Developments in the Sweetened Beverage Tax

By: Atty. Jomel N. Manaig

"The excise tax on sweetened beverage (more commonly known as the Sweetened Beverage Tax or SBT) is a relatively young tax measure – just a bit over eight (8) years from the enactment of TRAIN Law. While its eight-year run may not be long enough to generate a substantial number of administrative and judicial tax principles, the few that we have certainly made its presence felt."

The excise tax on sweetened beverage (more commonly known as the Sweetened Beverage Tax or SBT) is a relatively young tax measure – just a bit over eight (8) years from the enactment of TRAIN Law. While its eight-year run may not be long enough to generate a substantial number of administrative and judicial tax principles, the few issuances and cases that we have certainly made its presence felt.

One particular case comes to mind touching upon the basic precepts of the SBT which was decided upon by the tax court. The case involves a very popular drink that the BIR subjected to SBT despite the protest by the taxpayer. The tax court initially decided in favor of the BIR but eventually changed its position at the en banc level. Ultimately, the tax court sided with the taxpayer and ordered the refund of the tax paid.

The shift by the tax court and the eventual decision favoring the taxpayer came with several significant legal tenets.

FIRST. The Codex Alimentarius Food Category Descriptors (Codex Standard 192-1995, Rev. 2017), “Codex Stan” for short, has been adopted as of the effectivity of TRAIN Law. While a mouthful to say, why is the Codex Stan relevant?

The Codex Stan primarily organizes food products into specific categories. It provides for a structured approach for determining how food additives can be used across different food products. Essentially, it is a standard guide to identify food into its proper classification, which is important in determining whether a particular food can be considered as falling into a specific classification, such as those expressly subjected to SBT.

Since the tax court ruled that the Codex Stan had already been adopted upon the effectivity of TRAIN Law, then it provides a common point of reference to guide both the BIR and taxpayers. Such common point of reference is further made significant in tax refund cases, considering that taxpayers must prove the twin criteria that a particular food: 1) falls under one of the food categories that are excluded from the imposition of SBT; and 2) it is not excluded from such food category.

SECOND. The Food and Drug Administration’s (FDA) classification of beverages, while not definitive, is still instructive and can be relied upon, unless there is evidence to the contrary.

At the heart of the dispute between the taxpayer and the BIR is the classification of the beverage. The BIR argued that it falls within the overarching definition of a sweetened beverage, while the taxpayer argued that it falls within one of the food categories that are expressly excluded from the SBT.

As proof of the classification (i.e., among those excluded in the imposition of SBT), the taxpayer provided the product registration certificate of the beverage issued by the FDA. Despite the FDA’s classification, however, the BIR still insisted that the taxpayer’s beverage does not fall within the excluded beverage classifications.

The tax court ruled upon this on the side of the taxpayer. The FDA is the lead government agency tasked with the role of identifying and classifying food products. Its classifications, therefore, are presumed valid and regular, as it was performed in the course of the FDA’s official duties. In the absence of contrary evidence, the presumption stands.

This is a very welcome aspect of the decision as it enforces the primacy of functions by specialized government agencies. It likewise provides stability in terms of official government dealings and avoids flip-flopping government pronouncements tending to suit their particular interests.

THIRD. A beverage does not need to have a total absence of sugar to be excluded from SBT. This principle comes after the argument of the BIR that the beverage of the taxpayer has more sugar content than milk (which is an SBT-excluded beverage) and that it is primarily composed of sugar and/or sweeteners.

The taxpayer was able to show that milk was the primary ingredient of the beverage and that the sugar content does not exceed the milk content. In addition (which I believe is the more rounded principle affirmed by the tax court), it was held that a beverage (e.g., milk) is not required to have zero sugar or caloric sweetener to qualify for exclusion from SBT.

The presence of naturally occurring sugars does not automatically subject a beverage to SBT. Further, even sugars or caloric sweeteners added by manufacturers in lesser proportion relative to milk cannot be used as basis to dispute the FDA classification.

While the goals of SBT is a noble one, it should not come at the expense of those that are not duly covered by it. Decisions and rulings, such as those made by the tax court, help in defining the parameters and bounds of the law.

I should note, however, that the case mentioned above is currently pending with the Supreme Court. We now wait and see which side the highest court of the land would favor. Truly, these developments make taxation dynamic.

The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 8403-2001 local 140.