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Wall Street Journal|Sues Texas Over Taxes

AUSTIN (CN) - Dow Jones is paying state taxes under protest, saying Texas taxed it illegally because "The Wall Street Journal" costs more than $1.50 on newsstands.

Dow Jones says the Texas law that defines a newspaper as costing no more than $1.50 is unconstitutional, and that anyway, 96 percent of the Journal's Texas readers are subscribers, who pay only 73 cents a copy.

Dow Jones says it paid the state tax of $97,206.96 on May 19 under protest. The Texas Comptroller announced in February 2010 - illegally, Dow Jones believes - that the sales price of a newspaper would be determined by its "masthead price, not the actual price paid," according to the complaint in Travis County Court.

"As the Comptroller has recognized, the Comptroller's administrative position effectively denies the benefit of the sales tax exemption to some newspapers (such as the WSJ and The New York Times), while preserving it for other newspapers." (Parentheses in complaint.)

The complaint continues: "This violates well-established state and federal law, including the First Amendment of the United States Constitution. The United States Supreme Court has long recognized that the First Amendment prohibits a state from imposing differential tax treatment on publishers within the same medium. See Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575 (1983). In other words, if a state generally exempts newspapers from a tax, it may not deny that exemption to certain newspapers. Here, there is no legitimate basis for discriminating between newspapers."

Dow Jones specifically objects to Section 151.319 of the Texas Tax Code, which exempts newspapers from sales, excise and use taxes. Section 151.319(f), however, defines a newspaper as any "publication that is printed on newsprint, the average sales price of which ... does not exceed $1.50, and that is printed and distributed at a daily, weekly or other short interval for the dissemination of news of a general character and of a general interest."

Even if this definition were constitutional, which Dow says it is not, The Wall Street Journal would still qualify as a newspaper, as more than 96 percent of its sales in Texas are by subscription, or home delivery, and those customers pay less than 73 cents per copy, according to the complaint.

Throughout the complaint, oddly enough, Dow claims that Texas is also being unfair to The New York Times, which is not listed as a co-plaintiff.

Dow Jones seeks declaratory judgment that the Texas attorney general's and comptroller's interpretation of the state Tax Code is unconstitutional. It also wants its taxes refunded, and an injunction. It is represented by Thomas Leatherbury with Vinson & Elkins of Dallas.

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