Kenney signs sugary drink tax into law

Mayor Kenney signs the sugary-drink tax into law Monday, June 20, 2016, at City Hall in Philadelphia.

Before dozens of cheering supporters in City Hall, Mayor Kenney signed the sweetened beverages tax into law Monday.

Now comes the tough part: enforcement.

The 1.5-cent-per-ounce tax on sugar-sweetened and diet beverages is expected to raise about $91 million annually, which will go toward expanding prekindergarten in the city; creating community schools; improving parks, recreation centers, and libraries; and funding various other budget programs.

Getting that money will be dependent on the Revenue Department's enforcing the tax on distributors, or, in some cases, the vendors.

Opponents of the tax have vowed to fight it in court, claiming it is unconstitutional.

The American Beverage Association has retained the Center City law firm Kline & Specter P.C. to "pursue legal action" against the city.

Partner Shanin Specter declined to say whether the group would be seeking an injunction.

On Monday, Kenney said the city Law Department is prepared to fight any legal challenge. But when it comes to enforcement, he left it to the Revenue Department to explain.

Asked what comes next after signing the bill, Kenney quipped: "I go back to my office, have lunch."

The city plans to start collecting the tax on Jan. 1.

Between now and then, the Revenue Department will hire 15 people to help with outreach to distributors and vendors, and eventually to collect the tax.

Distributors of sweetened beverages, whether in or outside the city, will have to register with the Revenue Department if they plan to sell the newly taxed beverages to vendors in Philadelphia, according to Deputy Revenue Commissioner Marisa Waxman.

"Philadelphia retailers will need to make sure that they're purchasing from a registered distributor," Waxman said.

When store owners or representatives go to buy wholesale beverages from a distributor, they must disclose that the products being purchased will be sold in Philadelphia. Then, the distributor will have to note on the invoice the amount of sweetened beverages that were bought and the tax owed on those items.

Distributors are expected to pay the taxes to the city each month, with the first filing being Feb. 15, Waxman said. The city estimated that there are at least 31 distributors of sweetened beverages and flavored syrups in the Philadelphia region.

There are tens of thousands of vendors in the city who will be selling the taxed items. If those vendors don't have an invoice from a registered distributor showing that the distributor paid the tax, the vendor would be on the hook, Waxman said.

To help businesses understand the new tax, the Revenue Department has a list of basic questions and answers about the tax at http://www.phila.gov/Revenue/businesses/taxes/Pages/SweetenedBeverageTax.aspx. In addition, department officials will be doing outreach to beverage retailers and distributors.

The tax will affect sodas, teas, sports drinks, sweetened-flavored waters, bottled coffees, energy drinks, and other products. Exempt products include baby formula and beverages that are more than 50 percent fresh fruit, fresh vegetables, or milk. Beverages for which customers request sweetener or add it themselves (as at a coffee shop) are also exempt.

Also on Monday, the Office of Education officially launched its pre-K effort, sending out requests for qualifications (RFQs) to providers interested in partnering with the city.

The city issued a request to "high quality" pre-K providers designated STAR-3 or STAR-4 in a four-tier system administered by the state. The city plans to enroll 2,000 3- and 4-year-olds in "high quality" pre-K settings in January.

A second RFQ seeks providers that are not highly rated but are interested in improving through city-provided training, technical assistance, professional development, and facility enhancements. Both RFQs are at www.phila.gov/contracts.

cvargas@phillynews.com

215-854-5520@InqCVargas

Staff writer Julia Terruso contributed to this article.