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.
I have been audited and assessed for Philadelphia Beverage Tax and I disagree. What is the appeal process?
As with most other Philadelphia taxes, audit assessments may be appealed to the Tax Review Board .
Filing a Return
Monthly, on the 20th of the month for the prior month's activity. For example, beverages supplied in January 2017 have to be reported on a return due on February 20, 2017.
You will need 4 things: the volume of taxable ounces of non-caloric beverages supplied, the volume of taxable ounces of caloric beverages supplied, the volume of taxable finished non-caloric beverages produced from syrups or other concentrates, and the volume of taxable, finished -caloric beverages produced from syrups or other concentrates supplied. The online return will automatically calculate the amount of tax due (and any late fees if necessary).
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.
A Dealer that I distribute to has locations inside and outside Philadelphia, but they haven't told me how much of their order is going to be held out for retail sale in Philadelphia. What do I do?
First, ask the Dealer to clarify. If you are unable to get a response, assume 100% of the product is taxable. If you get updated information after the return is filed, you may file an amended return.
It turns out that more of the product I supplied was held out for retail sale in Philadelphia than I initially was told. How do I correct this underpayment?
If the Dealer has notified you of the error and you have allowed the Dealer to recharacterize the sale as a Philadelphia sale (including any potential price changes), you must file an amended return and make the additional tax payments, or make the necessary adjustments on your next return. If the Dealer does not notify you of the error or you are unable to reconfigure the sale to accommodate any price differential, you have no obligation. The Dealer will have to register as a Special Dealer and pay the tax directly.
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.
Either the volume of taxable beverages distributed in ounces or the amount of tax due on the transaction. This may be presented as a grand total or by item.
On the invoice, do I show the amount of tax or volume of beverage for each individual item or for the entire order?
Distributors may choose whether to present the amount of tax or volume of beverage by item or for the entire order. If you cannot fit this on the invoice, you may use the Invoice Supplement form provided by the Department of Revenue .
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 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 of taxable product. The tax would be 20 ounces times 1.5 cents for a total of 30 cents.
1.5 cents per ounce of sweetened beverages. For syrups and other concentrates, 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 for purposes of calculating the tax on the distribution. The tax would be 20 ounces times 1.5 cents for a total of 30 cents.
Contact the Department of Revenue to arrange a payment agreement in order to avoid additional charges. Email us at firstname.lastname@example.org or call 215-686-6600.
For beverages prepared using more than one sweetened syrup or concentrate, how is the tax calculated?
Tax on products with two types of sweetened concentrates should only be based on the total ounces of finished product, either by taxing just one of the sweeteners or prorating between the two.
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 .
A Dealer that I supply with sweetened beverages is located in Philadelphia but has not sent the notification for the Philly Bev Tax. Should I pay the tax on those transactions anyway?
First, reach out to the Dealer. It is possible that they have registered to pay the tax directly or do not intend to hold the products out for retail sale in Philadelphia. You can access materials here to help make the Dealer aware of the Philly Bev Tax. However, if you have a PA Sales Exemption Certificate on file with a dealer that has a Philadelphia address, that is sufficient notice to collect and remit the tax. Dealers that sell sweetened beverages at retail in Philadelphia and fail to notify their Distributors are liable for payment and any fees and penalties for non-compliance.
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.
I have PA Sales Tax Exemption certificates from my customers and I know they are located in Philadelphia but they haven't notified me about paying the tax, what should I do?
A PA Sales Tax Exemption certificate is sufficient notification from a dealer that the Philadelphia Beverage Tax is due on transactions to them, so provide confirmation to them that you are a Registered Distributor and begin reporting and paying on your supply of product to them.
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.
Refunds & Overpayments
I filed a return and made a payment, but some of the product expired and had to be destroyed or returned or given away after sitting on the shelves. Can I get a refund?
No. The products were supplied with the intent of retail sale. The transaction is taxable.
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.
No, but we strongly recommend it. All Philadelphia dealers are required by law to either purchase from a Registered Distributor or to register on their own and file and pay directly. Many dealers have indicated that they would prefer to purchase from a Registered Distributor and they will have to switch if their current distributor does not get registered or register as a Registered or Special Dealer.
I am a distributor and I sell to other distributors, who then sell the product to dealers. Should I file and pay the Philadelphia Beverage Tax?
No. The Philadelphia Beverage Tax is on the distribution of sweetened beverages intended for retail sale. Supply to other wholesalers is not subject to the tax.
If a retail product consists of a concentrate packaged separately from an unsweetened beverage, and the retail customer mixes the two together, is the distribution of that product taxable?
No. For the distribution to be taxable, the concentrate has to be intended to be used in the preparation of a beverage by a Dealer for retail sale.
Medical foods are foods designed to treat or manage a diagnosed medical condition. The federal Orphan Drug Act defines medical foods. Taxpayers may be asked to provide documentation for any products for which they claim a medical foods exemption. More information is available in Section 102 of the Philly Bev Tax regulations.
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.
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.
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.
No. The taxpayer should make that determination based on information about the product following the guidelines in the Philly Bev Tax regulations. Taxpayers may be required to produce documentation supporting the medical foods exemption for all products they exclude from the tax.
How is the tax calculated when the manufacturer has more than one set of instructions for preparation of the beverage from a syrup or other concentrate?
Use the instructions that produce the largest volume of finished beverage.
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.
Is there a "Floor Tax" for the existing sweetened beverage inventory I have on January 1, 2017 when the Philly Bev Tax starts?
No. There is no Floor Tax for the Philly Bev Tax. Products distributed to a Dealer on or after January 1, 2017 are taxable.
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.
No. The Philly Bev Tax is due when it is distributed to a Dealer who intends to sells the product at retail in Philadelphia.
If a product is distributed and then redistributed before being sold to a Dealer in Philadelphia, will the tax be due more than once?
No. The Philly Bev Tax is due when it is distributed to a Dealer who intends to sell the product at retail in Philadelphia. Distribution from one wholesaler to another is not taxable.
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.
Is anyone who buys from a distributor located within the city limits subject to the tax, or just dealers who have a place of business in Philadelphia?
Sweetened beverages distributed for resale in Philadelphia are subject to the tax. So if you are distributing to a dealer who is reselling at a business outside of Philadelphia, then those products are not subject to the tax.
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.
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.