The Department of Revenue is adding Investigators and Auditors to visit Dealers and Distributors, to examine their records and identify under-reporting and non-compliance. In addition to fines and penalties, businesses that fail to pay may be closed or have judgments entered.
Making a Payment
The Philly Bev Tax is imposed upon the distribution of the sweetened beverages to Dealers who intend to sell the product at retail in Philadelphia. It is generally paid by Distributors. A Dealer can choose to take on the obligations of a Distributor, including payment of the tax, if that makes more sense for their business. Distributors (and Dealers who opt to act like Distributors) need to register for the Philly Bev Tax.
The consumer is not responsible for payment of the Philly Bev Tax. The Philly Bev Tax is on the distribution of sweetened beverages intended for retail sale in Philadelphia, based on the volume sold. The Philly Bev Tax is typically paid by the Distributor. The Dealer collects the Pennsylvania Sales Tax based on the price charged to the end customer. The two are not related. Accordingly, Dealers do not collect the Philly Bev Tax from consumers.
I know only 100% juice is exempt and that all juices with added sweeteners are taxable; but what about juices that are not drinkable without a little sweetener, like cranberry juice cocktail?
Even lightly sweetened juices are taxable. Only juices with no added sweeteners are not subject to tax.
Thickened beverages are not taxable when they are medical foods, used for the treatment or management of a diagnosed medical condition, such as those specifically marketed for use by people with dysphagia and/or swallowing dysfunction.
Unless the particular product meets the definition of a medical food or other criteria for exemption, sweetened sweetened meal replacements and weight loss drinks are taxable.
Mixes sold at retail are not taxable if they are sold in concentrate form to the end customer who will mix them to create a beverage. If a dealer mixes the concentrate to create a beverage for resale, then distribution concentrate is taxable.
Multi-use sweeteners like table sugar, agave, honey, and stevia are not taxable when sold on their own, but beverages, syrups, and concentrates containing these sweeteners as an ingredient may be taxable.
First, determine if the product has ingredients that would make it subject to the Beverage Tax (see regulations for guidance) and instructions for using the product to prepare a beverage. If the answer to both conditions is yes, then the product is a sweetened concentrate used to prepare a beverage. Then look at how the product is being used and sold:
- If the concentrate is being sold directly to the end consumer to mix themselves into a beverage – NOT TAXABLE
- If the concentrate is being sold to a dealer to create finished beverages – TAXABLE, based on volume of finished beverage created using the manufacturer’s instructions, but subtracting alcohol from that volume.
No. Sweetened nut and plant milks are taxable unless the USDA has deemed them nutritionally equivalent to dairy milk and that nut or plant milk is 50% or more of the finished beverage. Unsweetened nut and plant milks are not taxable.
No. The Philly Bev Tax is on the distribution of sweetened beverages to a Dealer. Individuals may purchase products for personal consumption wherever they choose.
Yes. If you are registered for the Philadelphia Beverage Tax, you will need to file monthly returns even if you have no tax liability for that month. Simply file $0 for the month.
Where is the funding going? I heard most of it actually isn’t going to pre-K, schools, parks, rec centers, and libraries.
In fiscal year 2021, which begins July 2020, 99 percent of the tax revenue will go toward those three programs. The remaining 1 percent of revenue will be spent on the Healthy Beverages Tax Credit, which was passed in spring 2016 to help small businesses sell healthier items.
Similar concerns were raised after the “liquor by the drink” tax went into effect—and they proved empty. However, our revenue projections do account for a significant drop in consumption of these products within Philadelphia. But even with the drop in consumption, our revenue projections still cover the programs.
Similar ominous predictions were made after the “liquor by the drink” tax went into effect, but Philadelphia’s bar and restaurant scene has only grown since that time. Stores that do see a decline in sweetened drink sales and decide to shift to healthier products will be eligible for the Healthy Store Tax Credit. This credit, offered against the City’s Business Income and Receipts Tax, is offered to qualifying merchants who increase their inventory of healthy beverages. The credit is calculated as the difference in merchant cost for healthy beverages compared to the prior year, up to $2,000.
The tax was passed to provide revenue for pre-K, community schools, and Rebuild. We chose to tax the distribution of sweetened beverages because, unlike wage or property taxes, it’s a tax that no consumer has to pay. You have a choice: You can buy these nonessential, non-nutritious drinks or not.
The Common Pleas Court found in favor of the City in December 2016. The American Beverage Association has decided to appeal that ruling, but the City remains confident in its defense. While the appeal is pending, the City cannot spend the tax revenue as it originally intended, and that’s why we’re moving forward with abbreviated and slower rollouts of the programs the tax will fund at this point. Pre-K will maintain its current commitment to 2,000 seats, but we will not add an additional 1,000 in September 2017, as previously planned, if the appeal is still pending at that time. Additionally, we will hold off on the $300M planned investment in parks, rec centers and libraries, until the appeal is resolved. At this time, the Rebuild team will utilize $5M for the planning and design phase. We have taken a number of actions in the appellate courts to expedite a final resolution in the litigation so that we can move forward with these programs as soon as possible.
Through the end of November 2016, the lawsuit has cost the City approximately $828,000. The Laura and John Arnold Foundation is generously contributing $500,000 toward the cost of the City’s defense. The current contracts for our outside lawyers are capped at $1.6M.
In September 2016, the American Beverage Association and other co-plaintiffs filed a lawsuit challenging the Philadelphia Beverage Tax in the Philadelphia Court of Common Pleas. On December 19, 2016, the Philadelphia Court of Common Pleas dismissed the lawsuit in its entirety. The tax went into effect as scheduled on January 1, 2017. Plaintiffs appealed the decision to the Commonwealth Court of Pennsylvania. On June 14, 2017 the Commonwealth Court of Pennsylvania ruled in favor of the City and upheld the Philadelphia Beverage Tax. We’ll update this website if future legal actions ever impact your obligations under the Philly Bev Tax.