American Beverage Association Files Soda-Tax Lawsuit

The ABA spent $10.6 million lobbying against the tax earlier this year. Now the organization claims it is unconstitutional double taxation.
istockphoto.com NoDerog

istockphoto.com NoDerog

The American Beverage Association filed a lawsuit today claiming that the soda tax passed by the city in June is unconstitutional.

The ABA joined with local residents and business owners in attempt to stop the tax from going into effect on January 1, 2017. The lawsuit requests an injunction against the tax, which will add 1.5 cents per ounce to the cost of sugary drinks.

The suit, filed in Common Pleas Court, argues that the city doesn’t have the right to tax soft drinks because they’re already subject to Pennsylvania sales tax. At the center of the argument is whether or not the soda tax counts as a sales tax: the city argues that it doesn’t because the distributor, not the consumer, is taxed, but the ABA argues that consumers will end up bearing the brunt of the tax.

The “practical effect is double taxation,” the lawsuit says. “The City may not circumvent the Commonwealth’s supreme taxation authority simply by changing its label or shifting the point at which the Tax is imposed.”

The lawsuit also claims that the soda tax violates the uniformity clause of the state Constitution, which requires similar products to be taxed equally, and it claims that the city cannot tax products purchased through food stamps or the Supplemental Nutrition Assistance Program.

Philadelphia is the first major American city to levy a soda tax. The tax was hailed as a win for pre-K, community schools, and parks and recreation centers, all of which will receive a portion of the money raised through the tax. Part of the revenue will also go toward the city’s fund balance.

The tax, which is expected to bring in $91 million per year, is a hotly debated topic among health advocates, educators, soda lobbyists and the soda industry workers’ union, among others. The American Beverage Association spent a whopping $10.6 million in 2016 lobbying against the tax.

Lawyers for the plaintiffs are hoping the state Supreme Court will review the case, according to the Inquirer. Several organizations have responded to the lawsuit, like the Philadelphians Against the Grocery Tax Coalition and the local Teamsters union, both of which have denounced the soda tax.

Follow @ClaireSasko on Twitter.