Philadelphia’s City Council gave preliminary approval to a bill that would make much of Mayor Jim Kenney’s much-discussed proposal to tax sugary drinks a reality last night. But even if the mayor gets his votes, the battle may be far from over.

The levy would fund a raft of Kenney's campaign pledges, like starting a universal pre-K program and funding city building projects. But a legal challenge to the tax, if passed, is already being floated by beverage industry lobbyists.

“We aren’t taking any options off the table, and there’s a strong legal case to be made that this tax is unconstitutional,” said Anthony Campisi, of Ceisler Media, which is handling communications for the American Beverage Association's anti-tax efforts.

A memo drafted by the ABA to City Solicitor Sozi Tulante outlines the group’s case against the mayor’s plan. The anti-tax lobby plans to argue that the tax, which would be applied to beverage distributors, counts as a sales tax, which typically applies to consumers.

This is a crucial distinction because Philadelphia cannot legally impose a sales tax without approval from Republican-dominated Harrisburg, which has often received tax proposals coolly.

“Although the drafters of the proposed tax seem to have gone to great lengths to avoid calling it a ‘sales tax’...There is no denying that it would be triggered by the sale of beverages,” reads the memo. “It is clear that at least a substantial portion, if not all, of the tax will ultimately be paid by consumers.”

This has been the broader argument posed by the ABA, which has sought to rebrand the soda tax as a “grocery tax” that will hit shoppers’ wallets as distributors pass on increased costs. But the memo goes on to assert that if the tax is allowed to stand, it would set the precedent that Philadelphia could sidestep taxing authority restrictions by simply by applying taxes one notch above the consumer level.

It could be a stretch, given that the tax is unquestionably being imposed on distributors – an argument reiterated by the Kenney administration in a statement last week.

But the ABA is banking on the precedent set by the 1970s case, United Tavern Owners vs. Philadelphia School District, which ruled that the city had no taxing authority in areas where they are preempted by state taxes. In that case, a move to impose a city tax on retail sales of alcohol was preempted by an existing state tax at the distributor level, but the ABA presumably plans to argue that the inverse is true.

Anti-tax lobbyists have also previously raised questions about the tax’s alleged violation of Pennsylvania’s uniformity clause, which stipulates that the same class of products must be taxed at the same rate. Since the beginning, Kenney’s sought to dampen some opposition by exempting diet drinks and other beverages from taxation. The ABA memo makes clear that it intends to argue this distinction violates the clause because diet beverages still use sweeteners. 

Were courts to agree with this line of reasoning, it would invalidate the tax altogether. Interestingly, the administration has argued the beverages exist as separate classes mainly for health-related reasons.

“[Solicitor Tolante] has advised that it does not violate the Uniformity Clause because the classes of sugared versus unsweetened beverage are clearly distinct, particularly since the scientific consensus is that the former promotes obesity, diabetes, and other health problems, while the latter does not,” wrote Kenney spokesperson Mike Dunn, in an email last Friday.

This is also unclear territory because diet soda’s track record as a “healthier” beverage is decidedly mixed. More importantly, in Council budget talks yesterday, councilmembers appeared poised to pass a bill that would also tax diet beverages.

A legal challenge would be the latest headache for an administration that has already survived a revolt by Council President Darrell Clarke and a competing beverage container tax proposal from Council member Blondell Reynolds Brown. At press time, the mayor had support to pass a 1.5-cent tax in a full vote next week, half of what Kenney initially proposed.