Terminally silly: Part of Philadelphia airport will pay soda tax, another part won't

While most of Philadelphia International Airport is in Tinicum Township, Delaware County, more of the terminal area is in Philadelphia.

Draw a jagged line through Philadelphia International Airport. On one side are Terminals A West and A East, two runways, and aircraft gates at the end of Concourse B which are in Tinicum Township, Delaware County.

On the other side is the City of Philadelphia -- home to Terminals B, C, D, E and F and the city's new sweetened-beverage tax, slated to take effect Jan 1.

"What the city needs to do is paint a big red stripe down the terminal floors with arrows pointing 'Philadelphia soft drink tax' this side, and 'No Philadelphia soft drink tax' the other side," said Shanin Specter, attorney for the plaintiffs seeking an injunction to stop the city from collecting the tax. "People are going to be shocked come Jan. 1 at the price disparity depending upon what terminal they are in, if this tax isn't voided."

The levy, signed into law by Mayor Kenney in mid June, and the first of its kind passed by a major U.S. city, will impose a 1.5 cents per ounce tax on sugar-sweetened and diet drinks in Philadelphia. The tax is expected to generate about $92 million annually citywide.

Two-thirds of PHL is in Tinicum, including passenger Gates B15 and B16, the main east-west runways, and cargo operations. Most of the terminals are in Philadelphia.

Merchants in Tinicum will be exempt from the sweetened-beverage tax, while those in Philadelphia will likely incur higher beverage costs - and pass the prices to consumers.

Advice to the flying public might be: grab your Pepsi, Diet Coke, or sweetened tea in Tinicum before heading to the terminal next door.

The city insists the tax will be at the distributor level, and not on consumer purchases. But critics of the tax say the costs will almost certainly be passed by small businesses to customers -- in this case, airport travelers.

Several vendors operate in both Tinicum and Philadelphia terminals, including Pete Ciarrocchi, founder and CEO of Chickie's and Pete's, which has restaurants in Terminal A West and in Terminals C, D, and E as well as three other Philadelphia locations in the Northeast, South Philadelphia, and Mayfair.

"I don't know how I'm going to handle it -- the accountants will handle it," Ciarrocchi said. "We do it with payroll. I guess if you can do it with the payroll, you do it with the soda," he said referring to other tax discrepancies between Philadelphia and Delaware counties.

"I think what will happen is it will just get rung up that way on the register, if you are going to charge tax per drink, which I think is not the way you are supposed to do it, but I guess that's the way you have to do it. You might have to have an increase in Philadelphia, I would imagine. I don't know yet. We haven't got that far."

With a court challenge looming that seeks to invalidate the tax, Ciarrocchi said he's not worrying yet. "At this time of year, with the holidays, there's so much going on. Who gets to that until you have to?" he said. "But the day they start taxing us, we'll have to figure it out."

The city plans to use the revenue to pay for prekindergarten and other programs.

"The beverage tax isn't a sales tax. It's expected to be paid by distributors who supply beverages to dealers - for example, an airport concessions stand- in Philadelphia," said city spokeswoman Lauren Hitt.

"As with all local Philadelphia taxes, the businesses located in the Philadelphia portion of the airport will need to comply with the Philadelphia Beverage Tax," she said. "Specifically, retailers in the Philadelphia section will need to obtain sweetened beverages from a registered distributor, or can make arrangements to pay the tax to the city directly if their distributor is not registered.

"Businesses not in the Philadelphia section will not have to comply," Hitt said, adding, "but we don't anticipate this will cause any confusion because all airport businesses are well aware of which side of the county line they fall because they have to comply with all other Philadelphia taxes in similar fashion."

The American Beverage Association, along with some Philadelphia residents and businesses, filed a lawsuit in September calling the so-called soda tax unconstitutional. Philadelphia Common Pleas Court Judge Gary S. Glazer has said he would rule by Jan. 1.

Specter, representing opponents of the tax, said the Philadelphia wage tax is "entirely different" than a soft drink tax. "Employees know where they work, so they know whether they are subject to the wage tax. A consumer has no idea which terminals are in Delaware County and which terminals are in Philadelphia County."

Mel Hannah, general manager of MarketPlace which oversees food and retail concessions at PHL, said his staff will reach out to the city department overseeing the soda tax program "to make sure that it's properly implemented to allow all the taxes to be properly calculated and billed.

"Then we will make sure our merchants are aware of this new requirement and hope that everything goes as smoothly as possible," he said.

So far, there's been no negative feedback from food and beverage merchants about the tax. "Not at all yet," Hannah said.