Billboards, Taxes, And The First Amendment

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Following the decision in Clear Channel, in which the Maryland Court of Special Appeals upheld Baltimore City’s excise tax on billboards as not violating the First Amendment’s free speech protections, comes Lamar, in which the taxpayer challenges a similar tax imposed by Cincinnati on the same grounds. The Ohio Supreme Court heard oral arguments on June 16, and the case is still pending. The facts that underpin the taxpayers’ constitutional arguments are nearly identical in Clear Channel and Lamar. Licenses to install billboards are subject to an excise tax in Cincinnati. Only billboard operators are subject to the levy, which they are free to pass on to their clients. The tax does not apply to any other types of signage. Newspapers and other forms of media are likewise immune from the law.
However, the facts of the two cases differ with regard to a provision of Cincinnati’s law related to the tax’s imposition that prohibits billboard operators from informing customers of the tax “in any manner, directly or indirectly,” though the operator is free to pass the tax on to customers in the form of higher rental fees. Civil and criminal consequences apply to violations of the restriction.
Because the tax singles out the press and is targeted at only a small group of taxpayers, such as billboard operators, Lamar Advantage GP Co. LLC claims that the tax infringes on its First Amendment right of free speech. As a result, the proper legal standard by which the tax should be adjudicated is strict scrutiny.
Lamar claims that as a billboard operator, it qualifies as the press because the United States Supreme Court held in Metromedia that billboards are a “medium of communication warranting First Amendment protection,” and thus, like other media, the First Amendment prohibits governments from controlling communications displayed on billboards, regardless of whether such signage is a paid advertisement or other for-profit endeavor. In addition, Lamar cites the Supreme Court’s decision in Minneapolis Star, arguing that the city’s levy is illegal per se since it singles out the press and targets a tiny group of speakers, namely itself and the city’s other restricted number of billboard operators.
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The levy does, as Lamar points out, target the press and billboard operators in this instance, but the Court established the rule in the disjunctive in Minneapolis Star: A tax is unlawful under the First Amendment if it targets the press or a limited group of speakers.
In either event, according to Lamar, these two criteria are all that is required for the Minneapolis Star to declare a legislation unconstitutional; it makes no difference if the measure is otherwise content neutral. “Differential taxation of the press, then, places such a burden on the interests protected by the First Amendment that we cannot countenance such treatment unless the state asserts a counterbalancing interest of compelling importance that it cannot achieve without differential taxation,” Lamar writes, quoting the Minneapolis Star Court.
This, according to Lamar, is why the city’s tax is unlawful. The city’s fee, Lamar claims, “chills expression and burdens speech in a way tantamount to outright censorship” by targeting the press and a small number of speakers, and the city provided no basis for its levy to achieve a legitimate governmental interest it couldn’t meet without imposing the tax.

VARIOUS CITIES – OCTOBER 24: CIROC Debuts New Kendrick Simpson Freedom Billboards… [+] to Vote #CIROCStands on October 24, 2020 in Various Cities, UNSPECIFIED – Region AMER. (Photo courtesy of Getty Images/Larry French for CIROC)
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The Ohio judges looked suspicious of the city’s claim throughout oral argument. Cincinnati’s general lawyer, Marion E. Haynes III, contended that the tax is collected on billboard operators, not on billboard speech.
When the operators rent out their billboards, he claims, they are not engaged in communication; “they are not speakers or members of the press.” “What they do is offer a product to their consumers,” Haynes said, citing the operators’ admissions during trial.
As a result, the only issue in this case is a tax on the operators’ economic activity, which has no bearing on First Amendment issues. He added that the city’s limited pool of billboard operators is due to the city’s restriction of billboards in general; the city allows no more than 800 billboards within its authority, and the tax is levied equally on all billboard operators.
Haynes went on to separate the city’s tax from the one at issue in the Minneapolis Star and other Supreme Court First Amendment cases, pointing out that the levies in previous cases were constructed in such a way that they were questionable.
He explained that while the state’s tax on newsprint and ink was referred to as a use tax in the Minneapolis Star, it was not complementary to the state’s sales tax, making it clear that the tax targeted newspapers and, more specifically, a specific number of newspapers out of those in circulation at the time. According to Haynes, the nature of the tax was evident, and this is what rendered the Minnesota tax illegal.
Cincinnati’s tax, on the other hand, is just an excise tax on a billboard operator’s economic activity within the city, he told the court.
Haynes was questioned by the court about why the city imposed a levy on billboard operators but not on other forms of advertising media. The city’s argument that there was a difference between a billboard operator selling advertising space on its billboard and a television or cable operator selling advertising space on its channels did not persuade the justices, and they were even less convinced by the argument justifying the tax on fixed billboard operators but not on mobile operators, whose product is essentially a billboard. The court also stated that billboard space sold on a building was not taxed.
In short, the court appeared to conclude that the city’s distinction between stationary, stand-alone billboard operators and other sorts of media amounted to a distinction without a difference, and that the levy thus targeted a specific type of operator for taxation.

MARCH 13TH, ST. PAUL, MN: McClatchy wants to buy Knight Ridder from its honor box adjacent to one showcasing the St. Paul Pioneer Press, according to a headline in the Minneapolis Star Tribune. In St. Paul, Minnesota, on March 13, 2006. The McClatchy Company, which owns the Minneapolis Star Tribune, has agreed to buy the Pioneer Press from Knight Ridder. (Photo courtesy of Getty Images/Cory Ryan)
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While it’s impossible to foresee how the state supreme court will decide in Lamar, what stands out is the court’s concentration during oral arguments in Clear Channel v. Maryland Court of Special Appeals.
The Ohio court’s lengthy questioning on the tax’s applicability to various forms of media, despite being couched in terms of the First Amendment, suggests it may also be considering the implications of the 14th Amendment on its ruling.
There is a solid case that the tax in Lamar violates the 14th Amendment’s equal protection guarantee. In Clear Channel, this was also true.
The Clear Channel court, on the other hand, made no mention of the 14th Amendment other than to determine that the tax had a reasonable basis and served a legitimate governmental interest.
The 14th Amendment issue, on the other hand, is not before the Ohio court, but it may bring it up on its own.
On the First Amendment question, the Ohio court might follow the Maryland court’s lead and rule that the city’s tax does not violate the amendment since it restricts or suppresses speech content. That is, while the content of billboard messages is protected by the First Amendment, the business of selling billboard space is not.
The fact that billboards are a form of communication, according to the Maryland court, does not turn a tax on the activity of selling billboard space into a regulation of speech. Even if the Ohio court is inclined to follow the Maryland court’s decision in this regard, it’s hard to see how it can avoid Minneapolis Star.
Putting suspect tax structuring aside, the fact that excise taxes are common at both the state and local levels does not mean that they only affect a small group of taxpayers, namely those who own or lease fixed, stand-alone structures on which space is rented for customers to communicate their messages to the public, rather than any other fixed or mobile medium that serves the same purpose.
Although the Maryland court dismissed the case, it is hoped that the Ohio court will not do so. In the end, one must conclude that, while the facts of the Maryland and Ohio cases are similar, the conclusion of the Ohio case may differ significantly from the Maryland judgment.
The First Amendment ramifications of city government-imposed excise charges on billboards are once again in the spotlight.
A Maryland court recently ruled that a city tax on billboard space sales did not violate the amendment because it was essentially a tax on the economic activity of selling billboard space.
The Ohio Supreme Court is now hearing the case, and it could follow the Maryland court’s judgment; but, based on the tone of the oral argument, that seems unlikely, as the Ohio court appears to be considering questions that the Maryland court did not. Keep an eye out for updates./nRead More