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A Soda Black Market in Philadelphia

Sweetened-beverage tax stirs illegal sales from outside the state: report

PHILADELPHIA -- As opposing factions in Philadelphia and the beverage industry continue to wage a legal battle over the city's sweetened-beverage tax, a soda black market is slowly gathering steam, according to reports.

Unmarked white vans and other vehicles are cruising Philly streets, the drivers selling pallets and cases of Coca-Cola, Red Bull, Mountain Dew and other carbonated soft drinks (CSDs) that saw their prices rise by 1.5 cents per ounce (an additional $2.16 for a 12-pack) on Jan. 1, 2017.

The unregistered drivers are filling their vans at untaxed retail locations outside the city, then selling the products to retailers in the city for cash, said Danny Grace, secretary-treasurer for the local Teamsters, to Stuff, a New Zealand-based news site reporting on the phenomenon of sugar taxes. Many of Teamsters' members drive for Coke and Pepsi. 

"They're going to distributors, to bars; they're going wherever they can and selling it. There's no tracing it at that point," Grace said. "We know they're coming out of Maryland. We know they're coming out of Virginia. We think they're coming out of New York."

Philadelphia Mayor Jim Kenney acknowledged the black market exists, according to the report, but said the vast majority of affected taxpayers play by the rules.

"The fact that we raised $60 million over nine months makes clear that while black-market activity exists, it is not widespread," he said.

Meanwhile, an attorney representing the small businesses, the Pennsylvania Retailers Association and other groups seeking to have the Philadelphia's soda tax reversed filed an amicus brief March 12 with the state Supreme Court. The brief outlines the ways the opposition believes the tax violates the state's Sterling Act, which prohibits taxation on the same product or transaction as the state retail tax.

The Supreme Court agreed in January to review a commonwealth court’s decision that confirmed the legality of the tax. No hearing date has been scheduled.

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