Williams v. City of Phila.

• Decision Date: 18 July 2018
• Docket Number: Nos. 2 & 3 EAP 2018,s. 2 & 3 EAP 2018
• Citation: 188 A.3d 421
• Parties: Lora Jean WILLIAMS; Gregory J. Smith; CVP Management, Inc. d/b/a or t/a City View Pizza; John's Roast Pork, Inc. f/k/a John's Roast Pork; Metro Beverage of Philadelphia, Inc. d/b/a or t/a Metro Beverage ; Day's Beverages, Inc. d/b/a or t/a Day's Beverages; American Beverage Association; Pennsylvania Beverage Association; Philadelphia Beverage Association ; and Pennsylvania Food Merchants Association, Appellants v. CITY OF PHILADELPHIA and Frank Breslin, in his Official Capacity as Commissioner of the Philadelphia Department of Revenue, Appellees
• Court: Pennsylvania Supreme Court

188 A.3d 421

Lora Jean WILLIAMS; Gregory J. Smith; CVP Management, Inc. d/b/a or t/a City View Pizza; John's Roast Pork, Inc. f/k/a John's Roast Pork; Metro Beverage of Philadelphia, Inc. d/b/a or t/a Metro Beverage ; Day's Beverages, Inc. d/b/a or t/a Day's Beverages; American Beverage Association; Pennsylvania Beverage Association; Philadelphia Beverage Association ; and Pennsylvania Food Merchants Association, Appellants

v.CITY OF PHILADELPHIA and Frank Breslin, in his Official Capacity as Commissioner of the Philadelphia Department of Revenue, Appellees

Nos. 2 & 3 EAP 2018

Supreme Court of Pennsylvania.

Argued: May 15, 2018

Decided: July 18, 2018

Charles Lyman Becker, Esq., Tracie L. Palmer, Esq., Shanin Specter, Esq., David Collin Williams, Esq., Kline & Specter, P.C., Allyson N. Ho, Esq., Michael E. Kenneally, Esq., John P. Lavelle Jr., Esq., Marc J. Sonnenfeld, Esq., Morgan, Lewis, & Bockius, L.L.P., for Appellants.

Scott B. Cooper, Esq., Schmidt Kramer, P.C., for Sen. Anthony Wms., Rep. Angel Cruz, & 32 other Indiv. Pa. Sens. and Mbs. of the Pa. Hs. of Reps., Appellant Amicus Curiae.

Thomas Herman Kohn, Esq., Markowitz & Richman, for Teamsters Local Union 830, Appellant Amicus Curiae, Pennsylvania Conference of Teamsters, Appellant Amicus Curiae.

Kevin James McKeon, Esq., Whitney Elizabeth Snyder, Esq., Hawke McKeon & Sniscak, L.L.P., for National Federation of Independent Business Small Business Legal Center, Appellant Amicus Curiae, Pennsylvania Chamber of Business and Industry, Appellant Amicus Curiae, Pennsylvania Restaurant and Lodging Association, Appellant Amicus Curiae, Pennsylvania Retailers Association, Appellant Amicus Curiae, National Association of Theatre Owners, Appellant Amicus Curiae, Tri-State Automatic Merchandising Council, Appellant Amicus Curiae.

Mark Alan Aronchick, Esq., Andrew Martin Erdlen, Esq., John Stephen Stapleton, Esq., Hangley Aronchick Segal Pudlin & Schiller, Marcel S. Pratt, Esq., City of Philadelphia Law Department, Dimitrios Mavroudis, Esq., Matthew Stephan Olesh, Esq., Kenneth Israel Trujillo, Esq., for Appellees.

Matthew P. Faranda-Diedrich, Esq., Jessica Lynne Itzkowitz, Esq., Royer Cooper Cohen Braunfeld LLC, Sabrina Adler, Esq., Deborah Barron, Esq., Seth E. Mermin, Esq., Benjamin Winig, Esq., for ChangeLab Solutions, Appellee Amicus Curiae, Children's Defense Fund, Appellee Amicus Curiae, Pennsylvania Association for the Education of Young Children, Appellee Amicus Curiae, Highscope Educational Research, Appellee Amicus Curiae, Pennsylvania Child Care Association, Appellee Amicus Curiae.

Lee Applebaum, Esq., Diane Bernoff Sher, Esq., Fineman Krekstein & Harris, P.C., Jacqueline Danielle DiRubbo, Esq., for The Sustainable Business Network of Greater Philadelphia, Appellee Amicus Curiae.

Daniel Berger, Esq., Lawrence Jay Lederer, Esq., Neil Kailash Makhija, Esq., Sarah Rebecca Schalman-Bergen, Esq., Berger & Montague, P.C., Lowell Lee Thomas, Esq., Philadelphia Housing Development Corporation, for African-American Chamber of Commerce of Pennsylvania, New Jersey, and Delaware, Appellee Amicus Curiae.

Michael J. Quirk, Esq., Berezofsky Law Group LLC, Rachel S. Bloomekatz, Esq., for American Heart Association, Appellee Amicus Curiae, Pennsylvania Medical Society, Appellee Amicus Curiae, American Cancer Society Cancer Action Network, Appellee Amicus Curiae, Food Trust, Appellee Amicus Curiae, Healthy Food America, Appellee Amicus Curiae, Momsrising.org, Appellee Amicus Curiae, National Alliance For Hispanic Health, Appellee Amicus Curiae, National Association of Chronic Disease Directors, Appellee Amicus Curiae, National Association of Local Boards of Health, Appellee Amicus Curiae, Notah Begay III Foundation, Appellee Amicus Curiae, Public Health Law Center, Appellee Amicus Curiae, American Medical Association, Appellee Amicus Curiae, National Association of County and City Health Officials, Appellee Amicus Curiae, Pennsylvania Association of Staff Nurses and Allied Professionals, Appellee Amicus Curiae, Philadelphia County Medical Society, Appellee Amicus Curiae, Physicians for Social Responsibility Philadelphia, Appellee Amicus Curiae.

Michael J. Boni, Esq., John Elliott Sindoni, Esq., Boni, Zack & Snyder LLC, for Philadelphia Opportunities Industrialization Center, Inc., Appellee Amicus Curiae, City of Berkeley, Appellee Amicus Curiae.

Farimah F. Brown, Esq., Jessica E. Mar, Esq., for City of Berkeley, Appellee Amicus Curiae.

Rigel Caitlin Farr, Esq., William J. Leonard, Esq., for Obermayer Rebmann Maxwell & Hippel LLP, International Municipal Lawyers Association, Appellee Amicus Curiae.

Rachel Kathleen Gallegos, Esq., Stephen G. Harvey, Esq., Steve Harvey Law LLC, for Public Citizens for Children and Youth, Philadelphia, Appellee Amicus Curiae, Ceiba, Inc., Philadelphia, Appellee Amicus Curiae, Delaware Valley Association For the Education of Young Children, Philadelphia, Appellee Amicus Curiae, Public Health Management Corporation, Philadelphia, Appellee Amicus Curiae.

Michelle S. Payne, Esq., for Delaware Valley Association for the Education of Young Children, Appellee Amicus Curiae.

Wendy Susanne Smith, Esq., Morgan & Akins, for Philadelphia Parks Alliance, Appellee Amicus Curiae.

Joshua D. Snyder, Esq., Boni & Zack, LLC, for City of Berkeley, Appellee Amicus Curiae, City of Berkeley, Appellee Amicus Curiae, Philadelphia Opportunities Industrialization Center, Inc., Appellee Amicus Curiae.

SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

OPINION

CHIEF JUSTICE SAYLOR

In this limited appeal by allowance, we address a claim that the Philadelphia City Council violated an express statutory limitation on taxing power delegated to it by the Pennsylvania General Assembly, when the council created what is colloquially referred to as the City's soda or beverage tax.

In June 2016, City Council enacted the challenged ordinance, which imposes a tax regarding specified categories of drinks sold, or intended to be sold, in the municipal limits. See PHILA. CODE , ch. 19-4100. Although the council's formal denomination for this levy was the "Sugar-Sweetened Beverage Tax," a broader array of beverages is impacted, including specified drinks containing sugar substitutes. See Williams v. City of Phila. , 164 A.3d 576, 579 (Pa. Cmwlth. 2017) (en banc ) (delineating these categories with reference to Section 19-4101(3) of the Philadelphia Code). For convenience, the term "beverage tax" is employed below, and the words "beverage" and "beverages" are used to refer to drinks within the purview of the tax.

The tax applies to the supply, acquisition, delivery, or transport of beverages. See PHILA. CODE § 19-4103(1). It is generally collected when beverages are transferred from a distributor, wherever located, to a Philadelphia retailer, which the ordinance refers to as a "dealer." Id. § 19-4101(1). Apart from such transfers, the tax is also collected in connection with the "transport of any [covered] beverage into the City by a dealer." Id. § 19-4103(1).

The beverage tax is assessed at one and one-half cents per fluid ounce, based on the volume of the drink to be sold at retail, see id. § 19-4103(2)(a) & (b), and is ordinarily paid by distributors, albeit that dealers must remit payment under some circumstances. See id. §§ 19-4103(1), 19-4105(1), (2) & (4), 19-4107. In all cases, the levy applies only when the transfer or transport "is for the purpose of the dealer's holding out for retail sale within the City the [covered beverages]." Id. at § 19-4103(1) (emphasis added).

Appellants -- a group of consumers, retailers, distributors, producers, and trade associations -- commenced the present civil action against the City and the Commissioner of the Philadelphia Department of Revenue, in the court of common pleas, challenging the legality and constitutionality of the tax and seeking declaratory and injunctive relief. In relevant part, Appellants advanced a theory of express preemption premised upon the Sterling Act,¹ by which the Pennsylvania Legislature afforded to the Philadelphia City Council broad authority to impose taxes, within its borders, inter alia , on "transactions" and "subjects." 53 P.S. § 15971(a) (conferring upon the City "the power to [tax] any and all subjects of taxation which the Commonwealth has power to tax but which it does not ... tax or license"). Appellants emphasized, however, that, per the explicit terms of the enactment, City Council lacks the authority to impose duplicative taxes, i.e. , any tax on a transaction or subject "which is now or may hereafter become subject to a State tax ...." Id.

According to the complaint, the beverage tax duplicates the six-percent state sales and use tax levied on the purchase price of tangible personal property, including "soft drinks." 72 P.S. §§ 7201(a) & (m), 7202. Prominent within the complaint was Appellants' contention that a subject matter of the local and state taxes -- i.e. , beverages -- is the same. Accord Brief for Appellants at 8 ("Virtually every beverage covered by the [beverage tax] is already subject to the Commonwealth's sales tax, and vice versa.").

From the outset, Appellants recognized that the beverage tax is assessed at a different tier of commercial activity than the state sales and use tax, since the beverage tax generally is paid at the distributor/dealer level. See, e.g. , Complaint ¶ 4 ("[T]he City has attempted to skirt the preemptive effect of the [state sales and use tax] by imposing the [beverage tax] on ‘the distribution’ of soft drinks that will be held out for retail sale in the City -- one step up the chain from the actual retail sale of these beverages to consumers."). It was the Appellants' position, however, that this distinction lacked legal significance, since, they asserted, the practical effect is that the tax is imposed on consumers, just as in the case of the state sales and use tax.

In this regard, Appellants also stressed that the beverage tax has a strong retail-sale nexus, see PHILA....