New law to scrap tax on free newspapers.

New law to scrap tax on free newspapers

A bill eliminating the new printing tax imposed on free-circulation newspapers in California is expected to be approved by state legislators and signed by Gov. Pete Wilson this week, said Fred Silva, budget director for Senate President David Roberti, D-Hollywood.

Last week, two versions of the same measure - a Senate bill and an Assembly bill - were breezing through the committee process and they were expected to reach the floors of both legislative houses for final votes on Monday.

Both bills would exempt free papers from the newspaper tax that went into effect earlier this year. The new law, as it is now being applied, taxes paid newspapers on their circulation revenue and free newspapers on their printing costs.

The new Senate bill also contains a provision exempting from the tax non-profit corporations that circulate newsletters and magazines to contributors. Examples would be the newletters of tax-exempt charitable organizations or the magazines of public television stations.

"They (the bills) are both moving along very well. There has been some political maneuvering to make sure there's no conflict between the two," said William Fleet, publisher of the Los Angeles Independent and co-chairman for Southern California of the California Free Press Association.

Silva said Wilson supports the exemption for free newspapers but a few details remain to be worked out with the governor's staff regarding non-profit corporations' publications.

"We've done an awful large amount of work in a short time," said Ric Trent, president and publisher of Southern California Community Newspapers and chairman of the board of CFPA. "It's just a good example of how a grassroots effort can be successful in changing bad legislation."

Meanwhile, in a rather humorous effort to avoid the tax on free newspapers, some free publications distributed in newsracks in central and northern California have been placing collection cups next to their displays, asking people to pay one cent for each paper so they could qualify as paid-circulation papers and pay tax on their penny revenues, instead of their printing costs.

One such paper was San Francisco Weekly.

"First and foremost, it was a protest. In our view, it drew attention so people could see the issue clearer," said Lee Houskeeper, spokesman for San Francisco Weekly and organizer of the penny drive. "Secondly, it provided a shield, so when they (owners of free papers) went to their printer, they could say, |We are a paid paper,' and not pay the tax. This kept some papers in business."

Houskeeper repeated a complaint voiced before by free newspapers - that paid, daily newspapers abandoned them in legislative negotiations, allowing a law to pass under which the paid papers could justify raising their prices, in some cases by more than the amount of the tax. Meanwhile, free newspapers would be forced out of business by their printing taxes.

The penny paper drive was successful, said Houskeeper, because it "got the attention of the Board of Equalization" and helped legislators understand the issue. Some 10 to 15 newspapers participated, he said.

"We discontinued it because we were told this (repeat bill) was going to go through," said Houskeeper.

Fleet said the papers involved knew all along that they couldn't get away with the tactic.

"There are a handful of papers around the state trying that," said Fleet. "The Board of Equalization is not going to allow that. That is a voluntary contribution. That absolutely is not an option."

Trent agreed, saying that CFPA's official position on the protest is that "it is not a sufficient substitute for getting rid of the tax. It just won't work over the long period of time."