Last week, Philadelphia's City Council passed a new law taxing sugar-sweetened beverages. Here are some FAQs:
What is a sugar-sweetened beverage? Examples include soda, non-100% fruit drinks, sports drinks, flavored water, energy drinks, pre-sweetened coffee or tea, and non-alcoholic beverages intended to be mixed into an alcoholic drink. The new law contains an ingredient-based definition.
Are there exclusions from the tax? Yes, exclusions include, among other things, baby formula, any product, more than 50% of which, by volume, is milk, and any syrup or other concentrate that the customer combines with other ingredients to create a beverage.
How much is the tax? The tax is one and one-half cents per fluid ounce for sugar-sweetened beverages.
How is the tax imposed? The tax is imposed on each of the following: (a) the supply of any sugar-sweetened beverage to a dealer; (b) the acquisition of any sugar-sweetened beverage by a dealer; (c) the delivery to a dealer in the City of any sugar-sweetened beverage; and (e) the transport of any sugar-sweetened beverage into the City by a dealer. The tax is imposed only when the supply, acquisition, delivery or transport is for the purpose of the dealer's holding out for retail sale within the City the sugar-sweetened beverage or any beverage produced therefrom.
How does it work? The new law defines a "dealer" as any person engaged in the business of selling sugar-sweetened beverages for retails sale within the City, including restaurants, retail stores, street vendors, owners and operators of vending machines, and distributors who engage in retail sales. The law defines a "distributor" as any person who supplies sugar-sweetened beverages to a dealer.
Distributors must register with the City, and dealers must notify distributors that the dealers are subject to the new law through a sale for the purpose of resale exemption certificate. The tax is paid to the City by the registered distributor, and the dealer is not liable to the City for payment of the tax as long as the registered distributor has received the proper notification from the dealer.
Are waivers available? Yes, the City retains discretion to grant a waiver from the tax upon a showing of extraordinary circumstances.
Are there penalties for noncompliance? Yes, a violation is a Class II offense, and a repeat violation within a twenty-four month period subjects the offender to suspension of his or her commercial activity license.
When is the new law effective? January 1, 2017.