Los Angeles Tax on Media Is Let Stand by Court

The Supreme Court on Tuesday rejected a free-speech challenge to the way Los Angeles taxes businesses operating within the city.

The court, citing the lack of a “substantial federal question,” let stand rulings that the tax is valid even though it subjects, on a percentage basis, newspaper and magazine publishers and radio and television stations to greater taxes than movie producers. Although the justices did not hear arguments in the case or issue a written opinion, their action is considered a precedent and is binding on lower courts.

The city business tax was challenged in a 1984 lawsuit filed by Times Mirror Co., which publishes the Los Angeles Times; Tribune Newspapers West, which formerly published the Los Angeles Daily News; and Lozano Enterprises, which publishes La Opinion.

Before 1984, Los Angeles exempted from the tax gross receipts from the publication and sale of newspapers, magazines and other regularly published periodicals, as well as those of radio and television stations. That year, however, the law was changed to treat publishers and broadcasters the same as manufacturers and to define their products as “goods, wares or merchandise.”

In the appeal acted on Tuesday, lawyers for the publishing companies said that more than $4 million was at stake in their lawsuit, adding that “that figure increases at the rate of more than $1 million a year.”

Similar lawsuits by other news and advertising media businesses are pending against the city.

The three publishing companies acknowledged that they are not immune to taxation by the city. But they challenged the city’s power to impose “widely disparate taxes on different media” and the city clerk’s allegedly “standardless discretion to apportion taxes on the media.”

“The tax on $100 million in production costs for the motion picture industry would be $10,750; a billboard company with the same $100 million in gross receipts would owe the city $500,000; and a newspaper would owe a tax of $125,000 on its retail receipts or $100,000 on its wholesale receipts,” the appeal said.

“Such differential taxation of First Amendment activities is impermissible absent a showing of a compelling justification for such disparate treatment,” the appeal contended.

The publishing firms have paid their taxes under protest while challenging the tax. During 1984 and 1985, Times Mirror paid about $1.4 million in business taxes. Tribune Newspapers West paid $202,000 and Lozano Enterprises paid $22,000.

Lawyers for the city urged the justices to reject the appeal.

“There is no discrimination,” they said. “There is no special or unique tax. There is neither content review nor a censorial threat repugnant to the First Amendment.”