Taxing Patience On Madison Ave.

By Richard Hornik

& Florida Governor Bob Martinez thought he had discovered that politician's dream, a painless tax increase. Last April 23 he signed a law that extended the reach of the state's 5% sales tax to cover everything from legal services to pest control to credit collection. The new levies were intended to raise about $700 million a year, including some $100 million from a tax on advertisers, both in state and out. But while the Governor's constituents have greeted the measures with passive acceptance, Martinez has run into a wave of prickly Madison Avenue opposition that has turned the advertising-tax ploy into something of a political Everglades swamp.

In general, Florida's levy breaks no new ground. Similar service taxes already exist in New Mexico, Iowa and South Dakota. The Sunshine State's law, however, contains one major difference: any national advertiser whose message reaches Florida by way of print, radio or television must pay a state sales tax based on Florida's share of the advertiser's total audience. Thus if NBC- TV receives $400,000 in revenues for a 30-second commercial on, say, The Cosby Show, and if Florida viewers account for 5% of the national television audience, then a Cosby advertiser would have to pay a tax of 5% levied on $20,000.

The advertising industry is outraged. "It's like taxation without representation," fumes Peter Diamandis, president of CBS Magazines. "If this were 1776," he says, "we'd be pouring tea into the Fort Lauderdale harbor." Instead, opponents have been pouring antitax messages into Martinez's political bailiwick. The Florida Association of Broadcasters has produced a 30-second television commercial attacking the tax as inflationary and providing the Governor's phone number for citizens who would like to complain personally. In addition, a number of media companies, including NBC, CBS and Time Inc., have canceled plans to hold conferences and conventions in Florida as long as the law is on the books. Several major national advertisers have removed ads from publications and broadcasts that appear in Florida. Procter & Gamble has already suspended some advertising efforts, as have Clorox and Kraft.

The state has launched its own ad rebuttal. One 30-second protax television spot opens with a scene of a crowded sidewalk, while a voice-over intones that "growth is choking Florida. Too many people. Not enough water, roads, schools." The ad concludes that "special interests will have to pay their fair share."

The final battleground, however, may be the courts. Opponents of the measure already have at least three lawsuits in the works. The Florida State Supreme Court, in an unusual move, has agreed to send an advisory opinion to the Governor's office on the state constitutionality of the levy before the measure officially goes into effect on July 1.

The greatest fear of national advertisers is that the Florida example could set off a stampede in the rest of the country for such "easy" tax dollars. In fact, the rampage may already be starting. At least twelve other states, including Texas and Illinois, are weighing similar legislation. Says William F. Gorog, president of the Magazine Publishers Association: "It would be a nightmare if this extended beyond Florida."

With reporting by Marcia Gauger/Miami and Christine Gorman/New York