January 31, 2002

Legislative Activity

Date: January 31, 2002

To: AAF Members

From: Clark Rector, Jr., Vice President-State Government Affairs

Re: Nebraska Advertising and Services Tax Threat

State Senator Kermit Brashear has introduced legislation (Legislative Bill 1280) that would extend the state sales tax laws to include many services, including advertising agency services. LB 1280 is a far reaching bill that also makes changes to other sections of the tax code.

It is premature to launch an all out lobbying campaign against the measure. Senator Brashear has introduced similar proposals in the past that did not go anywhere. In addition, Governor Mike Johanns has promised that no tax increases are necessary to balance the budget.

However, we must not take this bill for granted. Nebraska is looking at a projected $78 million budget deficit for the second year of the current biennium. In such circumstances, all tax proposals must be considered a threat. We will conduct intelligence in the Capitol to assess the prospects for the LB 1280. In the meantime, if you or members of your advertising federation talk with members of the legislature, let them know you are opposed to the Brashear proposal.

The bill should be opposed because:

  • Nebraska advertising agencies will be put at a competitive disadvantage. Advertising is an extremely portable service. Clients can easily take their business to agencies in Iowa, Colorado, Kansas or any other state that does not have a surcharge on agency services.
  • Local businesses will suffer. The clients least able to use out of state agencies will be small, locally owned businesses, which will find it that much harder to compete with larger companies.
  • Placing a tax on advertising services increases the cost of advertising. Because most clients operate on a fixed advertising budget, those using Nebraska agencies will compensate for the tax by decreasing their advertising purchases. This will have a direct — and negative — impact on their business, the advertising industry, economy, consumers and the state.
  • Advertising is the engine that fuels the economy. Less advertising means fewer sales. Fewer sales mean reduced revenue and fewer jobs. Fewer sales also result in less sales tax revenue for the state.

I also encourage you to attend the February 22 meet and greet with State Senators hosted by the Omaha Federation of Advertising. This will be an excellent opportunity to voice your concerns about an advertising tax to Senators in an informal setting.

Please do hesitate to call me at 1-800-999-2231 if you have any questions.