State Eases Sales Tax Rules for Entertainment Industry

The California Board of Equalization on Wednesday approved the updating of state sales tax regulations to provide an estimated $10 million in relief to firms that provide certain creative services to Hollywood studios.

Board Chairman Conway Collis said the changes, voted unanimously, should help staunch the flow of these service firms out of the state to avoid the sales tax.

Services that will be exempted from the tax are certain “post-production” activities, such as film editing and sound, music and special effects, as well as film animation.

Those services used to be done in-house at the studios, Collis said, but in recent years have been contracted out to independent firms.

Separate efforts to obtain the relief were begun last year by the Alliance of Motion Picture & Television Producers in Los Angeles and by Marvel Productions, a major animation company headquartered in Van Nuys.

Margaret Loesch, Marvel’s president and chief executive, who worked on behalf of the animation segment, said the changes could save her firm $1 million or more a year. Several other animation firms could get similar relief, she said.

She called the changes the “most significant” state action achieved on behalf of animators, which she said is a part of the film industry that has been somewhat neglected.