               [J-31A-2018 and J-31B-2018] [MO: Saylor, C.J.]
               IN THE SUPREME COURT OF PENNSYLVANIA
                            EASTERN DISTRICT


LORA JEAN WILLIAMS; GREGORY J.         :   No. 2 EAP 2018
SMITH; CVP MANAGEMENT, INC. D/B/A      :
OR T/A CITY VIEW PIZZA; JOHN'S         :   Appeal from the Order of
ROAST PORK, INC. F/K/A JOHN'S          :   Commonwealth Court entered on
ROAST PORK; METRO BEVERAGE OF          :   06/14/2017 at No. 2077 C.D. 2016
PHILADELPHIA, INC. D/B/A OR T/A        :   affirming the Order entered on
METRO BEVERAGE; DAY'S                  :   12/19/2016 in the Court of Common
BEVERAGES, INC. D/B/A OR T/A DAY'S     :   Pleas, Philadelphia County, Civil
BEVERAGES; AMERICAN BEVERAGE           :   Division, at No. 01452 September
ASSOCIATION; PENNSYLVANIA              :   Term 2016.
BEVERAGE ASSOCIATION;                  :
PHILADELPHIA BEVERAGE                  :   ARGUED: May 15, 2018
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             :

LORA JEAN WILLIAMS; GREGORY J.         :   No. 3 EAP 2018
SMITH; CVP MANAGEMENT, INC. D/B/A      :
OR T/A CITY VIEW PIZZA; JOHN'S         :   Appeal from the Order of
ROAST PORK, INC. F/K/A JOHN'S          :   Commonwealth Court entered on
ROAST PORK; METRO BEVERAGE OF          :   06/14/2017 at No. 2078 C.D. 2016
PHILADELPHIA, INC. D/B/A OR T/A        :   affirming the Order entered on
METRO BEVERAGE; DAY'S                  :   12/19/2016 in the Court of Common
BEVERAGES, INC. D/B/A OR T/A DAY'S     :   Pleas, Philadelphia County, Civil
BEVERAGES; AMERICAN BEVERAGE           :   Division, at No. 01452 September
ASSOCIATION; PENNSYLVANIA              :   Term 2016.
BEVERAGE ASSOCIATION;                  :
PHILADELPHIA BEVERAGE                  :   ARGUED: May 15, 2018
    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                :


                                    DISSENTING OPINION


JUSTICE MUNDY                                                    DECIDED: July 18, 2018
         Philadelphia City Council skillfully constructed the Sugar-Sweetened Beverage

Tax1 (Beverage Tax) to appear to tax distributors, rather than sugar-sweetened

beverages (SSBs) retailed in Philadelphia. However, because the tax does not tax all

distributors, and only taxes SSBs intended for retail sale in Philadelphia, the Pennsylvania

sales tax on the retail sale of SSBs preempts the Beverage Tax. 72 P.S. § 7202(a).

         At the outset, I agree with the Majority that the legal-incidence test applies,

specifically an analysis of the subject matter and measure of the tax, and not an

economic-incidence test. Majority Opinion at 15. I further agree that the particular

motivations of City Council in enacting the Beverage Tax are not relevant to our inquiry.

Id. at 19, n. 16. However, I disagree with the Majority’s conclusion that the subject of the

Beverage Tax is the distributor. Id. at 21. While it is true that the distributor or dealer is



1   PHILA. CODE. § 19-4100.


                     [J-31A-2018 and J-31B-2018] [MO: Saylor, C.J.] - 2
ultimately the payor, and thus seemingly the subject, for the reasons that follow, in my

view the SSBs are the subject of the Beverage Tax.

         In Murray v. City of Philadelphia, 71 A.2d 280 (Pa. 1950), this Court considered an

amendment to a City ordinance which increased an existing tax, and imposed the tax on

additional subjects. The Court’s analysis focused on whether the City had the authority

to impose the tax under the Sterling Act. 2 In so doing, the Court noted, “whether the city

tax conflicts with that imposed by the state, the practical operation of the two taxes is

controlling as against mere difference in terminology from time to time employed in

describing taxes in various cases.” Id. at 284. Ultimately, this Court held “[w]hen the

corporation pays to its stockholders income out of the property on which the capital stock

tax has been paid, the city may not again tax the income in the hands of the stockholder;

and the reason is that the Sterling Act did not confer the power to tax the ‘subject’ that

the state had taxed; on the contrary, tax was prohibited.” Id. at 285. The subject of the

tax in the hands of the corporation was property, while the subject in the hands of the

stockholder was income; nevertheless, the practical operation was a duplicative tax.

         In this case, the subject of the tax is SSBs intended to be sold in Philadelphia; it is

not a tax on all distributors in Philadelphia. If the tax applied to the sale of all SSBs sold

in the City of Philadelphia, the issue would be resolved as a clear violation of the Sterling

Act. In order to distance the tax from the retail transaction, the Beverage Tax is applicable

only on distributors who sell SSBs to dealers who intend to retail the beverages in the

City of Philadelphia. PHILA. CODE. § 19-4103. Further, a dealer is subject to the tax if the

distributor has not paid it. PHILA. CODE. § 19-4105(2). However, the tax does not apply

to the act of distribution because not all distributors in Philadelphia are subject to the tax.

For example, under the parameters of the Beverage Tax, a distributor is exempt from the


2   Act of Aug. 5, 1932 P.L. 45, §1, as amended 53 P.S. §§ 15971-73.


                     [J-31A-2018 and J-31B-2018] [MO: Saylor, C.J.] - 3
tax if it sells SSBs to a dealer in Philadelphia as long as the dealer intends to sell the

beverages outside the city limits. Additionally, a distributor is exempt if it sells SSBs to

dealers who do not intend to sell the beverage but rather to give it away or provide it to

their own employees for consumption.          Likewise, a distributor located outside the

Philadelphia City limits is obligated to pay the tax if it sells SSBs to a dealer transporting

the SSBs into Philadelphia for retail sale. Plainly, these illustrations demonstrate that the

subject of the tax is only SSBs retailed in Philadelphia, albeit imposed at the distribution

level prior to holding the SSBs out for retail sale. The imposition of the tax at the

distribution level to attempt to avoid duplication of the tax at the retail level is strikingly

similar to Murray.

        Thus, while I agree that the legal-incidence of taxing the transaction of distribution

may not be a violation of the Sterling Act, I cannot agree that under the specific language

of the Beverage Tax that it is truly a tax on distribution. Instead, the Beverage Tax is a

tax on SSBs intended for retail sale in Philadelphia. As a result, the imposition of the

Beverage Tax is a violation of the Sterling Act by the Philadelphia City Council.




                     [J-31A-2018 and J-31B-2018] [MO: Saylor, C.J.] - 4
