Not much is going their way nowadays, but newspapers may be getting a lucky break – in California at least.
The state is in the act of repealing a sales tax that was first foisted on newspaper publishers back in the fat days of the 1990s, providing a much-needed financial fillip as the industry continues its rocky transition to the digital age.
The sales tax is being withdrawn out of recognition that newspaper publishers now derive a growing proportion of their subscription revenues from sales of digital subs, even in cases where digital and print subs are bundled together.
Specifically, the tax authority ruled that at least 53% of the price paid for a bundled print and digital sub can be attributed to the digital access, allowing the subs to be categorized as primarily digital content, which isn’t taxable under the tax law passed in 1991.
The reduced sales tax on newspaper subscriptions, which amounts to a whopping $0.53 on each dollar of sales tax paid by newspaper publishers, takes effect October 1. A number of publications, including free newspapers and weekly publications, were exempt from the tax.
The tax on newsstand sales remains the same – but publishers of big metro dailies with large subscription bases should see a modest but much-needed bump to their bottom lines.
According to one estimate from the California Board of Equalization, the tax revenues returned to newspaper publishers will come to around $50 million a year. It’s worth noting that the same sales tax was repealed for bottled water and snack foods just a year after it was passed, in 1992. Apparently, newspaper publishers didn’t have the political sway of junk food.
This rare win for the newspaper industry, which otherwise has received scant sympathy from state and federal regulators, follows a prolonged lobbying effort by publishers that petitioned the Board of Equalization, which oversees California’s taxes on goods including fuel, alcohol and tobacco.
I remember those days well. The State Board of Equalization informed us that we owed years of back taxes on our Nutrition News newsletter. They were willing to bankrupt us until I followed my printer's advice to challenge them.
I did and lo and behold, I found the appropriate classification for our tex exempt status. They even argued that since we used a Vol, No. and Year notation instead of the months of the year, we failed to meet the serials standard.
Fortunately more intelligent heads prevailed. They found no annomalies or accounting irregularities and were forced to rule in our favor. They sent an auditor back out the following year for a second crack at us. That turned up nothing but hours of wasted time and no revenue for the State.
Haven't heard from them since. I can definitely feel for the newpaper publishers. All I can say is that it's about time. I'll be toasting you all on Oct. 1st.