City: Soda tax brought in twice as much money as expected in January

- The city’s Revenue Department announced it collected $5.7 million from the Philadelphia Beverage Tax in its first month – January. That more than doubles the city’s predictions.

Early Thursday morning, revenue officials stressed that number is a preliminary figure and likely to increase because not all payments received have been fully processed.

The forecast for soda tax money included in the City’s Quarterly City Manager's Report was just $2.3 million.

“There is always a lag in revenues when taxes of this kind are instituted,” Director of the Pennsylvania Budget and Policy Center, Marc Stier, explained. “Reasons for this can include the time that distributors need to gear up for new tax, and the possibility that some of their inventory on-hand is not taxed. That the first month’s Beverage Tax revenues are so high is reason to believe the goal for the year will be met.”

The city’s projection for a full fiscal year of the Philly Bev Tax was more than $91 million, with the initial months expected to be lower  because inventory on hand as of Jan. 1 was not subject to tax.

That caused many stores to stock up in advance.

Opponents of the tax sued unsuccessfully. Lawyers for the beverage industry argued it duplicates the state sales tax already imposed on soda, and unfairly taxes drinks based on their size, not price.

Jeff Brown, who owns six ShopRite locations and is a FOX 29 sponsor, says it’s hurting business and will cause people to be laid off from their jobs.

At his stores, 3,000 items are affected and sales of those products are down 50 percent in six weeks since the tax started.

Brown said people in the city are shopping for soda in the suburbs, and then doing other shopping there as well.

That means layoffs are likely since a drop in sales means a drop in the workload. Also, since the stores are unionized, the newer workers are having their hours cut first and they’re going to start looking for other jobs.

On the other hand, Mayor Jim Kenney, has been a big proponent of the tax. He says to wait to see what will eventually happen over the next few months.

The mayor said opponents were “whining like little babies” and possibly fear-mongering to scare other cities and keep them from repeating what Philadelphia did.

The Revenue Department launched a monitoring campaign to ensure compliance with the tax and hired eight new people to focus on collections and enforcement. Dealers and distributors will be visited by Revenue field investigators and auditors, who will review invoices and customer lists.

“This monitoring protocol isn’t about punishing businesses,” said Revenue Commissioner Frank Breslin. “It’s about helping make sure everyone is doing what they are required to do so everyone can avoid penalties and, ultimately, so we can fuel bigger and better things for the people of Philadelphia.”

At the same time, the city is continuing its outreach initiative so distributors and dealers better understand their responsibilities.

Click here for a list of registered distributors.

Money from the tax is supposed to be used to invest in pre-K and community schools, as well as Philadelphia parks, rec centers, and libraries. According to the city’s Five Year Plan, when the programs are fully implemented in two-and-a-half years, 97 percent of the money will go toward the programs.

The remaining 3 percent will support the Healthy Beverages Tax Credit and the cost of collecting the tax. Click here for more on the programs.

The Philadelphia Beverage Tax is a 1.5-cents-per-ounce tax on the distribution of sweetened beverages as well as syrups and concentrates used to make sweetened beverages.

Distributors were encouraged to register by Dec. 31, the day before it went into effect.

The distribution of sweetened beverages in Philadelphia is subject to the tax, and filings related to sweetened beverages are due monthly, on the 20th of the month for the prior month's activity.

That means numbers above should be from Feb. 20.

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