February 5, 2003

Legislative Activity

Date: >February 5, 2003

To: South Dakota Advertising Federation
Black Hills Advertising Federation

From: >Clark Rector Jr., senior vice president-state government affairs

Re: Ad Tax Legislation in South Dakota

Thursday, February 6, tow advertising tax bills will be the subjects of hearings in two South Dakota House Committees.

HB 1216 would impose the sales and use tax on certain advertising services. It will be considered by the Committee on Taxation.

HB 1207 would "establish a teacher career fund to reward certain teachers and to dedicate certain revenue from taxes on advertising services therefor." This bill will be considered by the Committee on Education.

While neither bill appears to have broad support, it is very important that representatives of the advertising industry contact committee members and express opposition to the bills. I have listed below arguments to use against the bills. I have also attached a list of the members of both committees. All Members of the House of Representatives can be reached by calling (605) 773-3851. You can find more information, and links to House members' email by visiting the legislatures web page at http://legis.state.sd.us/sessions/2003/index.cfm

Please let me know of any responses you receive. Do not hesitate to call me at 1-800-999-2231 if you have any questions.

Advertising taxes such as those in HB 1216 and HB 1207 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 South Dakota 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.

House Committee on Taxation

Cutler, Joni M. (R) - Sioux Falls
Garnos, Cooper (R)
Hackl, Tom (R)
Hundstad, Jim (D)
Juhnke, Kent (R)
Koistinen, Al (R), Vice-Chair
Kroger, Mike (D)
Lange, Gerald (D)
McLaughlin, Ed (R) - Rapid City
Rave, Tim (R)
Teupel, John (R)
Valandra, Paul (D)
Van Etten, Don (R) - Rapid City
Weems, Keri K. (R)
Wick, Hal (R), Chair - Sioux Falls

House Committee on Education

Begalka, Tim (R)
Bradford, Jim (D)
Buckingham, Mike (R) - Rapid City
Dykstra, Joel D. (R)
Elliott, Burt (D)
Haverly, Jeffrey K. (R) - Rapid City
Heineman, Phyllis M. (R), Chair - Sioux Falls
Juhnke, Kent (R), Vice-Chair
LaRue, Maurice (R)
McCaulley, Matt (R) - Sioux Falls
McCoy, Alice (R) - Rapid City
McLaughlin, Ed (R) - Rapid City
Schafer, Donna (R)
Thompson, Bill (D) - Sioux Falls
Van Norman, Thomas J. (D)