An analysis from the NFIB Legal Center
Like many states, Pennsylvania imposes a uniform sales tax for goods. Certain products are subject to higher taxes for compelling reasons. For example, Pennsylvania imposes a statewide excise tax on cigarettes. The Pennsylvania Supreme Court will now decide, in Williams v. Philadelphia, if municipalities can impose special taxes on products not taxed by the Legislature. At issue is Philadelphia’s controversial soda tax, passed under the guise of reducing soda consumption and obesity. If Philadelphia prevails it will pave the road for other municipalities throughout the Keystone State to impose special taxes on products. That would mean retailers in Pennsylvania would have to conform not only to a uniform statewide sales tax, but also balkanized taxation rules at the local basis
Unquestionably if Philadelphia sought to impose its soda tax directly on the consumer it would have been struck-down because cities may not impose added sales tax at the point of sale. But Philadelphia seeks to get around that double-taxation restriction by imposing its soda tax on businesses selling or distributing soda in the city.
NFIB filed an amicus brief and argued this tax effectively amounts to double taxation—a tax on top of existing sales tax—regardless of where it is imposed in the chain of commerce.
Unfortunately, the lower courts sided with Philadelphia in a decision that invites other cities to adopt similar measures. For example, Pittsburgh might choose to begin taxing companies distributing or selling plastic products in an effort to discourage use of perfectly lawful disposable products. Another city might choose to impose special taxes on gas-powered vehicles to encourage residents to buy electric vehicles. NFIB is encouraged that the state Supreme Court has agreed to hear the dispute. We now have a final chance to take the pop out of Philadelphia’s double-taxation scheme.