Going back to the basics of a sales tax regime, sales tax is generally due on the sale of tangible personal property at retail in a state. Here, a newspaper is tangible property and as long as it is sold at retail within the state’s borders, then it is generally taxable. While it may seem counter intuitive, many states adhere to this general view and impose a sales tax newspaper. A few states, for public policy reasons, have determined that newspapers should be exempt, therefore, make an exception to the general rule and statutorily take newspapers out of the sales tax rule. Maine imposed a reduced sales tax of 5% on the sales of newspapers until recently.
In a recent, somewhat comical piece (comical from a state and local tax attorney’s perspective), Businessweek reported that Maine will begin taxing newspapers at the higher rate of 5.5% beginning in October, 2013. Although usually anti-tax, Gov. Paul LePage thought it was in the state’s best interest to lift the exemption on newspapers and magazines from 5 to 5.5%.
The tax will certainly raise revenue for the state but one can only wonder the governor’s true motive in increasing taxes. The Republican governor has been on record joking about blowing up the headquarters of the Portland Press Herald, Maine’s largest newspaper. When asked if this was a direct shot at newspapers, the governor responded that buying a newspaper is “like paying somebody to tell you lies.”
Earl Brechlin, the President of the Maine Press Association, found it “interesting” that the newspaper industry was the only one hit by the new tax. He went out to say “I will allow people to make their own judgments – that was the only change in what is taxable in Maine.” He also reiterated that the newspaper companies will have to eat the tax because it is too costly to change the vending machines to reflect the new tax rate. Offering an analogy, Brechlin concluded the interview by stating, “My heart goes out to the small store retail clerk, that when someone hands them a dollar and starts to walk away tomorrow, they’re going to have to call after them for the last 6 cents.”
Who knew sales tax could be at the center of such state turmoil?