October 15, 2019

Tax Break Merry-Go-Round

Florida's tax law exemptions

Jason Garcia | 6/24/2019

Expanding breaks

The floodgates opened, and a combination of Department of Revenue opinions and court decisions soon bestowed the tax exemption on industry trade publications, community association newsletters, apartment guides, real estate listings and business directories.

The magazines won their case a few year later — but not in the way they’d imagined. A 1993 Florida Supreme Court ruling found that it was unconstitutional to limit the sales tax break to newspapers. But instead of declaring magazines tax exempt, the court declared that both newspapers and magazines should have to pay the tax.

Meanwhile, all the shoppers and advertising publications kept their tax exemption.

The magazines had a backup plan — the Legislature. Time, which had a customer-service center in Tampa that employed about 2,000 people, hired former House Speaker H. Lee Moffitt to lobby lawmakers to restore the exemption. The company warned it might close the fulfillment center and move the operation to another state.

The Legislature, which had just come under Republican control, was reluctant. Republicans increasingly regarded newspapers as liberal opponents, and the new tax on newspapers was generating quite a bit of money for the state. Time and its lobbyists wrote a revised exemption that would apply to both magazines and newspapers — but only when they were delivered through the mail.

The Legislature passed the exemption, meaning most newspaper subscriptions were taxed, while most magazine subscriptions weren’t. (The center, which was bought years later by Meredith Corp., has since closed.)

Newspapers were suddenly on the sidelines, exemption-less. But the exemption for advertising-dominated publications continued to grow. Clothing retailer American Eagle Outfitters, for instance, avoided at least $200,000 a year in sales tax in the mid-2000s when it had brochures, postcards and other advertising mailers printed in Florida, according to documents filed in litigation with the state.

Those documents showed that American Eagle, which does $4 billion a year in sales, was, at least at the time, spending more than $2 million annually printing mail in Florida that qualified for tax-exempt publications.

Not everyone was that successful. Sharper Image, for instance, lost a court case seeking to have its catalogs deemed tax-exempt.

But then there is always the Legislature. In 2003, Valpak, the St. Petersburg-based direct-mail marketer that fills millions of mailboxes around the country with coupons in its signature blue envelopes, sued the state seeking a refund to $1.6 million worth of sales taxes it had paid over a roughly five-year period. The company argued its coupons were advertising publications covered by the sales-tax exemption.

The 1st DCA disagreed, ruling that a bunch of coupons stuffed in an envelope could hardly be considered a “publication.”

The company turned to the Legislature, which, in 2006, passed a sales-tax exemption specifically to cover Valpak’s mail, too. Rep. Thad Altman, a Republican from Brevard County who sponsored the legislation to help Valpak, said the issue was simply a matter of fairness.

Tags: Politics & Law, Government/Politics & Law, Feature

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