Emmis Pub. Corp. v. Indiana Dept. of State Revenue, 49T05-9011-TA-00059

• Decision Date: 08 April 1993
• Docket Number: No. 49T05-9011-TA-00059,49T05-9011-TA-00059
• Citation: 612 N.E.2d 614
• Parties: EMMIS PUBLISHING CORPORATION, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, and Kenneth L. Miller, in his Capacity as Commissioner of the Indiana Department of State Revenue, Respondents.
• Court: Indiana Tax Court

Page 614

612 N.E.2d 614

EMMIS PUBLISHING CORPORATION, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, and Kenneth L. Miller,

in his Capacity as Commissioner of the Indiana

Department of State Revenue, Respondents.

No. 49T05-9011-TA-00059.

Tax Court of Indiana.

April 8, 1993.

Stephen H. Paul, Edwin W. Free, Baker & Daniels, Indianapolis, for petitioner.

Pamela Carter, Atty. Gen., Marilyn S. Meighen, Deputy Atty. Gen., Indianapolis, for respondents.

FISHER, Judge.

The Petitioner, Emmis Publishing Corporation (Emmis), appeals the final determination of the Respondent, the Indiana Department of State Revenue (the Department), denying the refund of state gross retail (sales) tax ¹ paid for the years 1987, 1988, 1989, and the period from January 1, 1990, through June 30, 1990. The matter is before the court on the parties' motions for summary judgment.

ISSUES

The parties raise several issues which the court restates as follows.

I. Does 45 I.A.C. 2.2-5-26(b)(2) unconstitutionally discriminate on the basis of the content of speech for purposes of exemption from sales tax, and, if so, what is the proper remedy for such discrimination?

II. Is Indianapolis Monthly a newspaper for purposes of exemption from sales tax under IND.CODE 6-2.5-5-17? ²

III. Is Emmis is entitled to relief under 42 U.S.C. Sec. 1983?

FACTS

The following facts are undisputed. For most of the years at issue Mayhill Publishing Co., Inc. (Mayhill) published and distributed Indianapolis Monthly. Emmis purchased the assets Indianapolis Monthly from Mayhill in August of 1988 and has published Indianapolis Monthly since that date. Both Mayhill and Emmis collected and remitted sales tax on subscription sales of Indianapolis Monthly during the years at issue totaling $56,820.41. Emmis returned $61.24 of the previously collected sales tax to certain subscription customers and seeks a refund from the Department. With the exception of this small amount, Emmis continues to collect and remit sales tax to the Department on subscription sales of Indianapolis Monthly. Additional facts are introduced below as necessary.

DISCUSSION AND DECISION

I.

STANDARD OF REVIEW AND RELEVANT LAW

The court begins with the familiar standard that summary judgment may be granted if no genuine issue of material fact exists and a party is entitled to judgment as a matter of law. Ind.Trial Rule 56(C). Indiana imposes a sales tax on retail transactions made in Indiana. IND.CODE 6-2.5-2-1. "Sales of newspapers are exempt from [sales] tax." IC 6-2.5-5-17 (the newspaper exemption). Emmis does not challenge the constitutionality of the newspaper exemption in its motion for summary judgment. Rather, the catalyst setting off the parties' dispute is the Department's regulation addressing the newspaper exemption, which provides:

(a) General Rule. In general, sales of all publications irrespective of format are taxable. The exemption provided by this rule [45 IAC 2.2] is limited to sales of newspapers.

(b) Application of the general rule. For purposes of [sales] tax, the term 'newspaper' means only those publications which are:

(1) commonly understood to be newspapers;

(2) published for the dissemination of news of importance and of current interest to the general public, general news of the day, and information of current events;

(3) circulated among the general public;

(4) published at stated short intervals;

(5) entered or are qualified to be admitted and entered as second class mail matter at a post office in the county where published; and

(6) printed for resale and are sold.

(c) Publications which are primarily devoted to matters of specialized interest such as business, political, religious, or sporting matters may qualify for exemption if they also satisfy the criteria listed in subsection 26 of this rule [subsection (b) of this section].

(d) Magazines, periodicals, journals, bulletins, advertising supplements, handbills, circulars, or the like are not newspapers until distributed as a part of a publication which is a newspaper within the meaning of this rule [45 IAC 2.2].

(1) Magazines are not construed to be newspapers. The retail sales of all magazines and periodicals are subject to sales tax. The sale of magazines by subscription is subject to sales tax without regard to the price of a single copy, and sales tax must be collected by the seller from the person who subscribes to the magazine on the full subscription price.

(2) For purposes of [sales] tax, the term 'newspaper' shall include advertising inserts. Advertising inserts shall mean only those publications which are:

(A)(i) produced for a person by a private printer and delivered to the newspaper publishers, or

(ii) produced and printed by a newspaper publisher, or

(iii) produced and printed by a person and delivered to the newspaper publisher, and (B) inserted by the newspaper publisher into the newspapers and distributed along with the newspapers.

Any distribution not meeting the above test does not qualify for the newspaper insert exemption. Examples of items distributed along with a newspaper that do not qualify for the exemption include: gum, shampoo, and detergent samples.

(e) Publications issued monthly, bimonthly, or at longer or irregular intervals are generally not considered to be newspapers.

(f) Racing forms and tip sheets are not newspapers.

(g) A preponderance of advertising, lack of authorization to carry legal advertizing, or lack of a masthead setting forth the publisher, editor, circulation, and place of publication are characteristics of publications other than newspapers.

45 I.A.C. 2.2-5-26 (emphasis added).

In its motion for summary judgment, Emmis contends the criteria to determine whether a publication is a newspaper under subsection (b)(2), emphasized above, discriminate on the basis of the content of speech in violation of the First and Fourteenth Amendments to the United States Constitution and Article 1, Sec. 9 of the Indiana Constitution. The court agrees.

" 'The liberty of the press is indeed essential to the nature of a free state,' " J. Nowak, R. Rotunda, J. Nelson, CONSTITUTIONAL LAW 886 (2d ed. 1983) (quoting 2 T. Cooley A Treatise on the Constitutional Limitations Which Rest upon the Legislative Power of the States of the American Union 886 (8th ed. by W. Carrington 1927)), and the First Amendment provides restraints on government in regulating the press. "Clearly, the First Amendment does not prohibit all regulation of the press. It is beyond dispute that the States and the Federal government can subject [the press] to generally applicable economic regulations without creating constitutional problems." Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue (1983), 460 U.S. 575, 581, 103 S.Ct. 1365, 1369, 75 L.Ed.2d 295, 302. Taxation of the press may, however, implicate the concerns of the First Amendment when it "is directed at, or presents the danger of suppressing, particular ideas." Leathers v. Medlock (1991), --- U.S. ----, ----, 111 S.Ct. 1438, 1447, 113 L.Ed.2d 494, 507-08. For example, in Grosjean v. American Press Co. (1936), 297 U.S. 233, 56 S.Ct. 444, 80 L.Ed. 660, the Supreme Court struck down a Louisiana tax that was deliberately calculated to limit the circulation of information by certain publishers.

The Supreme Court has also articulated three circumstances in which a tax upon the press will run afoul of the First Amendment, regardless of the legislature's good or bad motives. ³ First, a tax that singles out the press for differential treatment is presumptively unconstitutional. See Minneapolis Star, 460 U.S. at 585, 103 S.Ct. at 1372, 75 L.Ed.2d at 305. Second, selective taxation of the press that targets a "small group" of members of the press or singles out a "few members" of the press may offend the First Amendment. ⁴ Id. at 591-92, 103 S.Ct. at 1375, 75 L.Ed.2d at 308-09. And third, "for reasons that are obvious, a tax will trigger heightened scrutiny under the First Amendment if it discriminates on the basis of the content of speech." Leathers, at ----, 111 S.Ct. at 1444, 113 L.Ed.2d at 504.

In Arkansas Writers' Project, the Supreme Court examined the constitutionality '[T]he First Amendment means that government has no power to restrict expression because of its message, its ideas, its subject matter, or its content.' Police Dept. of Chicago v. Mosley [1972], 408 U.S. , at 95, 92 S.Ct. [2286], at 2289 . See also Carey v. Brown [1980], 447 U.S. , at 462-463, 100 S.Ct. [2286], at 2291 . 'Regulations which permit the government to discriminate on the basis of content of the message cannot be tolerated under the First Amendment.' Regan v. Time, Inc., 486 U.S. 641, 648-649, 104 S.Ct. 3262, 3266-3267, 82 L.Ed.2d 487 (1984).

                of an Arkansas sales tax scheme that exempted sales of newspapers and certain types of magazines.  The exemption of magazines was dependent on content, and " 'religious, professional, trade and sports journals' " were exempt. 5  Arkansas Writers' Project, 481 U.S. at 224, 107 S.Ct. at 1725, 95 L.Ed.2d at 216 (quoting Ark.Stat.Ann. Sec. 84-1904(j)).  The Arkansas Times, a general interest monthly publication, was neither a newspaper nor a religious, professional, or trade publication;  consequently, it objected to the denial of an exemption on First Amendment grounds.  The Supreme Court agreed the Arkansas exemption scheme was unconstitutional because it discriminated among magazines on the basis of content.  "[T]o determine whether a magazine is subject to the sales tax, Arkansas' 'enforcement authorities must necessarily examine the content of the message that is conveyed....' "  Id. 481 U.S. at 230, 107 S.Ct. at 1728, 95 L.Ed.2d at 220 (quoting FCC v. League of Women Voters of California (1984), 486 U.S. 364, 383, 104 S.Ct. 3106, 3119, 82 L.Ed.2d 278)
                

Id. 481 U.S. at 229-30, 107 S.Ct. at 1728, 95 L.Ed.2d at 220.

Turning to the case at bar, 45 I.A.C. 2.2-5-26 is drafted so that a publication must meet each of...