Industry Group Sues To Stop Philly Soda Tax

(RTTNews) - The soda industry has filed a lawsuit to block Philadelphia's recently-enacted sweetened beverage tax, saying it violates state law and is unconstitutional.

The American Beverage Association or ABA, which represents Coca-Cola Co. (KO) and PepsiCo Inc. (PEP), has joined with business owners and some Philadelphia residents, to file the lawsuit in Common Pleas Court.

The lawsuit seeks an injunction to stop the city from collecting the tax, which goes into effect on January 1, 2017.

The lawsuit argues that Philadelphia cannot tax the soft drinks as they are already subject to a state sales tax. ABA and others also say that the tax violates the uniformity clause of the state Constitution, which requires similar products to be taxed equally.

In June, Philadelphia Mayor Jim Kenney signed the city's 1.5 cents per ounce soda tax on both regular and diet soda beverages, making Philadelphia the first major U.S. city to levy a soda tax. The move, after two previous failed attempts, is aimed to help fund the expansion of pre-kindergarten education.

It is expected that most of the estimated $90 million in new tax revenue next year would be spend on prekindergarten, community schools and recreation centers.

However, supporters of the soda tax, who aim to discourage consumers from taking sugary beverages for health reasons, expect the passage of the tax in Philadelphia would lead to similar actions in other cities.

The soda industry, which had spent some $10 million against the move, is adamant to fight to repeal the tax on sweetened beverages.

In response to the lawsuit, Philadelphia Mayor Kenney said, "While it is repugnant that the multi-billion-dollar soda industry would try to take away these educational and community programs from the hundreds of thousands of Philadelphians who need them, we were not surprised by their lawsuit given the ten million dollars they have already spent opposing the tax. I have no doubt we'll be successful in defeating lawsuit."