Soda Taxes

Philly Tax Spurs Black Market Soda Smuggling

A beverage tax provokes a strange but predictable response.

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sweet, sweet, soda
Belinda Wu/Dreamstime.com

Philadelphia's soda tax has produced a peculiar but predictable outcome: a thriving black market in soda imports.

On March 1, Mayor Jim Kenney released a budget proposal that cut revenue projections for the city's 1.5 cent tax on soda from an originally estimated $92.4 million to $78 million, a drop of nearly 15 percent.

Danny Price—the secretary-treasurer of Teamsters Local 830, which represents soda bottlers and delivery drivers—attributes a good chunk of that lost revenue to black-marketeers carting in soda from untaxed jurisdictions.

"People are going out of Philadelphia, to Delaware, New Jersey, and the surrounding counties, and they're bringing back soda," Price tells Reason, adding that he and his union's members spot vans loaded with soda coming into the city every day. The soda is then sold to local businesses looking to skirt the city's tax.

The result, says Price, is less money for the city and less work for his union's members. "Our delivery drivers bid on an area and that's their area. If people are buying on the black market, our guys lose."

A similar phenomenon has been reported by Vince Cicione, of Cicione Beverage, a small Philadelphia distributor of beer and soft drinks. Since the soda tax was implemented in January of last year, he says, his business has seen a moderate drop in soda sales.

"When a customer comes in the store, you tell them the price, and they walk right out," says Cicione, who says that soda smuggling is "very common."

Unlike the more elaborate clandestine operations Price describes, Cicione says a lot of these black market beverages are being brought in by businesses themselves, particularly restaurants and offices. "They are going to Sam's Club, bringing it back," he tells Reason.

A flurry of studies have been conducted on the effects of Philadelphia's soda tax, and though individual results vary, all find a sharp drop in soda sales. One study, conducted by the Florida-based marketing firm Catalina, says that sales of soda at franchised grocery and drug stores dropped 55 percent in the first five months after the tax's implementation, while sales just outside the city rose 38 percent.

It is unclear how much of those increased sales outside the city consists of individual consumers ducking across the line for soda, and how much is the more organized tax-dodging described by Cicione and Price.

Mayor Kenney's staff did not respond promptly to questions about the scale of the black-market soda activity or what enforcement measures the city is taking. The city's website says its Department of Revenue is staffing up with auditors and investigators to ensure compliance.

The Pennsylvania Supreme Court will soon hear a case challenging the soda levy on the grounds that it is an illegal double tax. But until the tax is either struck down in court or repealed at city hall, the smuggling is likely to continue.

Check out Reason's recent video on Philly's soda tax:

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50 responses to “Philly Tax Spurs Black Market Soda Smuggling

  1. I didn’t see this coming at all.

    1. In your day they were loaded with shit-tons of cocaine, so at least there was that case to be made.

    2. If only we were gifted with future sight. It is truly the only way we could have known.

      I go to Philly now and I see cars on fire, no drivers at the wheel. And the sewers are all muddied with a thousand lonely suicides. The government is corrupt And we’re on so many drugs. The sun has fallen down, and the billboards are all leering and the soda coolers are all empty, at the back of the stores.

      1. These are truly the last days.

        1. *snerk*

      2. Pfft, that’s just from the Eagles winning the Superbowl

      3. Pfft, that’s just from the Eagles winning the Superbowl

    3. Confirm Sevo

      I live in northern Delaware, I mile from the PA border. My Giant grocery store car park is full of PA plates. I do not begrudge these folks reducing their taxes. These folks maybe quintessential Libertarians. Screwing both Delaware, Pennsylvania, Philadelphia, and the Federal government out of their “revenue” is a ‘libertarian’ thing.

      My issue is that as a Delaware resident I must supplement their savings as Delaware will jack up my rates to compensate for their asses.

      They are not Libertarian, they are impacting me.

      1. How could them buying soda in Delaware possibly affect you in anyway? Jack up what rates? You can still buy soda.

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  2. Predictable consequences not being unforeseen, either Philadelphian politicians wanted and intended to encourage smuggling for reasons of their own, or they’re a pack of idiots.

    Both may be true.

    1. I’ll go with any answer that includes “pack of idiots”.

      Also, a nice illustration of the invariable answer of government to unanticipated consequences: “staffing up with auditors and investigators to ensure compliance”. Well of COURSE.

    2. It’s a cash grab scheme to bulk up the Philly’s General Fund, plain and simple. Philly pols don’t care about the businesses they supposedly represent losing money as long as they’re getting theirs. That the SBT money would even be going to the General Fund wasn’t announced until the day of the vote, and now it’s taking 75% of what’s collected (reported last Tuesday by Philly City Controller).

  3. Why wouldn’t a Sin Tax spur the degenerates to crime?

  4. Maybe when they start selling ‘loosies’ on the street corner we can start to worry.

    1. Then the cops can just bean you with the cans, instead of the agonizing death of oxygen deprivation. It’s a humanitarian gesture, really.

      1. Time to bring back glass bottles.

  5. But now they can arrest all of the dangerous smugglers. Wreckers, Kulaks all of them!

    1. Somewhere in a Philly dive bar is a roguishly handsome guy that owns a rusted out Nissan Serena Nismo minivan bragging about how he made the Cherry Hill run in 8.9 miles.

      1. *slow clap*

  6. At least the Mafia hasn’t gotten in on it. They’ve been doing a multibillion-dollar business here in New York for years, and de Blasio (I’d suspect him if he were a real Italian) has only made it an easier call for the two dozen or so New Yorkers who still get their ciggies legitimately.

    1. You saw the part with the Teamsters, right?

  7. Well, damn! whodathunkit?
    Waiting for the survey about soda CONSUMPTION, not sales, going up, down, or staying constant – – – – –

    1. Soda CONSUMPTION?

      Well, what difference, at this point, does it make?

  8. This is easily fixed by imposing the death penalty on soda smugglers.

    1. Just drone them. (Speaking of which – thanks again, Franky!)

      1. In Philly? And do away with all those union firebombing-helicopter pilot jobs? Good luck with that, pal.

  9. Sounds alot like what happened during prohibition. The reality is the city and Teamsters thought is was a way to line their pockets. The fact people are going out of the city to buy soda and bringing it back home is called freedom, not a black market. A black market is when you are selling illegal or stolen goods. Screwing the city of taxes they do not deserve is justice.

    1. What difference does it make, even from a justice perspective, whether it’s the sale of goods that the state has proclaimed to be “illegal” or whether it is only the sale itself that is illegal? Illegal sales are black market, whether or not it is just. It’s not a normative term.

      1. If this were collected only at the retail level then there’d be no incentive for these guys to go out of town – the wholesalers would be selling at the same price and they’d just tack the tax on.

        What seems to be happening is that the tax is collected at the wholesale *and* retail level – with every sale of the product. So the state is getting to take two bites for everyone else’s single.

        If you buy out-of-area you only need to add that tax in *once* – at the retail level – and so you can keep your prices down.

        And, worse, if the city decided to make the tax apply *only* at the wholesale level, well they’re just morons then.

  10. Danny Price?the secretary-treasurer of Teamsters Local 830 said “Gov’t should’t artificially raise the cost of a product, that’s our job”.


  11. Unlike the more elaborate clandestine operations Price describes, Cicione says a lot of these black market beverages are being brought in by businesses themselves, particularly restaurants and offices. “They are going to Sam’s Club, bringing it back,” he tells Reason.

    Exactly this. People don’t realize how many of those convenience stores purchase their stuff from other retailers and just mark it up, so really all they need to do is purchase from further out where those taxes don’t apply. Which is going to be great for sellers just outside the jurisdiction.

    1. I sell stuff from time to time with the ‘Member’s Mark’ branding. A convenience store’s value-add is *convenience* – Sam’s Club is on the other side of town.

  12. Ha, there are probably sodapop speakeasies in the city.

    (Hmm, Sodapop Speakeasy…good name for a band.)

  13. “People are going out of Philadelphia, to Delaware, New Jersey, and the surrounding counties, and they’re bringing back soda,” Price tells Reason…

    All those places are just as bad as Filthadirtbagia.

    And that’s the only comment here truly relevant to this situation.

  14. “They are going to Sam’s Club, bringing it back,” he tells Reason.

    Well, yeah. We don’t have a soda tax here but half the soda in the store I manage is bought directly from a wholesaler (often Sam’s Club) and not from a distributor.

    As for ‘black market’ – this isn’t illegal (maybe it is in Philly?).

  15. I have a vision of Eddie Murphy trying to convince a couple of guys to buy a truckload of soda, showing them the tax stamp and telling them “you can’t get any better than that”.

  16. If citizens are too stupid to be responsible with soda, are they also too stupid to vote?

  17. To make up for missing the $14M revenue projection, why not levy a sales tax on teacher union dues? There are 181,000 PSEA members pay $712 in union dues. A mere 11% dues tax would “help fund pre-K and open 11 community schools.” After all, it’s for the children.

  18. Wuzza, wuzza, wuzza. Union thugs can’t press their thumb into the spine of retailers like they used to. Yeah, my heart is breaking assuming that 60% of their retail trade wasn’t already coming in via “black market” trade. Oh, if the onion* monkeys only knew!

    * not a typo, thanks for asking.

  19. OK, hands up al those who are actually surprised.

    *Hmm hmm*

    Ok, tomorrow, all of you will be attending ‘Special Education’ classes.

  20. “cut revenue projections for the city’s 1.5 cent tax on soda from an originally estimated $92.4 million to $78 million, a drop of nearly 15 percent.”

    Nitpick: a drop from $92.4 million to $78 million is actually a bit more than 15%.

    1. However, with the cost of staffing auditors and investigators* to ensure compliance, the actual “profit” from the tax can be reduced to $73 million, soon to be also reduced by the cost of the investigation into where the money for the auditors and investigators was actually spent, and how the contracts were awarded.

      Those east coast guys have gotten really good at this shit.

      *-investigators soon to be know as “soda pop dicks”, which would also be a great band name.

  21. They forgot to require a tax stamp on every bottle of soda sold in Philly.

  22. I cheer the soda smugglers!

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  26. Why do they have to go out of state, instead of just outside Philadelphia city limits?

  27. Speaking of Philly – how’s that ban on bulletproof glass working out?

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