IN THE COMMONWEALTH COURT OF PENNSYLVANIA Nos. 2077 and 2078 C.D. 2016 __________________________________________________________________ LORA JEAN WILLIAMS; GREGORY J. SMITH; CVP MANAGEMENT, INC. d/b/a or t/a CITY VIEW PIZZA; JOHN’S ROAST PORK, INC. f/k/a JOHN’S ROAST PORK; METRO BEVERAGE OF PHILADELPHIA, INC. d/b/a or t/a METRO BEVERAGE; DAY’S BEVERAGES, INC. d/b/a or t/a DAY’S BEVERAGES; AMERICAN BEVERAGE ASSOCIATION; PENNSYLVANIA BEVERAGE ASSOCIATION; PHILADELPHIA BEVERAGE 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 __________________________________________________________________ BRIEF OF AMICI CURIAE STATE SENATOR ANTHONY WILLIAMS, STATE REPRESENTATIVE ANGEL CRUZ, AND 34 PENNSYLVANIA STATE SENATORS AND HOUSE OF REPRESENTATIVES IN SUPPORT OF APPELLANTS TO REVERSE THE TRIAL COURT OPINION AND ORDER OF DECEMBER 19, 2016 Appeal from the Opinion and Order of the Court of Common Pleas of Philadelphia County, Pennsylvania, at No. 1452, Control Number 16100940, entered on December 19, 2016 __________________________________________________________________ Scott B. Cooper, Esquire SCHMIDT KRAMER, P.C. Identification No. 70242 209 State Street Harrisburg, PA 17101 Counsel for Amicus Curiae, Certain Members of the General Assembly TABLE OF CONTENTS Page Statement of Interest of Amicus Curiae………………………. 1 Summary of Argument………………………………………… 2 Statement of Questions Presented………………………………. 5 A. WHETHER THE TRIAL COURT ORDER AND OPINION SHOULD BE REVERSED BECAUSE THE CITY OF PHILADELPHIA SWEETENED BEVERAGE TAX IS PREEMPTED BY THE STERLING ACT AND THE CITY OF PHILADELPHIA HAS NOT BEEN GIVEN LEGISLATIVE AUTHORITY TO ENACT THE SEPARATE SALES AND USE TAX ON NON-ALCOHOLIC/SWEETENED BEVERAGES?.... 5 B. WHETHER THE TRIAL COURT ORDER AND OPINION SHOULD BE REVERSED BECAUSE THE CITY OF PHILADELPHIA SWEETENED BEVERAGE TAX VIOLATES THE UNIFORMITY CLAUSE OF THE PENNSYLVANIA CONSTITUTION WHEN THE TAX IS BASED UPON QUANTIY AND VOLUME AND NOT ON A STRAIGHT PERCENTAGE, PRICE, OR A SET AMOUNT ADDED TO THE PRICE AND CAUSES UNFAIR, DISPARATE AND UNREASONABLE RESULTS?................................... 5 C. WHETHER THE TRIAL COURT ORDER AND OPINION SHOULD BE REVERSED BECAUSE THE CITY OF PHILADELPHIA SWEETENED BEVERAGE TAX THREATENS AND UNDERMINES THE OVERARCHING AND DOMINANT PUBLIC POLICY THAT THE AMICI PASS A BUDGET BY JUNE 30 EVERY YEAR AND WILL ALSO JEOPARDIZE THE FUNDING OF IMPORTANT SERVICES?.................................... 5 Argument………………………………………………………. 6 (a) The sweetened beverage tax is preempted by the Sterling Act …………………………………… 6 (b) The tax violates the uniformity clause in the Commonwealth of Pennsylvania’s Constitution…….. 8 (c) The tax violates the overarching and dominant public policy to pass a budget by June 30 and jeopardizes the funding of critical services……... 10 Conclusion………………………………………………………. 13 Certificate of Word Count……………………………………….. 14 Certification of Electronic Filing……………………………….. 15 Exhibits A………………………………………………………….. 16 B………………………………………………………….. 18 C………………………………………………………….. 26 TABLE OF CITATIONS Page Cases Allentown School District Authority, 370 Pa. 161 (Pa.1952)……… 8 Clifton v. Allegheny Cty., 969 A.2d 1197, 1211 (Pa. 2009)………. 9 Marson v. Philadelphia, 342 Pa. 369 (Pa. 1941)…………………….. 6 Mount Airy #1, LLC v. Pa. Dept of Rev. et al, --- A.3d --- (Pa. Sept. 28, 2016)………………………………………………….. 8-10 United Tavern Owners of Philadelphia v. Philadelphia School District 441 Pa. 276 (1971) (plurality)………………………………………… 6,7 Statutes 53 P.S. § 15971 …………………………………………………….. 2,6 72 P.S. § 7201(a)…………………………………………………..... 7 Other Authorities Pa. Const. art. 8, §§ 1, 12, 13………………………………………… 2, 8, 10, 13 Act of July 12, 2016, Pub. L. No. 16A……………………………… 11 I. Statement of Interest of Amici Curiae: The Amici Curiae are Pennsylvania State Senator Anthony Williams, 8th Senatorial District, Pennsylvania State Representative Angel Cruz, 180th Legislative District, and 34 additional members of the Pennsylvania Senate and House of Representatives who write, debate, consider, and pass legislation, importantly a yearly budget.1 (See Exhibit “A” for a full listing of the Amici with counties each represents). They are bi-partisan and represent over 28 counties, including Philadelphia, in the Commonwealth. The Amici, and their constituents, are directly impacted by the Philadelphia Sweetened Beverage (“Soda”) Tax, or essentially a non-alcoholic beverage tax, because the tax is not Constitutional, violates the law, and will result in lost sales tax revenue collection into the Commonwealth’s general fund, directly impacting the budget and jeopardizing the ability to pass a timely budget and the funding of important services. Amici, therefore, have a direct interest in this matter. 1 Sen. Camera Bartolotta, 46th Senatorial District; Sen. Rich Alloway, 33rd Senatorial District; Sen. Mike Regan, 31st Senatorial District; Sen. Scott Martin, 13th Senatorial District; Rep. Adam Harris, 82nd Legislative District; Rep. Brandon Neuman, 48th Legislative District; Rep. Brett Miller, 41st, Legislative District; Rep. Bryan Cutler, 100th Legislative District;; Rep. Cris Dush, 66th Legislative District; Rep. Chris Sainato, 9th Legislative District; Rep. Dan Moul, 91st Legislative District; Rep. Daryl Metcalfe, 12th Legislative District; Rep. David Zimmerman, 99th Legislative District; Rep. Eli Evankovich, 54th Legislative District; Rep. Eric Nelson, 57th Legislative District; Rep. Frank Burns, 72nd Legislative District; Rep. Fred Keller, 85th Legislative District; Rep. Greg Rothman, 87th Legislative District; Rep. Jerry Knowles, 124th Legislative District; Rep. Joe Petrarca, 55th Legislative District; Rep. John McGinnis, 79th Legislative District; Rep. Kristin Phillips-Hill, 93rd Legislative District; Rep. Keith Greiner, 43rd Legislative District; Rep. Mark Keller, 86th Legislative District; Rep. Rick Saccone, 39th Legislative District; Rep. Russ Diamond, 102nd Legislative District; Rep. Seth Grove, 196th Legislative District; Rep. Sheryl DeLozier, 88th Legislative District; Rep. Stephen Bloom, 199th Legislative District; Rep. Will Tallman, 193rd Legislative District, Rep. Barry Jozwiak, 5th Legislative District; Rep. Martina White, 170th Legislative District; Rep. Mike Reese, 59th Legislative District; and Rep. Ron Marsico, 105th Legislative District. 01 II. Summary of the Argument: “If it talks like a duck, walks like a duck, acts like a duck; it is a duck.” The Philadelphia Sweetened Beverage Tax is an impermissible sales tax no matter how it is couched and, if allowed to stand, sets a dangerous precedent. The trial court erred when it upheld the tax. The tax should be stricken down because it (1) violates the Sterling Act; (2) violates the Uniformity Clause of the Pennsylvania Constitution; and (3) is against public policy since it jeopardizes the General Assembly’s ability to fund important services and pass a budget by the mandated June 30 deadline. Pa. Const. art. 8, §§ 12, 13 The Sterling Act expressly prohibits Philadelphia from taxing any subject already subject to taxation by the Commonwealth. 53 P.S. § 15971. Pennsylvania law states that the Appellee may not levy or collect any tax on any subject preempted by a state tax. Sweetened beverages - the object of the tax imposed by the Philadelphia sweetened beverage tax, are already subject to the Commonwealth of Pennsylvania 6% sales and usage tax on beverages. Philadelphia has not obtained any special legislation or permission to tax sweetened beverages, so the Sterling Act preempts it. The Appellee cleverly attempts to skirt this preemption by imposing the tax on “the distribution” of sweetened beverages. The Commonwealth’s taxation authority cannot be undermined by semantics. According to the Sterling Act the 02 tax does not need to be imposed at the same point in the distribution chain to be preempted. The Sweetened Beverage tax is imposed on precisely the same subject as the Commonwealth of Pennsylvania Soft Drink Tax - beverages. The tax is not being imposed at “the distribution point,” but is really being imposed on Amici’s constituents at the sales point. The Philadelphia sweetened beverage tax also violates the Uniformity Clause of the Pennsylvania Constitution. The tax is not imposed on products equally because it could be as high as 78% in one case, and in others as low at 6%. The Pennsylvania Constitution’s Uniformity Clause is violated when a tax is applied based upon quantity or volume and not value, a set percent, or capped amount, especially when it results in an unfair, arbitrary, or unreasonable result. The tax also undermines public policy, which is to pass a state budget on June 30 every year. Allowing the tax to stand would create a road map for the Appellee, and every other local governmental entity in the Commonwealth, to avoid the Sterling Act’s taxation structure. Local governments will place a sales tax on items already subject to the state’s sales and use tax. Each year more and more money will be lost in sales tax collections by the Commonwealth when people drive to other states to purchase the products to avoid paying the tax, or they simply stop buying the product altogether because of the expense. When money is not collected by sales tax, the state loses money to fund the general fund 03 which in turn jeopardizes Amici’s ability to meet the June 30 mandate. Unless struck down immediately, harm will occur this year