Opinion ID: 1771648
Heading Depth: 1
Heading Rank: 6

Heading: Use-Tax Exemption for Newspapers

Text: It is undisputed that daily and weekly newspapers are statutorily exempt from Mississippi's use tax. See Miss.Code Ann. ง 27-65-111(b) (exempting newspapers from sales tax); section 27-67-7(b) (exempting from use tax tangible personalty if its sale is specifically exempted from sales tax). It is also undisputed that no such exemption is provided for advertising materials, subject to the proviso that defendant interprets the statutory exemption for newspapers to include advertising inserts that are delivered by the printer to the newspaper and sold or distributed as a part of the newspaper. Plaintiff argues that, because newspapers and advertising inserts in newspapers are exempt, but its direct-mail advertising materials are subject to tax, the use-tax scheme violates its federal constitutional rights to free speech, free press and equal protection. United States Constitution, arts. I and XIV. On this basis, plaintiff prays for a full refund of the entire $658,150.23 at issue. This Court finds no merit to plaintiff's constitutional arguments. Plaintiff inaccurately cites Minneapolis Star and Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575, 103 S.Ct. 1365, 75 L.Ed.2d 295 (1983), for the proposition that differential taxation, in and of itself, is a presumptively unconstitutional form of regulation. The tax at issue in that case was a Minnesota special-use tax on the cost of paper and ink consumed in the production of publications, which was held unconstitutional because it singled out the press for special treatment and targeted a small group of newspapers to bear the tax burden. Leathers v. Medlock, 499 U.S. 439, 111 S.Ct. 1438, 113 L.Ed.2d 494 (1991). In contrast, the Mississippi use tax at issue in the present case is a tax of general applicability that applies to the use, storage or consumption of all tangible personal property, unless within a group of specific exemptions. Cf. id. (finding the Arkansas sales tax is a tax of general applicability). There is no evidence to demonstrate that the Mississippi use tax singles out the press or any small group thereof for special treatment. Where a state imposes a generally applicable tax, there is little cause for concern. Minneapolis Star and Tribune Co., 460 U.S. 575, 103 S.Ct. 1365, 75 L.Ed.2d 295. Plaintiff argues the Mississippi use-tax scheme violates the First Amendment because the newspaper exemption is applied on the basis of the publication's content. This Court finds no clear and convincing evidence of constitutionally-invalid content-based discrimination. It is undisputed that the Mississippi Use Tax Law contained no definition of newspaper at the times pertinent to this case. Instead, as the evidence showed, defendant was guided by Mississippi Code Annotated ง 13-3-31 (Supp.1996), which sets forth the factors for identifying publications for the placement of summons, order, citation, advertisement or other legal notice required to be published in a newspaper in this state. [6] These factors include distinctions based on both form and content. On similar facts, other jurisdictions have upheld statutory tax exemptions for newspapers reasoning that the newspapers may be identified by constitutionally-permissible distinctions based upon format, such as frequency of publication. E.g., Magazine Publishers of America v. Commonwealth of Pennsylvania, 539 Pa. 563, 654 A.2d 519 (1995); Gallacher, et. at. v. Comm'r of Revenue Services, 221 Conn., 166, 602 A.2d 996 (1992). See also Hearst Corp. v. Iowa Dep't of Revenue and Finance, 461 N.W.2d 295 (Iowa 1990), cert. denied, 499 U.S. 983, 111 S.Ct. 1639, 113 L.Ed.2d 735 (1991) (holding that, while classification of the publication's writing as news was a consideration, its form and frequency of publication were the primary factors for determining its qualification for the tax exemption for newspapers). Certainly, heightened scrutiny under the First Amendment is triggered if a tax discriminates on the basis of the content of taxpayer speech. Leathers, 499 U.S. 439, 111 S.Ct. 1438, 113 L.Ed.2d 494. Citing Arkansas Writers' Project, Inc. v. Ragland, 481 U.S. 221, 107 S.Ct. 1722, 95 L.Ed.2d 209 (1987), Minneapolis Star and Tribune Co., 460 U.S. 575, 103 S.Ct. 1365, 75 L.Ed.2d 295, and Grosjean v. American Press Co., Inc., 297 U.S. 233, 56 S.Ct. 444, 80 L.Ed. 660 (1936), plaintiff contends a state taxation scheme that discriminates between two different types of political speech. absent an overriding government interest that cannot be achieved without such differential taxation, is forbidden. Unlike the taxpayer speech at issue in these cited authorities, however, advertising is generally categorized as commercial speech and accorded a measure of First Amendment protection that is satisfied if a narrowly-drawn regulation directly and materially advances a substantial governmental interest. Florida Bar v. Went For It, Inc., 515 U.S. 618, 621, 115 S.Ct. 2371, 2375, 132 L.Ed.2d 541, 548 (1995). As the United States Supreme Court there explained. We have always been careful to distinguish commercial speech from speech at the First Amendment's core. `[C]ommercial speech [enjoys] a limited measure of protection, commensurate with its subordinate position in the scale of First Amendment values,' and is subject to `modes of regulation that might be impermissible in the realm of noncommercial expression.'... We have observed that `[t]o require a parity of constitutional protection for commercial and noncommercial speech alike could invite dilution simply by a leveling process, of the force of the Amendment's guarantee with respect to the latter type of speech.' Id. (citations omitted). In the present case, plaintiff cites no persuasive authority for the issue at hand, i.e., whether a state tax of general applicability that differentiates between noncommercial speech (newspaper) and commercial speech (advertising) violates the First Amendment. Although denial of a state-tax exemption constitutes a violation of the First Amendment where the taxpayer engaged in certain political speech and the denial was aimed at the suppression of dangerous ideas, Speiser v. Randall, 357 U.S. 513, 78 S.Ct. 1332, 2 L.Ed.2d 1460 (1958), there is no evidence of such conduct here. Thus, in the absence of any clear authority applicable on the facts of this case and being mindful of the aforementioned presumption of constitutionality, this Court is not persuaded the Mississippi use-tax exemption for newspapers impermissibly infringes upon the limited First Amendment protection afforded plaintiff's commercial speech. See also Redwood Empire Publishing Co., et al. v. State Board of Equalization, 207 Cal.App.3d 1334, 255 Cal.Rptr. 514 (Ct.App.1989) (Surveying federal decisional law addressing the constitutionality of differential regulation of commercial and noncommercial speech). Finally, plaintiff argues the statutory newspaper exemption, as well as defendant's interpretation of it to cover newspaper advertising inserts, violates its federal constitutional equal-protection guarantee because there is no rational basis for such differential treatment. Generally, the Equal Protection Clause is satisfied where there is a plausible policy reason for the classification, the legislative facts on which the classification is apparently based rationally may have been considered true by the government, and the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational. Nordlinger v. Hahn, 505 U.S. 1, 112 S.Ct. 2326, 120 L.Ed.2d 1 (1992). This Court, applying the test to this case, finds the statutory use-tax exemption for newspapers and defendant's interpretation that it encompasses newspaper advertising inserts are rationally related to the legislative policy of subsidizing newspapers as a vital source of public information and interpreter between the government and the people. Grosjean v. American Press Co., 297 U.S. 233, 56 S.Ct. 444, 80 L.Ed. 660.