On Oct. 1, Mainers will begin paying sales tax for something that was, up to that point, tax-free: the news.
Published periodicals — chiefly newspapers and magazines — are being taxed at 5.5 percent. There are no new taxes being levied against electronic media sources, such as radio, TV or online news. The new tax — actually, the lifting of an exemption — was included in the governor’s budget submitted to the Legislature Jan. 24.
Newspapers have been taxed in other states, but when they are, they are generally taxed along with other forms of media.
Since taking office in 2010, Gov. Paul LePage has made several widely publicized statements against newspapers:
— On June 18, LePage cut off access to three of the state’s largest daily papers to administration officials because they had conducted an investigation into actions taken by Patricia Aho, a former corporate lobbyist who had been appointed by LePage to become Department of Environmental Protection commissioner.
— Since 2011, LePage has stated newspapers are “full of lies” and that “his greatest fear is newspapers” — twice making those statements to schoolchildren.
— In August, while touring a fighter jet simulator, LePage joked he wanted to find the Portland Press Herald building and blow it up.
“It’s an interesting constitutional question,” said Zach Heiden of the ACLU of Maine. “For more than 75 years, the U.S. Supreme Court has shown special concern when government imposes new burdens on newspapers. Sometimes those burdens take the form of new taxes, sometimes they take the form of refusal to exempt newspapers from taxes.
“All Mainers, and all Americans, depend on newspapers to keep them informed about important matters of public concern.”
Heiden said the ACLU was looking at the issue with serious First Amendment concerns.
“We will review it further before we make any decisions,” he said.
According to Adrienne Bennett, spokeswoman for Gov. LePage, the governor’s office did not ask the attorney general’s office for a constitutional review. “We never considered it,” she told The Times Record.
Nor did the Legislature, according to Erica Dodge, spokeswoman for Maine Senate Democrats.
“To our knowledge, it never came up,” she said.
A spokesman from the minority Senate office said that while they opposed the new tax, their members had not requested a constitutional review, either.
Nor did the Maine Press Association — the trade group for the state’s news media — consider the issue of constutionality, either, said Tony Ronzio of the Bangor Daily News.
“We were trying to do the best thing for the majority of the industry in the state,” Ronzio said. “Other states have sales taxes, and we talked to other press associations about how they went about implementing them.”
The part of the budget that removes the exemption from sales tax for newspapers was discussed in the Appropriations and Financial Affairs Committee on March 13.
In his testimony, Earl Brechlin, then president of the Maine Press Association, made the point that taxing newspapers was a tax on information and that, because other forms of media weren’t being taxed, it was also discriminatory and arbitrary.
“Television, radio, and Internet news will remain free of the tax,” he said. “Repealing the exemption will be patently unfair and put paid newspapers at a disadvantage in the marketplace.”
The exemption was repealed, and the budget passed. Although it was vetoed by the governor, it was overridden two days later, on June 24.
When newspapers around the state learned they would have to collect tax on sales and subscriptions, Maine Revenue Services said if wouldn’t have any information about how to comply for the papers until September.
The Times Record, which has a number of young newspaper carriers, was forced to change the way it bills customers. The company now is sending invoices and asking that customers pay the office directly. Otherwise, its carriers, regardless of age, would have to obtain tax ID numbers and remit the taxes themselves.
Many customers are unhappy with the changes. Some object to the increase in cost, others object on general principle.
“One customer told me that he wouldn’t give the governor a cent in tax for news,” said George Reichert, The Times Record circulation manager.
“About 9 percent of our customers pay their carrier,” said Mike Theriault, circulation director for the Sun Journal of Lewiston. “They pay the carrier because it is their preference. And for many people — especially the elderly — it is a real hardship.
“Without a doubt, it will cost us business.”
Theriault said other costs to the company include having to alter vending machine sales and buying new software to handle the tax remittance.
Other compliance issues still have to be worked out, such as the issue of taxation of preprint advertising — the fliers and circulars, mostly from major national retailers, that filll the inside of a newspaper.
Under the terms of the budget item, circulars and fliers are also to be taxed, leading newspaper executives to wonder: Will preprint advertisers cut back on their advertising because of the increased cost? Will they skip newspaper advertising altogether in favor of radio or television advertising, which is not taxed?
Legal notices also are at issue.
Newspapers agreed to give up a large percentage of the costs of state legal advertising in order to retain any revenue; the state had proposed putting all legal notices on a state-run website and cutting out newspapers altogether.
While the state website never materialized, newspapers around the state still lost a great deal of money.
The Times Record agreed to give up 50 percent of its state legal notice revenue. In exchange, the threat to move legal notices to a web-based platform was removed — at least for the next five years.
Ronzio said that, as the discussions went along, it became clear there would be more traction for the industry to save legal notices than defeating the loss of a sales tax exemption.
“The sales tax appeared twice — once in the comprehensive budget itself and once in a taxation proposal,” he said. “We opposed both the removal of legal notices from the newspapers and the sales tax.”
Brechlin called the repeal of the sales tax exemption “unfortunate.” But he called accepting the tax change in exchange for keeping state public notices an important revenue stream for the industry, even at the discounted rates.
According to the most recent data kept by the Newspaper Association of America, 16 states tax newsstand sales of newspapers — none in New England.
In 2003, Connecticut briefly taxed newspapers but the tax was repealed in 2006.
The Times Record has attempted to mitigate some of the financial burden on subscribers by alerting readers to the tax, and inviting those whose subscriptions expire before Oct. 1 to avoid the tax by paying in September.
“We are looking at other creative solutions to help reduce the state’s Oct. 1 tax burden for our subscribers,” Times Record Publisher Larry Hubner said.
ghamilton@timesrecord.com
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