Alert: Possible Advertising/Services Tax

May 7, 2010

 
To:                   AAF Kansas Members
 
From:               Clark Rector, Executive Vice President- Government Affairs
 
Re:                   Possible Advertising/Services Tax
 
 
We have received reports that proposals to eliminate the sales tax exemptions for advertising and other services are floating around the Kansas legislature. The proposal was apparently discussed and withdrawn in the Senate in the past 24 hours.
 
There is a possibility that it may be made in the House also. Unfortunately, at this time we have very few specifics as to a sponsor or what form the proposal may take if indeed it is offered. As you know, Kansas, like most states is desperately looking for revenue to balance the state budget.
 
It is very important that advertising professionals contact their elected representatives and urge them not to remove the sales tax exemption for advertising. Specific talking points are listed below. 
 
The Kansas Legislature webpage can be found at http://www.kslegislature.org/legsrv-legisportal/index.do. There is a search engine that easily allows you to identify your elected representatives and gives contact information. 
 
Please do not hesitate to contact me at crector@aaf.org or 800-999-2231 if you have any comments or questions.
 
A tax on advertising should be opposed because:
 
·         National advertising dollars will leave the state. Marketers will move to markets where they can reach the most consumers with the fewest dollars. Florida taxed advertising for six months in 1987.  While that tax was in effect national advertising purchases increased 3%. In Florida they decreased 12%!
·         Advertisers can reach many Kansas consumers using untaxed out of state media from across the border. During the 1987 Florida tax, Pensacola broadcasters encountered revenue losses of 45%. Most of that money went across the border to competitors in Mobile, Alabama.
·         Local media will suffer huge losses. Advertising is the primary source of revenue for the print media and the sole source for broadcasters. A reduction in advertising would inevitably result in a loss of jobs and a decreased ability to provide quality content and programming.
·         An ad tax is too complex and expensive to administer. The Florida Department of Revenue spent millions of dollars to hire over 200 new auditors in 1987. The executive director admitted afterwards, "It was not enough."
 
A tax on advertising is bad public policy:
 
·         Placing a tax on advertising services and/or placement increases the cost of advertising. Because most clients operate on a fixed advertising budget, they will compensate for the tax by decreasing their advertising purchases. This will have a direct -- and negative -- impact on the advertising industry, economy, consumers and the state.
·         Advertising is the engine that fuels the economy. Less advertising means fewer sales. Fewer sales mean reduced revenue and fewer jobs. Fewer sales also result in less sales tax revenue for the state.
·         Prices may rise. Studies show that advertising fosters competition and helps lower the price of products and services. Less advertising means less competition.