MINNEAPOLIS STAR, ETC. v. COM'R OF REVENUE, 51616.
| Decision Date | 17 December 1981 |
| Docket Number | No. 51616.,51616. |
| Citation | 314 NW 2d 201 |
| Parties | MINNEAPOLIS STAR AND TRIBUNE COMPANY, Respondent, v. COMMISSIONER OF REVENUE, Appellant. |
| Court | Minnesota Supreme Court |
Warren Spannaus, Atty. Gen., and Paul R. Kempainen, Sp. Asst. Atty. Gen., Dept. of Revenue, St. Paul, for appellant.
Faegre & Benson, Lawrence C. Brown, John K. Steffen and John P. Borger, Minneapolis, for respondent.
Robert G. Danielsen, MCLU Volunteer Atty., St. Paul, Linda Ojala, MCLU Legal Counsel, Minneapolis, for amicus curiae.
Heard, considered and decided by the court en banc.
The issue in this case is whether the State of Minnesota may, consistent with both the federal and state constitutions, impose a use tax on consumption of ink and paper which, due to an exemption in the law, is paid by some newspapers and publications but not by all. The challenged statute in force at the times relevant here, Minn.Stat. § 297A.14 (1980), provided that "the cost of paper and ink products exceeding $100,000 in any calendar year, used or consumed in producing a publication defined in section 297A.25, subdivision 1, clause (i)" was subject to the general use tax imposed by the section: a tax on "using, storing or consuming in Minnesota tangible personal property" at a rate of 4% of the sales price of sales at retail of the item.1 Section 297A.25, subd. 1(i), states that a "publication" is a legal newspaper, defined by Minn.Stat. § 331.02 (1980), or any other publication "regularly issued at average intervals not exceeding three months." Respondent, a newspaper publisher consuming over $100,000 in paper and ink products annually, challenges the use tax as an unconstitutional burden upon freedom of the press, protected by U.S.Const. amend. I, XIV, and Minn.Const. art. 1, § 3, and a denial of equal protection of the law, provided by U.S.Const. amend. XIV, § 1, and Minn. Const. art. 10, § 1.
Respondent Minneapolis Star and Tribune Company (Star Tribune) sought a refund from the state department of revenue of $874,265.04, with interest, in use taxes paid over a 17-month period from January 1, 1974, to May 31, 1975. The refund was denied and respondent appealed the denial in Hennepin County District Court pursuant to Minn.Stat. § 297A.35, subd. 2 (1980). The district court granted summary judgment to Star Tribune, declaring the use tax unconstitutional on all suggested grounds. We reverse.
The use tax challenged here is part of a system of sales and use taxes initially created by the state legislature in the Tax Reform and Relief Act of 1967. Act of June 1, 1967, ch. 32, art. 13, 1967 Minn.Laws Sp.Sess. 2143, 2177. The law then wholly exempted from use tax the gross receipts from the sale, storage, use or consumption of all tangible personal property, including paper and ink products, used in or consumed in any publication regularly issued at average intervals not exceeding three months. Id. § 25, subd. 1(i), at 2186. The publications themselves were also exempt from sales tax. Id. The rate of sales and use tax was 3% at that time. Id. § 2, at 2179; § 14, at 2182.
Effective November 1, 1971, the paper and ink products exemption for publications was eliminated and all paper and ink products were subject to the use tax. Act of Oct. 30, 1971, ch. 31, art. 1, § 5, subd. 1(i), 1971 Minn.Laws Sp.Sess. 2561, 2565.
The use tax on all paper and ink products obtained until January 1, 1974. On that date, the legislature put into effect the section challenged here, which granted an exemption from the use tax only for the first $100,000 of paper and ink products consumed annually. Act of May 24, 1973, ch. 650, art. 13, § 1, 1973 Minn.Laws 1606, 1637 (codified at Minn.Stat. § 297A.14 (1980).)2 The consequence of this exemption was a $4,000 tax credit to newspapers and other publishers.3 Publications remained exempt from sales tax.
Respondent Star Tribune is the publishers of two newspapers in the state, one a morning paper and the other an evening paper. During 1974 and 1975, Star Tribune published the morning paper seven days per week and the evening paper six days per week. Currently, Star Tribune publishes the morning paper seven days per week and the evening paper five days per week. The physical components of Star Tribune's newspaper are, of course, newsprint and ink, the two items subject to the use tax at issue.
In 1974, Star Tribune was one of 11 publishers of daily newspapers in the State of Minnesota that consumed paper and ink products in excess of $100,000 and therefore paid the 4% use tax on the amount above that figure.4 That year there were 388 paid circulation newspapers in the state, 29 of which were daily papers.
In 1975, Star Tribune was one of 13 publishers of daily papers paying any use tax on ink and paper products, out of a total of 374 paid circulation newspapers in the state, 29 of which were daily papers.5
The data submitted by Star Tribune6 show a rough correlation between volume of circulation and incidence and amount of use tax paid, but larger papers did not uniformly pay more use tax. In 1974, for instance, the Brainerd Daily Dispatch, a newspaper with a circulation of 13,461, paid no use tax, while the West Central Daily Tribune, circulation 16,483, paid nearly $1500 and the Worthington Daily Globe, circulation 17,131, paid just over $200. In addition to these data, respondent's affiant, Robert M. Shaw, the manager of the Minnesota Newspaper Association, stated that a newspaper published fewer than three times per week would not have consumed sufficient paper and ink to requirement payment of any use tax in 1974 and 1975. Respondent's data show that in 1974 and 1975 approximately 3% of all newspaper publishers in the State of Minnesota consumed paper and ink in excess of $100,000 annually and were therefore obligated to pay the use tax in amounts varying from $120.00 to $636,113.00. The remaining 97% paid no use tax.
The equal protection claim in this case is closely intertwined with the first amendment interests at stake. The use tax law, because it appears to treat newspaper publishers as different from industrial users of paper and ink products, may be an unconstitutional burden on newspaper publication, an expressive activity protected by the first amendment. Moreover, because it appears to treat some newspaper publishers as different from other newspaper publishers, the use tax may be unconstitutional as an unfair burden upon only a segment of the class of publishers. Although the parties have treated the equal protection and first amendment issues in separate portions of their briefs, we find that the analysis is inextricable. See Police Department of Chicago v. Mosley, 408 U.S. 92, 95, 92 S.Ct. 2286, 2289, 33 L.Ed.2d 212 (1972). We will consider the first amendment and the equal protection claims together here.
In considering each of respondent's arguments, we keep in mind the strict standard that must be applied when protected first amendment rights may be infringed. Police Department of Chicago v. Mosley, 408 U.S. at 101 and n.8, 92 S.Ct. at 2293 and n.8; Williams v. Rhodes, 393 U.S. 23, 30, 89 S.Ct. 5, 10, 21 L.Ed.2d 24 (1968); Grosjean v. American Press Co., 297 U.S. 233, 56 S.Ct. 444, 80 L.Ed. 660 (1936); Big Mama Rag, Inc. v. United States, 631 F.2d 1030, 1035 (D.C.Cir.1980). We afford the legislature broad discretion in enacting tax laws, but we recognize that "it is settled that speech can be effectively limited by the exercise of the taxing power." Speiser v. Randall, 357 U.S. 513, 518, 78 S.Ct. 1332, 1338, 2 L.Ed.2d 1460 (1958).
We first address the issue whether section 297A.14 is unconstitutional because it appears to tax newspaper publishers in a different manner than it taxes other industrial users of paper and ink products. Newspaper publishers pay the use tax on paper and ink consumed in production of their products, but other industrial users, such as printers of food wrappers, books and stationery, do not.
Owners of newspapers are not immune from "ordinary forms of taxation for the support of the government" on account of the first amendment guarantee of freedom of the press. Grosjean v. American Press Co., 297 U.S. at 250, 56 S.Ct. at 449; cf. Mabee v. White Plains Publishing Co., 327 U.S. 178, 66 S.Ct. 511, 90 L.Ed. 607 (1946) (); Associated Press v. NLRB, 301 U.S. 103, 57 S.Ct. 650, 81 L.Ed. 953 (1937) (). The question here, then, "is not whether the prospective ban burdens newspapers — it clearly may do so — but rather whether there is something special about the burden that renders it unconstitutional." National Citizens Committee for Broadcasting v. FCC, 555 F.2d 938, 953 (D.C.Cir.1977), modified, 436 U.S. 775, 98 S.Ct. 2096, 56 L.Ed.2d 697 (1978).
An unconstitutional burden upon freedom of the press due to a tax measure was found in Grosjean v. American Press Co., 297 U.S. 233, 56 S.Ct. 444, 80 L.Ed. 660 (1936). The State of Louisiana had imposed a license tax only upon those publications with circulations greater than 20,000 copies per week. Just thirteen newspapers in the state qualified to pay the tax. Id. at 240-41, 56 S.Ct. at 445. The rate of the tax on these papers was 2% of the gross receipts from advertising.
The tax was struck down by the Supreme Court because it was a "deliberate and calculated device in the guise of a tax," enacted "with the plain purpose of penalizing the publishers and curtailing the circulation of a selected group of newspapers." Id. at 250-51, 56 S.Ct. at 449. The history and setting of the gross receipts tax showed that the law had been passed for this purpose because the large newspapers were carrying the banner of the political opposition to the governor of the state, Huey Long. See Giragi v. Moore, 49 Ariz. 74,...
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