Leathers V. Medlock: The Supreme CourtChanges Course On Taxing The Press

On April 16, 1991, the United States Supreme Court decided Leathers v. Medlock.(1) Leathers drastically changed the landscape of the First Amendment's Freedom of the Press Clause in the area of taxation of the media.(2) In Leathers, the Court held that an Arkansas sales tax could tax cable television differently from other members of the media, thus severely narrowing, if not implicitly reversing, several prior cases.(3) The newspaper, magazine, broadcast television and cable industries, as well as state legislatures and state courts, will all feel the impact of Leathers.(4) The result of Leathers is that the Court essentially has tossed the matter of differential taxation of the press back to the states with an important warning to avoid certain types of media discrimination.(5) Considering the direction that the Court had been heading in this area--toward mandating tax equality for all the media--Leathers represents an important shift in Court policy.(6)Before discussing Leathers more fully, however, an understanding of the Court's previous doctrine is necessary.(7)I. PREVIOUS CASE LAWThe Supreme Court's first foray into the field of taxation of the media occurred in 1936." In Grosjean v. American Press Co.(9) the Court decided that a Louisiana tax on newspapers violated the Fourteenth Amendment.(10) The Louisiana legislature had imposed a two percent license tax on publications that charged for advertising.(11) The legislature exempted newspapers with circulations less than 20,000.(12) The Court noted that the Louisiana legislature likely imposed the tax out of censorial motives, but the Court did not restrict its holding to taxes imposed only from censorial motive.(13) Until the early 1980s Grosjean was the only major case decided in this taxation of the press area.(14)Then, in the 1983 landmark case of Minneapolis Star & Tribune Co. v. Minnesota Commissioner of Revenue,(15) the Supreme Court ruled that a Minnesota special use tax on paper and ink violated the principles of the First Amendment.(16) In Minneapolis Star, although the Court could detect no evidence of censorial motive in the Minnesota legislation, the Court found that singling out the press through differential treatment made the Minnesota law unconstitutional.(17) The suspicion of mere differential treatment articulated in Minneapolis Star was a new and sweeping First Amendment doctrine.(18) Minneapolis Star created two categories in which state taxation of the press may run afoul of the First Amendment. One arises when a state singles out the press from other businesses and the other arises when a state singles out and taxes only a few members of the press.(19) The Court acknowledged that while the press is not immune from a generally applicable tax, the potential for abuse is present in differential taxation of the press.(20) Justice Rehnquist dissented in Minneapolis Star, arguing that while unfavorable treatment violates the First Amendment, mere differential treatment does not violate the First Amendment.(21)In 1987, the Supreme Court revisited the subject of taxation of the media in Arkansas Writers Project v. Ragland.(22) In Ragland, an Arkansas gross receipts tax on sales of tangible personal property exempted from taxation newspapers as well as religious, sports, trade, or professional journals.(23) The Court held that the Arkansas tax failed the second part of the Minneapolis Star test, because the Arkansas statute singled out some members of the press for taxation.(24) The Court also noted that the exemption was content-based because it identified certain subjects that a periodical could contain to qualify for an exemption.(25) Because the Arkansas statute was content-based, Justice Marshall's majority opinion in Ragland subjected the tax to a strict scrutiny test that Arkansas failed to meet.(26)Justices Scalia and Rehnquist dissented in Ragland, arguing that instead of applying a strict scrutiny test to the Arkansas tax at issue the majority should have applied a rational basis test. …