Local newspapers and broadcasters safe from digital ad tax for now

OLYMPIA — Earlier this week, Washington lawmakers voted to maintain the exemption for sales tax on advertising services for newspapers and radio and television broadcasting in the state’s digital ad tax.

Monday, Feb. 16, the Senate approved an amendment sponsored by Sen. Curtis King, R-Yakima, that eliminated Section 27 of Senate Bill 6113, striking a provision that would have extended the sales tax on all advertising services in the event that the state loses its lawsuit filed by Comcast in Thurston County Superior Court. 

“It’s a victory for Main Street,” said Rowland Thompson, executive director of Allied Daily Newspapers of Washington. 

The lawsuit brought by Comcast against the state Department of Revenue challenged last year’s Senate Bill 5814 that expanded the retail sales and use tax on other services, such as digital advertising, security services, and temporary staffing. The bill also included exemptions for ads for newspapers, and radio and television broadcasting, as well as billboards and buses.

Comcast contended that the sales tax on advertising services violates the federal Internet Tax Freedom Act, which prohibits states from levying “discriminatory” taxes on electronic commerce, meaning a tax on digital advertising also must be applicable to analog ads. 

Senate Bill 6113, in its original form, included a provision that made the tax on all advertising services contingent on the loss or settlement of the lawsuit, brewing stern opposition from local newspapers and broadcasters who argued an additional 8% to 10% sales tax on advertisements would be financially devastating for those who already operate on thin margins. 

“The WNPA is very grateful to see that common sense prevails, and we thank everyone who voted to remove that section,” Ellen Hiatt, executive director of the Washington Newspaper Publishers Association, said in a statement to the Columbia Basin Herald. 

The Comcast lawsuit, however, remains in place for further litigation, leaving lingering uncertainty. 

“Comcast can't abandon the suit for the reason that they need this tax to be as painful as possible,” Thompson said in a previous email to publishers across the state. 

Thompson explained that despite the recent legislative win, he believes Comcast makes a strong case and seeks to make an example out of Washington as the only state to tax advertising. He said that the continued collection of the sales tax revenue increases the state's potential liability.

Hiatt echoed those concerns, adding that the news ecosystem remains vulnerable and if the state loses, organizations are unsure how the legislature will manage the loss of revenue. 

“We're in no way out of the woods,” Hiatt said. “But we take this win and we’re very grateful for it.” 

Senate Bill 6113, in its amended form, was voted out of the Senate and will head to the House for consideration. The last day of session is Thursday, March 12.