Department of Revenue v. Magazine Publishers of America, Inc.

• Decision Date: 31 May 1990
• Docket Number: No. 75201,75201
• Citation: 565 So.2d 1304
• Parties: , 15 Fla. L. Weekly S323 DEPARTMENT OF REVENUE, Appellant, v. MAGAZINE PUBLISHERS OF AMERICA, INC., et al., Appellees.
• Court: Florida Supreme Court

Page 1304

565 So.2d 1304

59 USLW 2008, 15 Fla. L. Weekly S323

DEPARTMENT OF REVENUE, Appellant, v. MAGAZINE PUBLISHERS OF AMERICA, INC., et al., Appellees.

No. 75201.

Supreme Court of Florida.

May 31, 1990.

Rehearing Denied Sept. 10, 1990.

Robert A. Butterworth, Atty. Gen., and Kevin J. O'Donnell, Asst. Atty. Gen., Tallahassee, for appellant.

James M. Ervin, Jr. and Michael L. Rosen of Holland & Knight, Tallahassee, for Magazine Publishers of America, Inc., The Hearst Corp., Time, Inc., Golf Digest/Tennis, Inc., and Meredith Corp.

Laura Besvinick of Greer, Homer & Bonner, P.A., Miami, for The Miami Herald Pub. Co.

Barry Richard and William L. Hyde of Roberts, Baggett, LaFace & Richard, Tallahassee, for The Florida Press Ass'n, The Tallahassee Democrat, Inc., Florida Pub. Co., and Citrus Pub. Co., Inc.

Timothy J. Warfel of Messer, Vickers, Caparello, French, Madsen & Lewis, P.A., Tallahassee, for Florida Catholic Conference, Inc., The Voice Pub. Co., Inc., and Daughters of St. Paul, Inc.

Cecil L. Davis, Jr., Tallahassee, for Florida Baptist Witness, Inc.

EHRLICH, Chief Justice.

Magazine Publishers of America, Inc.; The Hearst Corporation, Time, Inc.; Golf Digest/Tennis, Inc.; and Meredith Corporation (Magazine Publishers) filed suit against the Florida Department of Revenue (Department) challenging the constitutionality of the imposition of sales tax on the retail sale of secular magazines pursuant to chapter 212, Florida Statutes (1987). The trial court granted the Magazine Publishers' motion for summary judgment. ¹ In its order, the trial court found that "Chapter 212 clearly imposes a differential tax on the press, singling out magazines for taxation while exempting newspapers." The trial court also found that the Department failed to assert a compelling state interest sufficient to support the differential tax. Accordingly, the trial court held the tax imposed on magazines to be an unconstitutional violation of the first amendment of the United States Constitution and ordered that the Department be enjoined from collecting the tax on magazines. Upon appeal by the Department, the First District Court of Appeal certified the question involved to be one of great public importance that requires immediate resolution by this Court. We have jurisdiction. Art. V, § 3(b)(5), Fla.Const.

Under Florida's sales and use taxation scheme, sales tax is levied on retail sales of secular magazines while retail sales of newspapers are exempt from taxation. §§ 212.05(1)(i), .06(9), .08(7)(w), Fla.Stat. (1987 & Supp.1988). Section 212.05(1)(i), Florida Statutes (Supp.1988), provides:

(1) ... [A] tax is levied on each taxable transaction or incident, which tax is due and payable as follows:

....

(i) At the rate of 6 percent on the retail price of magazines sold or used in Florida.

Section 212.08(7)(w), Florida Statutes (Supp.1988), which sets forth miscellaneous exemptions, provides:

(w) Newspapers--Likewise exempt are newspapers.

The Magazine Publishers assert that the differential taxation of magazines violates the free speech and free press clauses of the first amendment and the equal protection clause of the fourteenth amendment to the United States Constitution, as well as article I, sections 2 and 4, of the Florida Constitution. ²

The Department and the Newspapers contend that the statutory distinction between magazines and newspapers for purposes of the Florida sales and use tax is constitutionally permissible. These parties argue that the trial court erred in concluding that the appropriate standard by which to judge the differential treatment of the publications is a "strict scrutiny" standard, rather than a "rational basis" test, and in concluding that the differential taxation of magazines is unconstitutional under the first amendment of the United States Constitution. We reject the position asserted by the Department and the Newspapers.

The first amendment of the United States Constitution provides that Congress shall make no law abridging freedom of speech or freedom of the press. The first amendment clearly "does not prohibit all regulation of the press. It is beyond dispute that the States and the Federal Government can subject newspapers to generally applicable economic regulations without creating constitutional problems." Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575, 581, 103 S.Ct. 1365, 1369, 75 L.Ed.2d 295 (1983). However, "a discriminatory tax on the press burdens rights protected by the First Amendment." Arkansas Writers' Project, Inc. v. Ragland, 481 U.S. 221, 107 S.Ct. 1722, 1726, 95 L.Ed.2d 209 (1987) (footnote omitted). It is clear from the Court's analysis in both Ragland and Minneapolis Star that Florida's statutory differentiation between secular magazines and newspapers for purposes of sales taxation burdens rights protected by the first amendment.

In Minneapolis Star, Minnesota enacted a "use tax" on the cost of paper and ink products consumed in the production of a publication as part of the state's sales and use taxation scheme. A subsequent amendment exempted the first $100,000 worth of ink and paper consumed in any calendar year. After the enactment of the $100,000 exemption,

11 publishers, producing 14 of the 388 paid circulation newspapers in the State, incurred a tax liability in 1974. Star Tribune was one of the 11, and, of the $893,355 collected, it paid $608,634, or roughly two-thirds of the total revenue raised by the tax. In 1975, 13 publishers, producing 16 out of 374 paid circulation papers, paid a tax. That year, Star Tribune again bore roughly two-thirds of the total receipts from the use tax on ink and paper.

Minneapolis Star, 460 U.S. at 578-79, 103 S.Ct. at 1368 (citations omitted). The Court rejected the state's argument that the tax was valid, finding two distinct forms of discrimination.

First, in contrast to generally applicable economic regulations to which the press can legitimately be subject, the Minnesota use tax treated the press differently from other enterprises.[ ³ Second, the tax targeted a small group of newspapers. This was due to the fact that the first $100,000 of paper and ink were exempt from the tax; thus "only a handful of publishers pay any tax at all, and even fewer pay any significant amount of tax."

Ragland, 107 S.Ct. at 1727 (citations omitted). Thus, the first type of discriminatory tax identified in Minneapolis Star is a special tax that applies only to publications protected by the first amendment. 460 U.S. at 581, 103 S.Ct. at 1369. The second type of discriminatory tax identified is one that is tailored in such a way that it singles out or targets individual publications within the press. Id. at 591, 103 S.Ct. at 1375.

The Court held that such differential, discriminatory taxation of the press places a burden on the interests protected by the first amendment. Id. at 585, 103 S.Ct. at 1371. As the Court noted:

A power to tax differentially, as opposed to a power to tax generally, gives a government a powerful weapon against the taxpayer selected. When the State imposes a generally applicable tax, there is little cause for concern. We need not fear that a government will destroy a selected group of taxpayers by burdensome taxation if it must impose the same burden on the rest of its constituency. When the State singles out the press, though, the political constraints that prevent a legislature from passing crippling taxes of general applicability are weakened, and the threat of burdensome taxes becomes acute. That threat can operate as effectively as a censor to check critical comment by the press, undercutting the basic assumption of our political system that the press will often serve as an important restraint on government.

Id. at 585, 103 S.Ct. at 1371 (citations omitted). The Court also recognized the great potential for abuse that would be presented by recognizing a power in the state to tax selected members of the press. Id. at 592, 103 S.Ct. at 1375.

In Ragland, the Court again addressed the issue of differential taxation of publications protected by the first amendment. The Arkansas sales tax scheme examined by the Court in Ragland taxed general interest magazines, but exempted newspapers and religious, professional, trade, and sports journals. The question presented was whether Arkansas' system of selective taxation of publications violated the First Amendment's guarantee of freedom of the press. The Court again emphasized the danger of abuse by the state that is posed by differential treatment of entities in the press. The Court noted that both types of discrimination identified in Minneapolis Star could be established even where there is no evidence of an improper censorial motive "because selective taxation of the press--either singling out the press as a whole or targeting individual members of the press--poses a particular danger of abuse by the State." Ragland, 107 S.Ct. at 1727. The Arkansas tax scheme resulted in only a few Arkansas magazines paying any sales tax. The Court concluded that "[b]ecause the Arkansas sales tax scheme treats some magazines less favorably than others, it suffers from the second type of discrimination identified in Minneapolis Star." Id. In other words, although the tax is nominally imposed on receipts from sales of all tangible personal property, it targets individual members of the press. Id. The tax imposed on selective magazines was declared invalid.

The holding in Ragland eliminated the differential treatment between general interest magazines and the exempt special interest magazines. Because the tax on general interest magazines was declared invalid, magazines previously subject to sales tax would be treated no differently for tax purposes than the magazines specifically exempted from the tax. This holding also had the effect of eliminating the differential treatment of newspapers and magazines; neither general interest magazines,...