Singling out One Medium for Taxation Allowable: U.S. Supreme Court Rules 7-2 It Does Not Violate the First Amendment
Gersh, Debra, Editor & Publisher
Singling out one medium for taxation allowable
Singling out one medium for taxation while exempting others does not violate the First Amendment, as long as the taxation is neither censorial nor discriminatory, the U.S. Supreme Court ruled recently.
The 7-2 majority decision in Leathers, Commissioner of Revenues of Arkansas, v. Medlock determined that an Arkansas tax on cable television was not unconstitutional as it is part of a state general services tax. Other media are exempt from the tax.
The dissenting justices, however, found that singling out one medium for taxation leaves open the potential for governmental abuses.
The Leathers decision had repercussions for the newspaper industry beyond Arkansas, however, as the Court also acted on similar cases before it from other states.
A few days after the Leathers decision, the U.S. Supreme Court left in place an Iowa Supreme Court ruling that upheld a tax on magazines while exempting newspapers.
The Court also vacated a Florida Supreme Court decision that disallowed the distinction between magazines tax, however, the Florida court nullified the newspapers' exemption. The U.S. Supreme Court vacated the decision and ordered the Florida court to re-examine the case in light of the Leathers ruling.
"I think this is a pretty significant decision," National Newspaper Association general counsel Robert J. Brinkmann said of the Leathers ruling, adding it is particularly good for smaller newspapers.
"People can still tax newspapers if they want, but if they don't, it's OK," he said.
The decision also leaves in place protections for smaller newspapers. Part of the majority decision found that one measure for determining whether a tax is discriminatory is whether it involves a large number of media outlets or only a few, the latter not being allowed.
Justice Sandra Day O'Connor, writing for the majority in the Leathers decision, noted that previous U.S. Supreme Court cases "establish that differential taxation of speakers, even members of the press, does not implicate the First Amendment unless the tax is directed at, or presents the danger of suppressing, particular ideas."
"The Arkansas sales tax is a tax of general applicability," she wrote. "It applies to receipts from the sale of all tangible personal property and a broad range of services, unless within a group of specific exemptions . . . .
"The tax does not single out the press and does not therefore threaten to hinder the press as a watchdog of government activity . . . . We have said repeatedly that a state may impose on the press a generally applicable tax . . . .
"Futhermore, there is no indication in this case that Arkansas has targeted cable television in a purposeful attempt to interfere with its First Amendment activities. Nor is the tax one that is structured so as to raise suspicion that it was intended to do so," the Court majority found.
She noted that "The danger from a tax scheme that targets a small number of speakers is the danger of censorship; a tax on a small number of speakers runs the risk of affecting only a limited range of views. The risk is similar to that from content-based regulations: it will distort the market for ideas . . . . There is no comparable danger from a tax on services provided by a large number of cable operators offering a wide variety of programming throughout the state . . . .
"The Arkansas Legislature has chosen simply to exclude or exempt certain media from a generally applicable tax. Nothing about that choice has ever suggested an interest in censoring the expressive activities of cable television. Nor does anything in this record indicate that Arkansas' broad-based, content-neutral sales tax is likely to stifle the free exchange of ideas.
"We conclude that the state's extension of its generally applicable sales tax to cable television services alone, or to cable and satellite services, while exempting the print media, does not violate the First Amendment . …