499 U.S. 439 (1991), Leathers v. Medlock

Citation:499 U.S. 439, 111 S.Ct. 1438, 113 L.Ed.2d 494, 59 U.S.L.W. 4281
Party Name:Leathers v. Medlock
Case Date:April 16, 1991
Court:United States Supreme Court
 
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Page 439

499 U.S. 439 (1991)

111 S.Ct. 1438, 113 L.Ed.2d 494, 59 U.S.L.W. 4281

Leathers

v.

Medlock

United States Supreme Court

April 16, 1991

CERTIORARI TO THE SUPREME COURT OF ARKANSAS

Syllabus

Arkansas' Gross Receipts Act imposes a tax on receipts from the sale of all tangible personal property and specified services, but expressly exempts, inter alia, certain receipts from newspaper and magazine sales. In 1987, Act 188 amended the Gross Receipts Act to impose the tax on cable television. Petitioners in No. 90 38, a cable television subscriber, a cable operator, and a cable trade organization (cable petitioners), brought this class action in the State Chancery Court, contending that their expressive rights under the First Amendment and their rights under the Equal Protection Clause of the Fourteenth Amendment were violated by the extension of the tax to cable services, the exemption from the tax of newspapers and magazines, and the exclusion from the list of services subject to the tax of scrambled satellite broadcast television services to home dish antennae owners. In 1989, shortly after the Chancery Court upheld the constitutionality of Act 188, Arkansas adopted Act 769, which extended the tax to, among other things, all television services to paying customers. On appeal, the State Supreme Court held that the tax was not invalid after the passage of Act 769 because the Constitution does not prohibit the differential taxation of different media. However, believing that the First Amendment does prohibit discriminatory taxation among members of the same medium, and that cable and scrambled satellite television services were "substantially the same," the Supreme Court held that the tax was unconstitutional for the period during which it applied to cable but not satellite broadcast services.

Held:

1. Arkansas' 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. Pp. 444-453.

(a) Although cable television, which provides news, information, and entertainment to its subscribers, is engaged in "speech" and is part of the "press" in much of its operation, the fact that it is taxed differently from other media does not, by itself, raise First Amendment concerns.

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The Arkansas tax presents none of the First Amendment difficulties that have led this Court to strike down differential taxation of speakers. See, e.g., Grosjean v. American Press Co., 297 U.S. 233; Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575; Arkansas Writers' Project, Inc. v. Ragland, 481 U.S. 221. It is a tax of general applicability covering all tangible personal property and a broad range of services and, thus, does not single out the press, and thereby threaten to hinder it as a watchdog of government activity. Furthermore, there is no indication that Arkansas has targeted cable television in a purposeful attempt to interfere with its First Amendment activities, nor is the tax structured so as to raise suspicion that it was intended to do so. Arkansas has not selected a small group of speakers to bear fully the burden of the tax, since, even if the State Supreme Court's finding that cable and satellite television are the same medium is accepted, Act 188 extended the tax uniformly to the approximately 100 cable systems then operating in the State. Finally, the tax is not content-based, since there is nothing in the statute's language that refers to the content of mass media communications, and since the record contains no evidence that the variety of programming cable television offers subscribers differs systematically in its message from that communicated by satellite broadcast programming, newspapers, or magazines. Pp. 444-449.

(b) Thus, cable petitioners can prevail only if the Arkansas tax scheme presents "an additional basis" for concluding that the State has violated their First Amendment rights. See Arkansas Writers' supra, at 233. This Court's decisions do not support their argument that such a basis exists here, because the tax discriminates among media and discriminated for a time within a medium. Taken together, cases such as Regan v. Taxation with Representation of Washington, 461 U.S. 540, Mabee v. White Plains Publishing Co., 327 U.S. 178, and Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 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. Nothing about Arkansas' choice to exclude or exempt certain media from its tax has ever suggested an interest in censoring the expressive activities of cable television. Nor does anything in the record indicate that this broad-based, content-neutral tax is likely to stifle the free exchange of ideas. Pp. 449-453.

2. The question whether Arkansas' temporary tax distinction between cable and satellite services violated the Equal Protection Clause must be addressed by the State Supreme Court on remand. P. 453.

301 Ark. 483, 785 S.W.2d 202 (1990), affirmed in part, reversed in part, and remanded.

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O'CONNOR, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and WHITE, STEVENS, SCALIA, KENNEDY, and SOUTER, JJ., joined. MARSHALL, J., filed a dissenting opinion, in which BLACKMUN, J., joined, post, p. 454.

O'CONNOR, J., lead opinion

JUSTICE O'CONNOR delivered the opinion of the Court.

These consolidated cases require us to consider the constitutionality of a state sales tax that excludes or exempts certain segments of the media, but not others.

I

Arkansas' Gross Receipts Act imposes a 4% tax on receipts from the sale of all tangible personal property and specified services. Ark.Code Ann. §§ 26-52-301, 26-52-302 (1987 and Supp.1989). The Act exempts from the tax certain sales of goods and services. § 26-52-401 (Supp.1989). Counties

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within Arkansas impose a 1% tax on all goods and services subject to taxation under the Gross Receipts Act, §§ 26-74-307, 26-74-222 (1987 and Supp.1989), and cities may impose a further 1/2 or 1% tax on these items, § 26-75-307 (1987).

The Gross Receipts Act expressly exempts receipts from subscription and over-the-counter newspaper sales and subscription magazine sales. See §§ 26-52-401(4), (14) (Supp.1989); Revenue Policy Statement 1988-1 (Mar. 10, 1988), reprinted in CCH Ark.Tax Rep. 1169-415. Before 1987, the Act did not list among those services subject to the sales tax either cable television[1] or scrambled satellite broadcast television services to home dish-antennae owners.[2] See § 26-52-301 (1987). In 1987, Arkansas adopted Act 188, which amended the Gross Receipts Act to impose the sales tax on cable television. 1987 Ark.Gen.Acts, No. 188, § 1.

Daniel L. Medlock, a cable television subscriber, Community Communications Co., a cable television operator, and the Arkansas Cable Television Association, Inc., a trade organization composed of approximately 80 cable operators with systems throughout the State (cable petitioners), brought this class action in the Arkansas Chancery Court to challenge the extension of the sales tax to cable television services. Cable petitioners contended that their expressive activities are protected by the First Amendment and are comparable to those of newspapers, magazines, and scrambled satellite broadcast television. They argued that Arkansas' sales

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taxation of cable services, and exemption or exclusion from the tax of newspapers, magazines, and satellite broadcast services, violated their constitutional rights under the First Amendment and under the Equal Protection Clause of the Fourteenth Amendment.

The Chancery Court granted cable petitioners' motion for a preliminary injunction, requiring Arkansas to place in escrow the challenged sales taxes and to keep records identifying collections of the taxes. Both sides introduced extensive testimony and documentary evidence at the hearing on this motion and at the subsequent trial. Following the trial, the Chancery Court concluded that cable television's necessary use of public rights-of-way distinguishes it for constitutional purposes from other media. It therefore upheld the constitutionality of Act 188, dissolved its preliminary injunction, and ordered all funds collected in escrow released.

In 1989, shortly after the Chancery Court issued its decision, Arkansas adopted Act 769, which extended the sales tax to

all other distribution of television, video or radio services with or without the use of wires provided to subscribers or paying customers [111 S.Ct. 1442] or users.

1989 Ark.Gen.Acts, No. 769, § 1. On appeal to the Arkansas Supreme Court, cable petitioners again challenged the State's sales tax on the ground that, notwithstanding Act 769, it continued unconstitutionally to discriminate against cable television. The Supreme Court rejected the claim that the tax was invalid after the passage of Act 769, holding that the Constitution does not prohibit the differential taxation of different media. Medlock v. Pledger, 301 Ark. 483, 487, 785 S.W.2d 202, 204 (1990). The Court believed, however, that the First Amendment prohibits discriminatory taxation among members of the same medium. On the record before it, the court found that cable television services and satellite broadcast services to home dish-antennae owners were "substantially the same." Ibid. The State Supreme Court rejected the Chancery Court's conclusion that cable television's use of public

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rights-of-way justified its differential sales tax treatment, explaining that cable operators already paid franchise fees for that right. Id. at...

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