Newspaper sales tax repeal proposed

Assemblyman Marc Levine (D-Marin County) has introduced legislation on behalf of CNPA to repeal the sales tax on newspapers. AB 1776 is currently with the Assembly Rules Committee, awaiting referral by that committee to a policy committee. The bill’s path to the Assembly floor will be through the Assembly Revenue and Taxation Committee, chaired by Assemblywoman Autumn Burke (D-Inglewood), and then the Assembly Appropriations Committee, Chaired by Assemblywoman Lorena Gonzalez (D-San Diego).

Once the bill is set for committee hearing, CNPA governmental affairs staff will ask members to contact both their own representatives and the members of the committees that must approve this legislation if it is to reach the governor’s desk. Please look to this Bulletin for critical dates for action, talking points and contact information for key legislators.

Here is background information on AB 1776:

Faced with an unprecedented $8 billion budget deficit, the legislature in 1990 adopted a budget proposed by then-Gov. Pete Wilson that imposed a sales tax on four previously exempt products: bottled water, candy and snack foods, newspapers and periodicals and bunker fuel (stored fuel). Newspapers found themselves subject to California sales tax for the first time since the sales tax was created in the 1930s.

By 1992, the bottled water and snack industries had used the initiative process to easily reclaim their exemptions. Meanwhile, CNPA and the magazine industry succeeded in making important changes on the application of the tax to newspapers and magazines. In 1991 the legislature acted quickly to repeal the tax on freely distributed newspapers – an unfair tax on print costs which could not be passed on to readers since they receive the newspaper for free. That measure also repealed the tax on student, nonprofit and religious publications. In 1992 the legislature repealed the tax on mailed periodicals, which resulted (by regulatory changes) in also repealing the tax on sales of most weekly newspapers (i.e., those distributed between four and sixty times a year, sold by subscription and delivered by mail or common carrier.)

The last tax change occurred just a few years ago when CNPA worked with the State Board of Equalization to adjust the regulations to clarify that the digital part of a mixed digital/ print subscription was not subject to tax.

Ironically, the tax continues to be levied on the print products of the only business set out for special protection in the Bill of Rights – the press – while virtually every other content creator and aggregator of content competing for the same eyeballs and ad dollars is untaxed.

A June 28, 2018 column published in The Sacramento Bee outlining the Bee’s plan for sustainable local news, Bee regional editor Lauren Gustus wrote this:

Some of you will remember when we were a two-newspaper town. Today we’re competing with every single thing that’s on your phone, whether it’s a Yelp review or a friend’s text.

For both the print and digital offerings of CNPA members, this is no doubt true, and this doesn’t even include competition from content electronically delivered to larger boxes via broadcast, cable or Internet, nor competition for news consumers’ time and attention generally when they do put down their smart phones — kids, pets, the great outdoors, real life.

When news businesses compete for consumers in the digital realm, at least regarding California’s tax policy, the competitive playing field is level. News delivered electronically is not “tangible personal property” subject to sales and use tax. For printed and published newspapers, though, publishers continue to play on a tilted field that penalizes the distribution of printed newspapers and favors virtually all other media competitors.