Texas Considers Sales Tax on Newspapers

By: (AP) A morning stop at the coffee shop for a cup of joe and the local paper could get a little more expensive under an initial public school finance plan that would reinstate a Texas sales tax on newspapers and magazines.

The proposed legislation, filed Thursday by Rep. Jim Keffer, a Republican from Eastland, is a "shell bill" meant to start debate about fixing the state's $30-billion public education system. It calls for slashing local property taxes by a third, increasing the cigarette tax by $1 per pack, and eliminating the state's current franchise tax, which most businesses avoid paying.

Overhauling public school finance is the top priority for legislators. Republican Gov. Rick Perry has declared the item an emergency issue. The state is under court pressure to change the system that many school districts claim doesn't provide enough money to adequately educate all students.

Expanding the sales tax base is just one measure suggested to recoup an estimated $5.5 billion for education the state would lose if school property taxes are reduced from $1.50 to $1 per $100 property valuation.

According to a report by the State Comptroller's office, state sales taxes on newspapers and magazines would generate about $30 million.

The bill would repeal a 1981 law that made newspapers exempt from sales tax and a similar 1987 law exempting magazines.

Sales taxes on newspapers were collected in 1980, but the Texas Comptroller's office asked the Legislature to create the exemption because it created an "administrative nightmare" for the industry, said Billy Hamilton, deputy comptroller.

Because newspapers use individual distributors, vending machines, and a variety of other methods to dispense newspapers, Hamilton said, the collecting the tax is difficult.

Newspapers oppose the sales tax because it is hard to collect and unfair to customers, said Donnis Baggett, Texas Daily Newspaper Association executive committee chair and publisher of the Bryan-College Station Eagle.

"It's an unwieldy and difficult tax to administer," Baggett said. "Another element is you don't get taxed for getting information from the television or the Internet. It hardly seems fair to tax readers of newspapers and magazines."

At the current state sales tax rate of 6.25 percent, a 50-cent newspaper like the Houston Chronicle or The Dallas Morning News would cost at least 3 cents more during the week. Sales tax on more expensive Sunday papers would cost about 10 cents.

Baggett said he didn't expect an increase in cost would significantly impact newspaper sales.

A spokesman for Keffer, who chairs the tax-writing House Ways and Means Committee, said the language in the bill is just filler and may not be included at the end of the legislative process.

Texas newspapers are prepared to fight to make sure that language finds its way out of the bill before it becomes law.

"We will oppose that," Baggett said. "It's just a bad idea."