Philadelphia’s tax on “sugary beverages” has had a consequence in the form of higher prices for many drinks. These costs have been passed on to consumers in the form of price increases at the register. The tax applies a 1.5 cent charge per ounce on any beverage that has a sugar-based or artificial sugar substitute-based sweetener. This does not apply to baby formula, products containing more than 50 percent milk, and some other exemptions. Sweetened dairy substitutes, such as sweetened almond milk, will be taxed.
According to the Tax Foundation, sports drinks are now more expensive in beer in the city. The 1.5 cents per ounce charge is 24 times that levied on beer by the state of Pennsylvania; and the site found that a 12-pack of Propel sports drink at one Philadelphia retailer sold for $9.03 including the new tax, and a 12-pack of Icehouse beer at the same store cost $7.99.
Consumers will not only have to pay a tax surcharge on their purchases, but the base price of the products are also expected to increase because of the added cost to distributors.
According to Reason, a Philadelphia soda distributor pays $57.60 in tax on a box of syrup used in soda fountains that costs them $60. Reason reports that the distributor only makes $20 in gross profit on one of those boxes of syrup – and for that reason, must increase the price charged to retailers. Retailers, who also have slim profit margins, then pass on that cost to their customers.
Philly.com reports that some retailers may have products still in stock that were purchased from distributors before January 1 – the date the tax went into effect. So, not all sweetened beverages are yet subject to higher base prices. The news site looked at prices of selected sugary beverages at a ShopRite in the city. All of the following have not yet seen increases to their base price, so bigger price hikes in the future are likely. Some increases include: an 8-pack of gatorade, with a $5.99 base price that will now cost $8.39 with the soda tax and sales tax; a 64 fl oz bottle of V8 Splash Carrot Orange Juice Drink that went from $2.39 to $3.35 with the tax applied; and a 12-pack of Coca-Cola classic cans that used to retail for $5.58 and will now cost $7.74. All prices are just with the soda tax applied – sales tax drives up total cost even further.