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Ruling nears on legality of Philly sweetened-drinks tax

(AP Photo/Ted S. Warren

(AP Photo/Ted S. Warren

Before 2016 is over, Mayor Jim Kenney will find out whether his tax on sugary drinks will survive a legal challenge from the American Beverage Association.

Common Pleas Judge Gary Glazer has indicated he will rule before New Year’s Eve. He’s now balancing whether to deliver a favorable ruling for the city, paving the way for tax collections on soda and other sweetened drinks to start Jan. 1, or to grant the beverage industry’s request to halt the levy, which would represent a serious setback to Kenney’s program to fund pre-K and other public initiatives.

“Consumers are waiting for a decision, too. They are going to pay a heck of a lot of more money come Jan. 1 if the tax stays,” said attorney Shanin Specter, who represents the American Beverage Association.

In November, the Pennsylvania Supreme Court rejected an emergency request from Specter to have the matter taken up immediately by the state’s highest court.

Among Specter’s multi-pronged attack on the soda tax is that it duplicates Pennsylvania’s sales tax, which already applies to soda. And since the 1.5-cents-per-ounce tax is based on volume, not price, it’s what’s known as a non-uniform tax, and Specter claims that’s illegal.

But former City Solicitor Ken Trujillo and other lawyers working to defend the soda tax counter that because it falls on distributors, rather than on purchases at the point of sale, it’s not formally a sales tax. Whether distributors pass off some or all of the tax is a distributor decision. The tax is not intended to be shouldered by consumers, the city’s legal team says.

“The city is confident that the tax is lawful and well grounded, and will await Judge Glazer’s decision rather than engage in hypotheticals,” said Mike Dunn, a spokesman for Kenney.

“The beverage industry certainly has fought the tax for a long time in and out of court, but rest assured, the city is prepared to keep fighting, too, regardless of whether or where the beverage industry tries to take that fight next.”

The city has indicated that it has budgeted enough money to expand pre-K for at least the first half of 2017 with or without sweetened drink tax collections.

But if the soda tax withstands the soon-to-be-decided legal challenge, the first tax collection deadline is Feb. 20.

How ever Glazer rules, the case is expected to wind up in Commonwealth Court, an appeals court in Harrisburg that handles cases involving state and local government.

An appeal by the American Beverage Industry, Dunn said, will not stop tax collection on sweetened drinks.

“The city plans to collect and enforce the tax while any appeal by the ABA is pending,” Dunn said.

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