Beverage industry sues to block Philadelphia soda tax

The American Beverage Association and others have filed a lawsuit to block a soda tax set to take effect in Philadelphia in January.

The beverage industry had spent more than $10 million fighting the plan before the Philadelphia City Council approved it in June.

The 1.5-cent-per-ounce tax amounts to 18 cents on a 12-ounce can of soda or $1.44 on a six-pack of 16-ounce bottles.

Berkeley, California, has a similar soda tax while Chicago taxes retail soft drink sales and fountain drinks. But soda tax proposals have failed in more than 30 cities and states.

The beverage industry groups, restaurants and consumers who sued complain that the tax duplicates the state sales tax already imposed on soda.

Hotel stays in Philadelphia are also taxed by state and city authorities. However, lawyer Shanin Specter, who filed the soda tax lawsuit, said the city did not get the permission needed from the state to impose a duplicative tax.

Democratic Mayor Jim Kenney sold Philadelphia's council on the soda tax by pledging to spend most of the estimated $90 million in new tax revenue next year to pay for prekindergarten, community schools and recreation centres.

The lawsuit said the tax on both sugary and diet beverages is unfairly based on volume, not price, resulting in a higher tax rate on soda than on more expensive energy or coffee drinks.

"The tax will meaningfully diminish the everyday purchasing power of Philadelphia residents—particularly those on a limited or fixed income—and will put the city's small businesses that sell soft drinks at a material competitive disadvantage relative to comparable businesses just outside the city's borders,'' the lawsuit said.

Kenney, in a statement Wednesday, said the tax was levied on beverage distributors, not directly on consumers.

"While it is repugnant that the multi-billion-dollar soda industry would try to take away these educational and community programs from the hundreds of thousands of Philadelphians who need them, we were not surprised by their lawsuit given the ten million dollars they have already spent opposing the tax,'' he said. "I have no doubt we'll be successful in defeating the lawsuit.''