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Payments, assistance & taxes

What is subject to the tax

The Philadelphia Beverage Tax (PBT) is imposed on the distribution of sweetened beverages intended for resale in Philadelphia.

The information below is meant to help manufacturers, distributors and dealers understand which business transactions and products are taxable.

Business transactions

The Philadelphia Beverage Tax is due when a sweetened beverage is distributed to a Dealer who intends to sell it at retail in Philadelphia.

If you are distributing to a dealer who sells the beverage at their business location outside Philadelphia, the product is not subject to the tax.

Manufacturers

A manufacturer of sweetened beverages does not owe PBT when selling products to a distributor, or directly to a consumer. For example, a manufacturer who sells a sweetened beverage to consumers at a farmer’s market does not file or pay PBT.

Distributor and dealer

If you’re a Dealer who both:

  • Purchases sweetened beverages with the intent to sell them at retail, and
  • Resells them to other dealers,

Notify the distributor what percentage you yourself sell at retail in Philadelphia. Your distributor must file and pay PBT on that portion of the transaction. You must also become a Registered distributor to pay the tax on the inventory you sell to other Dealers in Philadelphia.

Another option is to become a Registered Dealer, if you find that it is easier to manage the payment of the tax on everything you yourself sell at retail, plus what you sell to other Dealers.

If you are a Dealer who both:

  • Uses concentrated sweeteners to make a finished product you sell at retail (subject to the tax), and
  • Makes concentrated sweeteners available to customers to mix in themselves (not subject to the tax),

Notify the distributor at the time of purchase, how much concentrated sweetener will be used for each purpose. If you are a Registered dealer or a Special dealer, file and pay PBT on the taxable transaction only.

Dealers who sell in and outside Philadelphia

If you own a retail store in Philadelphia, but sometimes deliver beverages to retail customers outside the city from that store, the products are still taxable. Those beverages were held for retail sale in Philadelphia, so the tax was due when you acquired them.

If you own retail stores both inside and outside of Philadelphia, the products purchased for sale in the stores outside are excluded only if you segregated them from the rest of your inventory, and informed your Distributor which portion you intended to sell outside Philadelphia.

Online distributors

If you purchase beverages from an online distributor, and then resell them in Philadelphia to retail customers, you must notify the online distributor that the distribution of those sweetened beverages is subject to PBT.

  • If your online distributor becomes a Registered distributor, and files and pays PBT on the products distributed to you, you are in compliance.
  • If your online distributor does not become a Registered distributor, you must become a registered dealer and file and pay PBT on the products yourself. Another option is to find a new vendor who is a Registered distributor.

Giveaways and promotions

Sweetened beverages given away for free are not subject to the tax, as long as they were never intended for retail sale in Philadelphia. Examples are beverages available for free at a school, company, or non-profit’s cafeteria. In this case, the transaction is not taxable.

However, if the products were ever held out for retail sale in Philadelphia, they are subject to the tax. If such products are part of a 2-for-1 special, or other giveaway, the entire volume distributed is taxable.

This also applies to sweetened beverages marketed as part of a meal or larger deal. The tax is calculated on the volume of the beverage distributed.

If a Distributor donates sweetened beverages, and then the products are sold at retail in Philadelphia, the distribution becomes taxable.

Products

New products come on the market every day. Maintaining a complete list of products that are subject to the Philadelphia Beverage Tax would be difficult and impractical. PBT regulations and the information below provide guidance about ingredients and categories of products that are subject to the tax.

Diet and low-sugar drinks

The distribution of products that are marketed as “diet” and “zero calorie” sweetened beverages is taxable. Products labeled “lightly sweetened” or “low-sugar” are also subject to the tax.

The distribution of beverages containing sweeteners with no calories, such as stevia, aspartame, sucralose, neotame, acesulfame potassium (Ace-K), saccharin, and advantame is taxable.

We have a separate webpage about filing caloric and non-caloric beverages.

Dairy and dairy substitutes

Beverages that are 50% dairy milk or more are not subject to the tax. For example, chocolate milk and drinkable yogurts that are 50% dairy milk or more are not covered, even if they have added sweetener.

In addition, the distribution of syrups and other concentrates is not taxable if they are part of a finished beverage that is 50% milk or more.

Milk solids plus water are considered the same as regular milk –and therefore not subject to the tax– if they are mixed in a proportion that is nutritionally equivalent to milk.

The distribution of sweetened coffee creamers is not subject to the tax.

Unsweetened non-dairy milks, such as unsweetened almond milk, soy milk, or rice milk, are not subject to the tax. Non-dairy milks that contain sweetener are subject to the tax.

However, sweetened dairy substitutes deemed to be nutritionally equivalent to dairy milk by the USDA are not subject to the tax. You can find examples listed on the WIC food list at the Pennsylvania WIC website.

Fruit and vegetable drinks

Only 100% juice, or 100% vegetable drinks are exempt from PBT. All juices or vegetable drinks with added sweeteners are subject to the tax.

Even lightly sweetened juices, like a cranberry juice cocktail, are subject to the tax.

Nevertheless, there is an exclusion for “fresh” fruit or vegetable drinks prepared at the point of sale. These drinks must contain at least 50% fruit or vegetable juice.

Medical foods

Medical foods are foods designed to treat or manage a diagnosed medical condition. The federal Orphan Drug Act defines medical foods. Taxpayers may be asked to provide documentation when they claim a medical foods exemption. More information is available in Section 102 of the PBT regulations.

Thickened beverages are not subject to the tax when they are medical foods. Examples include beverages specifically marketed for use by people with dysphagia and/or swallowing dysfunction.

Sweetened meal replacement beverages, weight loss shakes and similar products –which don’t meet the definition of a medical food– are taxed.

Mixes and other products

If a dealer mixes a sweetened concentrate to create a beverage before its retail sale, then distribution of that concentrate is taxable.

As an example, syrups that are added by a coffee shop’s staff as part of a drink recipe, are subject to the tax.

Tax on products with two types of sweetened concentrates should be based on the total ounces of finished product, either by taxing just one of the concentrates or prorating between the two.

Mixes sold at retail (like powdered iced tea, protein shakes, hot cocoa, or lemonade) are not taxable when they are sold in concentrate form to the end customer. An example is a customer who makes lemonade at home. The lemonade powder is not subject to the tax.

Table sugar sold at retail is not taxable.

Similarly, natural sweeteners, such as agave, honey and stevia are not taxable when sold on their own. Grenadine, maple syrup and honey are considered multi-use sweeteners and are also excluded if sold on their own. However, beverages, syrups, and concentrates that contain these sweeteners as ingredients are taxable.

The distribution of non-alcoholic beers is taxable if there is an added sweetener in the beverage.

A cocktail mixer may, or may not be, taxable. If it is sold directly to the end consumer on its own, it is not taxable. However, a cocktail mixer may also be a concentrate used to prepare a sweetened beverage. If that concentrate is sold to a dealer to create a finished beverage, it is subject to PBT.

Calculate the tax based on volume of finished beverage created using the manufacturer’s instructions, but subtract the alcohol from that volume.

If you have a question about a specific product, or want a product to be reviewed for exemption, please email your request to revenuetaxadvisors@phila.gov. Include any documentation that supports your request, such as medical studies or proof of exemption in other jurisdictions.


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