business news in context, analysis with attitude

The Wall Street Journal this morning reports that a coalition of organizations - including the American Beverage Association, the Pennsylvania Food Merchants Association, and several beverage distributors - is suing to prevent the city of Philadelphia's tax on sweetened drinks from going into effect next year.

The story notes that "Philadelphia become the first large US city to pass such a measure in June, when the city council approved a levy of 1.5 cents per ounce on nonalcoholic beverages with added sweeteners ranging from soda to sports drinks and energy drinks. A civil complaint filed with the Philadelphia County Court of Common Pleas argues the tax is unlawful because such drinks already are subject to a state sales tax and that Pennsylvania law prohibits cities from imposing duplicate taxes."

The Journal goes on: "City officials said Wednesday they are confident the tax will be upheld. They have argued the tax can withstand legal challenges in part because it is imposed on distributors and isn’t a sales tax ... The legal challenge, which had been expected, comes as other cities weigh special taxes on sugary drinks amid rising concern over obesity and diabetes rates. Residents in San Francisco; Oakland, Calif.; and Boulder, Colo., will vote in November ballot initiatives."
KC's View:
I'm not sure about the law, but I'm not sure how this isn't a tax. Even if distributors pay it in the beginning, won;t they eventually increase prices for consumers?