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.
Filing a Return
What happens if the amount of the tax due is equal to or more than the retail price of the product? Is there an alternative tax calculation in extreme cases?
No. The tax is due based on the volume of the beverage, and is unrelated to the price.
I am unable to report caloric and non-caloric beverages separately as required on the tax return. What are my options?
Taxpayers who can demonstrate a unique hardship can obtain permission from the Department of Revenue to report all sweetened beverages as caloric.
Making a Payment
The Philly Bev Tax is imposed upon the distribution of the sweetend 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.
Notification & Confirmation
Dealers should provide the Distributor with either their PA Sale for Resale Sales Tax Exemption Form with a Philadelphia address or use the alternate form provided by the Department of Revenue .
Distributors provide confirmation using the Distributor Confirmation Form provided by the Department of Revenue .
I have multiple retail locations in Philadelphia, do I need to provide separate notice to my distributor for each location?
No, but if you have some locations inside Philadelphia and some outside, you should communicate to your Registered Distributors which are Philadelphia so that they know when to pay the 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.
The law does not require a Dealer to pass the cost of the Philly Bev Tax on to customers. A Dealer has discretion in setting its prices. It is possible that a Dealer may independently decide to pass some, all or none of the cost of the Philly Bev Tax onto its customers.
Dealers purchasing all sweetened beverages from a registered distributor do not need to register for the Philly Bev Tax. Dealers who do not want to (or cannot) purchase all sweetened beverage from a registered distributor, should register either as a Registered Dealers or a Special Dealer through our online registration process . Learn more about Registered Dealers and Special Dealers.
You will need the EIN or SSN for your business, contact information, and will have to determine if you are filing as a Registered Distributor, Registered Dealer, or Special Dealer.
As a Dealer with multiple locations around the region, I won't know at the time of delivery to my warehouse how much is intended for retail sale in Philadelphia. How should we handle that?
If you cannot inform your distributor of the volume of taxable products intended for retail sale, a good option is to become a Registered Dealer and take on the responsibility to file and pay the tax directly.
If a concentrate is used to prepare a beverage, and the distribution of the end beverage would be exempt from tax if prepared to the manufacturer's specifications, is the distribution of the concentrate taxable? For example, prepared chocolate milk is exempt if it is more than 50% milk. Is chocolate powder or syrup exempt if the manufacturer's specifications say to mix it with milk such that the finished beverage is 50% or more milk?
If the finished beverage, when prepared to the manufacturer's instructions, would be exempt, then the syrup or other concentrate is exempt.
What is the definition of fresh fruit or vegetables with regards to the exemption of products that are at least 50% fresh fruit and/or vegetable?
The product has to be fresh at the time of retail sale (not processed). More information is available in the Philly Bev Tax regulations.
I do not follow the manufacturer's instructions for preparing the sweetened beverage. How should I calculate the tax?
The tax is calculated based on the amount of finished beverage produced, using the manufacturer's instructions. If the manufacturer says to dilute 1 tablespoon of powdered drink mix with 20 ounces of water then each tablespoon should be treated as 20 ounces (even if you mix into 30 ounces or 15 ounces).
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.
If a syrup or concentrated sweetener is used both to make finished beverages I sell and is used by my customers to add sweetener themselves at the point of sale, how do I figure out what is taxed?
If the Dealer is using a Registered Distributor, the Dealer must notify the Distributor, at the time of purchase, how much of the product is going to be used to make finished beverages (and is thus taxable) and how much of the product is going to be made available to the customer to add (and is thus non-taxable). If the Dealer is a Special or Registered Dealer, the Dealer should make those allocations on its own returns.
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.
I have a store in Philadelphia and pick up inventory from a wholesaler outside Philadelphia. What do I have to do?
If you have notified your Distributor and received confirmation that they are registered for the Philly Bev Tax, you are good to go. If your Distributor isn’t registered, you will need to either find a new Distributor or become a Registered Dealer.
I own a retail store inside Philadelphia and sometimes deliver beverages to retail customers outside the City. Are those beverages taxable?
Yes. Those beverages have been held out for retail sale in Philadelphia, so the tax was due you acquired them, unless you segregated your non-Philadelphia inventory and informed your Distributor of your plans.
My business sells to both retail customers and businesses who resell the beverages at retail in Philadelphia. How do I handle this tax?
If you are purchasing from a Registered Distributor you should let it know what percentage you will be selling at retail, so that the Distributor can pay the tax on those beverages. You will need to register as a Distributor to pay the tax on the inventory you sell to resellers (Dealers) in Philadelphia. You can also opt to become a Registered Dealer and pay the tax on everything you sell at retail plus what you sell to Dealers.
I purchase beverages from an online retailer and then resell them in Philadelphia to retail customers. How do I handle the tax?
If the online retailer is a Registered Distributor, and you have notified them and received confirmation that they will be paying the tax, you do not need to register and pay the Philly Bev Tax. If they are not a Registered Distributor, you should either switch to a Registered Distributor or register as a Registered Dealer to file and pay.
Can I reduce the number of ounces of product reported to the City to deduct for inventory that was damaged or stolen?
No. The Philadelphia Beverage Tax is on the distribution of products intended for retail sale and must be reported and paid by whomever is filing the return.
No.There is no category of entity (non-profit or otherwise) that is exempted from the tax if it otherwise meets the definition of dealer.
How will the tax be calculated on the distribution of sweetened beverages that will be sold through Coca Cola Freestyle® machines?
For beverages that are created using sweeteners, such as High Fructose Corn Syrup or a Non-Nutritive Sweetener, mixed with flavor cartridges, the amount of tax due will be based on the national average for ounces of sweetened beverages produced from the volume High Fructose Corn Syrup or Non-Nutritive Sweetener distributed. To calculate the amount of tax on products made from a flavor cartridge that contains a sweetener but which is not mixed with a stand-alone sweetener, prorate using the share representing the national average amount of finished beverages produced using that flavor cartridge but no other sweetener. Average beverage calculations must be updated at least annually, subject to audit.
What if the beverage is not sold and just given for free in our cafeteria to our staff - are those beverages taxable?
No. If the beverage distributed is not intended for retail sale, then the transaction is not taxable.
I am a manufacturer who sells sweetened beverages directly to the public, for example at a Farmer’s Market. Do I need to register and pay the tax for sweetened beverages I sell to the public in Philadelphia?
No. The Sweetened Beverage Tax is on the distribution of sweetened beverages for resale to a dealer in Philadelphia. In this case, because no distribution has occurred, no taxable transaction has occurred.
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.
What if a Dealer doesn’t want to (or can’t) purchase sweetened beverages from a registered distributor?
Sometimes it isn’t practical for a dealer to purchase all sweetened beverages from a registered distributor. A dealer can purchase sweetened beverages from an unregistered dealer, however the dealer must then register as a “Registered Dealer” through our registration site. Registered dealers have the same obligations to file and pay a Philly Bev Tax return as registered distributors. Additionally, if a dealer is purchasing a particular sweetened beverages from a distributor that is not registered, for example from an online seller that is unregistered, the dealer is then responsible to remit the Philly Bev Tax on those products. In this case, the dealer should register as a “Special Dealer” through our registration site.
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.