On Thursday Philadelphia became the first major U.S. city to approve a tax on sodas and other sweetened beverages. In enacting Bill Number 16017601, the Council added a new Chapter 19-4100 to the city code, which imposes a $0.015 per fluid ounce tax on beverages and beverage concentrates sweetened with sugar-based sweeteners or artificial sugar substitutes such as stevia, saccharin, or aspartame. The tax is expected to add 18 cents to the cost of a can of soda.
The provision does not apply to infant formula, medical foods, products that are more than 50 percent milk, products that are more than 50 percent fresh fruit, vegetables or a combination of the two, unsweetened drinks to which a purchaser can add or request the addition of sugar, or syrups or other concentrates that the customer can combines with other ingredients to create a beverage.
Examples of sugar-sweetened beverages include, soda, fruit drinks without the minimum amount of fruit, sports drinks, sweetened flavored water, energy drinks, presweetened coffee or tea, and non-alcoholic beverages intended to be mixed into an alcoholic drink.
Under the new section, retailers and restaurants selling “sugar-sweetened beverages” – a term that includes beverages sweetened with artificial sweeteners rather than sugar – must purchase the beverages from distributors who are registered with the city. In addition, such retailers must notify the registered distributor that the retailer is a dealer under the law and that the purchase is subject to the tax. Then, the registered distributor must provide confirmation to the retailer of the notice and provide a receipt detailing the amount of beverage purchased and the applicable amount of tax. The tax is paid to the city by the registered distributor, not by the retailer. However, if a retailer fails to provide notice to the registered distributor, it will be liable for the tax.
Under an original proposal, Philadelphia Mayor Jim Kenney sought a three-cent-per-ounce tax to fund various desired programs. A compromise resulted in the 1.5-cent-per-ounce tax, which is projected to raise $409.5 million over five years to support expanded pre-K, community projects, and other city expenses.
Several U.S. cities, including Boulder and San Francisco, are considering their own taxes on sweetened beverages. In addition, many states and cities already have carve-outs from their sales tax exemptions, providing that unlike other foods, sweetened beverages remain subject to sales tax. And in 2014, Berkeley, California became the first U.S. city to adopt a sweetened beverage tax, charging a penny-per-ounce. Readers will also recall that New York City’s effort to ban large soft drinks was struck down by a state court in 2013, on the grounds that the state health board did not have the authority to impose the ban.
The news of the new tax comes on the heels of FDA’s long-awaited and much-discussed final rule on nutrition labeling, which mandates the disclosure of added sugar on packaged food nutrition labels. In addition, FDA has hinted that it will look to redefine the conditions under which a product can be called “healthy,” and some public health advocates have suggested that the revision should include a limit on sugar or added sugars.