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Philadelphia beverage tax hard to swallow

  • Jan 5, 2017 | Gail Cole

 Is the experience worth the extra tax?

As of January 1, 2017, soda and a bevy of other sweetened beverages sold in Philadelphia are subject to the Philadelphia Beverage Tax (PBT).

The tax is levied on the distribution rather than the sale of soda and other drinks, and it’s paid by distributors. Yet, since not passing it along in the form of higher prices would cut into profits, most distributors are increasing their prices to offset the cost. As a result, many retailers are raising their sticker prices, too.

Consumer reactions vary. Some are outraged by the higher cost of their favorite drinks; others are taking the price hike in stride. Some plan to drink more water, which is exempt from the tax, while others intend to buy their favorite sweet drinks outside of the city limits, where the tax doesn’t apply.

Who must register and remit the tax

The 1.5-cents-per-ounce tax is levied on the distribution of the sweetened beverages, syrups, and concentrates used to make sweetened beverages. Wholesale suppliers were required to register with the city by December 31, 2016, and the first tax return and payment is due on February 20, 2017.

However, since some dealers may not purchase all taxable beverages from a registered distributor, the city allows dealers to pay the tax themselves. Dealers who intend to do so must register as a “Special Dealer” with the city, and file returns and remit the PBT by the 20th of each month.

What is subject to the tax

The tax applies to energy drinks, nonalcoholic cocktail mixers, presweetened coffees and teas, soda, sports drinks, sweetened water, and any nonalcoholic sugar or artificially sweetened beverage that has any of the following ingredients:

  • Caloric sugar-based sweeteners such as beet sugar, glucose, high-fructose corn syrup, honey, maple syrup, sucrose, and certain sugars from concentrated fruit or vegetable juices (e.g., apple juice concentrate, date juice concentrate)
  • Any sugar substitute or nonnutritive sweetener that causes humans to perceive sweetness in the absence of sugar, such as aspartame, saccharin, stevia, and sucralose
  • Any nonalcoholic syrup or other concentrate that’s intended to be used in the preparation of a beverage that lists any of the above as an ingredient

See FAQs for consumers, dealers, and distributors and the PBT regulations for additional information.

Philadelphia’s so-called soda tax was challenged by the beverage industry, but the case was dismissed in its entirety shortly before the tax took effect. For now, at least, the tax stands. However, the deep-pocketed beverage industry has already filed an appeal, and a lengthy legal battle would be challenging for the city to fund. Fortunately for Mayor Jim Kenney, the Houston-based Laura and John Arnold Foundation has gifted the city $500,000 for its legal defense of the soda tax.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.