201cSoda Tax\u201d or the \u201cPBT\u201d)\u00a0went into […]<\/p>\n","protected":false},"author":1,"featured_media":989,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":""},"categories":[14],"tags":[259,260],"content-type":[2145],"acf":[],"yoast_head":"\nPhilly\u2019s Soda Tax: The Final Straw? - HBK<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/hbkcpa.com\/phillys-soda-tax-the-final-straw\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Philly\u2019s Soda Tax: The Final Straw? - HBK\" \/>\n<meta property=\"og:description\" content=\"Philadelphia\u2019s infamous Beverage Tax (commonly referred to as the \u201cSoda Tax\u201d or the \u201cPBT\u201d)\u00a0went into […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/hbkcpa.com\/phillys-soda-tax-the-final-straw\/\" \/>\n<meta property=\"og:site_name\" content=\"HBK\" \/>\n<meta property=\"article:published_time\" content=\"2017-05-10T04:16:37+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-01-31T19:33:50+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/hbkcpa.com\/wp-content\/uploads\/2023\/08\/SodaTax.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1160\" \/>\n\t<meta property=\"og:image:height\" content=\"440\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"hbkadmin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"hbkadmin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/hbkcpa.com\/phillys-soda-tax-the-final-straw\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/hbkcpa.com\/phillys-soda-tax-the-final-straw\/\"},\"author\":{\"name\":\"hbkadmin\",\"@id\":\"https:\/\/hbkcpa.com\/#\/schema\/person\/c69c2864300bbcd56e62892d3379e7f2\"},\"headline\":\"Philly\u2019s Soda Tax: The Final Straw?\",\"datePublished\":\"2017-05-10T04:16:37+00:00\",\"dateModified\":\"2024-01-31T19:33:50+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/hbkcpa.com\/phillys-soda-tax-the-final-straw\/\"},\"wordCount\":976,\"publisher\":{\"@id\":\"https:\/\/hbkcpa.com\/#organization\"},\"keywords\":[\"PBT\",\"soda tax\"],\"articleSection\":[\"Tax\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/hbkcpa.com\/phillys-soda-tax-the-final-straw\/\",\"url\":\"https:\/\/hbkcpa.com\/phillys-soda-tax-the-final-straw\/\",\"name\":\"Philly\u2019s Soda Tax: The Final Straw? 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