House committee approves removal of sales tax exemption on newspapers
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House committee approves removal of sales tax exemption on newspapers

Date: March 21, 2012
By: Matthew Patane
State Capitol Bureau
Links: HB 1835

JEFFERSON CITY - Newspaper companies would face higher printing costs under a proposal by a House committee that eliminates the sales tax exemption for printing materials.

The bill, sponsored by the Budget Committee chair, Rep. Ryan Silvey, R-Kansas City, removes an exemption for newspapers from paying tax on certain materials used in the printing of newspapers, such as ink and paper. Silvey said the revenue from collection of the tax would be used to supply money for a health care fund for blind Missourians.

Legislative staff estimate that a repeal of the tax exemption could result in $4.2 million for aid to the blind per year.

Silvey said his proposal was not retaliation against Missouri newspapers, but a response.

"It has occurred to me that if we were (to do away with corporate welfare)....why wouldn't we start with the corporate welfare and corporate giveaway that goes to the people who are suggesting we get rid of them," Silvey said. "If they think we should raise taxes and get rid of corporate welfare, they should be the first in line."

The House Tax Reform committee approved the proposal with a 7-5 vote, mostly along party lines. Rep. Lindell Schumake, R-Hannibal, voted with Democratic members of the committee and said he had "deep concerns" about the economic impact the repeal could have on newspapers.

Rep. Leonard Hughes, D-Kansas City, said the bill established a "dangerous precedent" and a "slippery slope" on how the state deals with the press.

"Newspapers and the free press are there for the protection of a democratic society," Hughes said. "Without them, that protection is gone."

Silvey said he had heard concerns about the bill infringing on the First Amendment, but he said that since the exemption only applies to newspapers and not the entire news industry, it was not a violation of free speech.

"Once you try and take something away from someone who depends on it for their profit margin, they are going to come down and squeal about it," Silvey said. "You will this will cripple an industry or it will put people out of work, but I just want to remind you that its not their right to have a sustainable business model."

David Stringer, the publisher for the Hannibal Courier-Post, said it is not uncommon for newspaper to go to another site for printing, even if it is another state.

"The people that are involved directly in the printing of those newspapers (close to the border) -- I think by doing this you put their jobs at risk," Stringer said. "The newspaper industry employs thousands of people across the state of Missouri, the payroll is in the tens of millions of dollars, so I think you potentially put those jobs at risk by removing this exemption."

Stringer said his paper was located about 30 miles from Quincy, Ill. and he would have to see if it was "cost effective" to go across the border for printing. All states neighboring Missouri consider newspapers and publishers to be manufactures and have sales tax exemptions in place for printing materials.

The executive director of the Missouri Press Association, Doug Crews, said there was a "historic background" on why newspapers, along with other manufacturers, had tax exemptions. A 1989 Missouri case, Hearst Corp. v. Director of Revenue, established a precedent moving newspapers and other forms of media from the service industry to the manufacturing industry.

"I don't consider this corporate welfare, I consider this as we are a manufacturer, just like any other manufacturer in Missouri," Crews said.

Silvey proposed the bill as a part of his work on the state's budget in order to help countermand cuts to higher education proposed by Democratic Gov. Jay Nixon. Silvey's initial move was to cut a $28 million program for the blind to maintain level higher education funding. Now he plans to use the removal of the newspaper exemption to create a $4 to $6 million program for the blind.

Republican leaders in the Senate had said earlier that they would not allow the cuts to the blind pension fund. Senate President Pro Tem Rob Mayer, R-Dexter, said it would be an issue that the two chambers would have to negotiate in conference.

Currently, Missouri statute provides that while the sale of publications can be taxed, machinery and equipment used to produce newspapers are exempt from taxation. Other forms of printed materials, such as magazines, periodicals and books are not exempt from sales tax.

Silvey's bill will now go to the House floor. The House passed a version of the state's $24 billion budget that does not cut higher education funding, but maintained the proposed cuts to health care programs for the blind.

Representatives still need to vote on the budget before it can be sent to the Senate.