Utah newspapers are banding together to oppose a proposal to tax advertising inserts, calling it a challenge to the industry's First Amendment protections under the U.S. Constitution.
Newspapers nationwide have traditionally been exempt from paying taxes on ink, paper and other materials, including those used to produce ads, as well as sales to prevent government from having control over the press.Now the Utah State Tax Commission is considering assessing sales tax on advertisements that do not appear on the pages of a newspaper, unless they contain the newspaper's name and publication date.
Only four states - Arkansas, Connecticut, Idaho and Wisconsin - assess sales tax on pre-printed advertising inserts, according to information compiled by the American Newspaper Publishers Association.
Industry officials said the proposal, directed at advertising for supermarkets, discount stores and other businesses that is printed out of state and inserted by Utah newspapers for a fee, would reduce revenues.
"It is revenue that protects First Amendment rights," Janice Keller, executive director of the Utah Press Association, said. "What pays for a newspaper is advertising. It doesn't matter what form it takes."
State Tax Commissioner Roger Tew said the assessment was proposed because the inserts should be taxed the same as handbills and other forms of advertising delivered door-to-door or through the mail.
"We fail to see the distinction between the delivery mechanism," Tew said of the reason behind the proposed change in Tax Commission rules. "It's being done to bring consistency to how we treat advertising."
The rule change calls only for advertising inserts "that are identified with the name and date of publications of the newspaper with which they are delivered" to be exempted from sales tax.
The problem is that not all advertising inserts are printed by the newspaper carrying them. Some, especially those from national store chains, are printed by companies that distribute them to newspapers all over the country.
Adding an individual newspaper's name and publication date will add to the cost of printing. That additional cost could result in the affected companies choosing to advertise less. And less advertising means less revenue.
Tew said the assessment was not proposed to increase the state's sales tax revenues. He said there is no estimate of how much money would be collected if the rule change is adopted by the Tax Commission.
Members of the Utah Press Association, which represents nearly all of the state's daily and weekly newspapers, met Friday to consider how to battle the proposed tax.
Attorneys for the association as well as legal counsel for the state's largest newspapers are preparing statements opposing the enactment of the tax and will meet again next month to decide whether to request a public hearing.
Because of the concern being raised over the proposed tax, the Tax Commission has extended the deadline for public comments from May 1 until May 15.