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Peter J. Stahlbrodt, dba Shopping Bag v. Commissioner of Taxation and Finance of N.Y., 1998 N.Y. Int. 0164 (Dec. 17, 1998).




Whether Tax Law §1115(i) (the "ninety percent rule") violates the First Amendment by discriminating among shopping papers based on their content.


No. The 90% rule is Constitutional. Tax Law §1115(i) does not discriminate among shopping papers based on their content, but rather is a general tax on the sales of goods and services.


"The Shopping Bag" is a weekly advertising paper published and distributed free by Plaintiff. Plaintiff claimed that the paper was exempt from taxes on purchases of printing services since the paper qualified as a "shopping paper." The State Division of Taxation and Finance disagreed with his assessment and levied sales taxes on the printing services Plaintiff had purchased.

The Tax Appeals Tribunal upheld the State's appraisal, finding that "The Shopping Bag" did not qualify for the sales tax exemption because it did not meet the 90 percent rule of Tax Law §1115(i)(C), which requires that the paper's advertising copy not exceed 90 percent of the printed area of each issue. Plaintiff then brought an action for declaratory judgment alleging that Tax Law §1115(i)(C) violated the First Amendment and the Equal Protection Clause of the Fourteenth Amendment. The Supreme Court rejected his claims and dismissed the complaint. The Appellate Division affirmed, and Plaintiff brought this appeal. The Court of Appeals found Tax Law § 1115(i)(C) to be constitutional, and modified the Appellate Division by giving an adverse declaration to Plaintiff.

The Court rejected Plaintiff's argument that Tax Law §1115(i)(C) discriminates among shopping papers based on their content and thus violates the First Amendment. The Court of Appeals found the tax to be generally applied to all sales of goods and services, and not specifically directed at the press or at a specific type of news publication. Since the 90 percent rule does not single out any print media for unequal treatment based on content and since no invidious discrimination occurred, the Legislature can freely choose the forms of expression on which it will bestow tax exempt status.

Prepared by the liibulletin-ny Editorial Board.