January 30, 2002

Legislative Activity

Date: January 30, 2002

To: AAF Members

From: Clark Rector, Jr., Vice President-State Government Affairs

Re: Florida Advertising and Services Tax Threat Update

As you are aware, Senate President John McKay’s proposal to sunset many exemptions to the state sales tax continues to be the subject of much debate and attention in Tallahassee and throughout Florida. It has passed out of the Senate Finance and Tax Committee, and may be voted on by the full Senate later this week.

McKay has made some modifications to his proposal in an effort to generate greater support. He has offered to maintain the exemptions for many services, including broadcast and print advertising. More recently, advertising agency services were added to the list of exempted services. The proposal would now lower the sales tax rate from 6 percent to 4.5 percent, instead of to 4 percent as originally introduced. Most tourism related services would remain at 6 percent.

It is important to understand that the legislature is actually considering two pieces of legislation. The first is McKay’s bill to put on next fall’s ballot a constitutional amendment eliminating all sales tax exemptions. This remains essentially unchanged from his original proposal.

The second is an “implementing bill” introduced by Senator Ken Pruitt. This is the legislation that would maintain the exemptions for selected services. However, passage of this bill is not necessary for the constitutional amendment to be enacted.

AAF and the advertising industry remain opposed to the McKay plan. Even if both the constitutional amendment and implementing bill pass as they currently exist — which is by no means guaranteed — we believe the tax would still be harmful to small businesses in the state.

Jack Hebert, District 4 legislative chair, is in Tallahassee meeting with legislators and representing the industry. However, he cannot do it all on his own. I urge you to contact your representatives and let them know you are still opposed to the McKay services tax.

Contact information for Senators and Representatives can be found on the Florida Legislature’s homepage at www.leg.state.fl.us/Welcome/index.cfm.

Please feel free to give me a call at 1-800-999-2231 if you have any questions or comments.