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Subject: 90-29 & 90-38 -- OPINION, LEATHERS v. MEDLOCK




NOTICE: This opinion is subject to formal revision before publication in
the preliminary print of the United States Reports.  Readers are requested
to notify the Reporter of Decisions, Supreme Court of the United States,
Washington, D. C. 20543, of any typographical or other formal errors, in
order that corrections may be made before the preliminary print goes to
press.
SUPREME COURT OF THE UNITED STATES


Nos. 90-29 and 90-38



TIMOTHY J. LEATHERS, COMMISSIONER OF
REVENUES OF ARKANSAS, PETITIONER
v.
90-29
DANIEL L. MEDLOCK et al.



DANIEL L. MEDLOCK, et al., PETITIONERS
v.
90-38
TIMOTHY J. LEATHERS, COMMISSIONER
OF REVENUES, et al.


on writs of certiorari to the supreme court of arkansas

[April 16, 1991]



    Justice O'Connor delivered the opinion of the Court.

    These consolidated cases require us to consider the constitutionality
of a state sales tax that excludes or exempts certain segments of the media
but not others.

I
    Arkansas' Gross Receipts Act imposes a 4% tax on receipts from the sale
of all tangible personal property and specified services.  Ark. Code Ann.
15 26-52-301, 26-52-302 (1987 and Supp. 1989).  The Act exempts from the
tax certain sales of goods and services.  MDRV 26-52-401 (Supp. 1989).
Counties within Arkansas impose a 1% tax on all goods and services subject
to taxation under the Gross Receipts Act, 15 26-74-307, 26-74-222 (1987 and
Supp. 1989), and cities may impose a further 12% or 1% tax on these items,
MDRV 26-75-307 (1987).
    The Gross Receipts Act expressly exempts receipts from subscription and
over-the-counter newspaper sales and subscription magazine sales.  See 15
26-52-401(4), (14) (Supp. 1989); Revenue Policy Statement 1988-1 (Mar. 10,
1988), reprinted in CCH Ark. Tax Rep. MDRV 69-415.  Before 1987, the Act
did not list among those services subject to the sales tax either cable
television  {1} or scrambled satellite broadcast television services to
home dish-antennae owners. {2}  See MDRV 2652-301 (1987).  In 1987,
Arkansas adopted Act 188, which amended the Gross Receipts Act to impose
the sales tax on cable television.  1987 Ark. Gen. Acts, No. 188, MDRV 1.
    Daniel L. Medlock, a cable television subscriber, Community
Communications Co., a cable television operator, and the Arkansas Cable
Television Association, Inc., a trade organization composed of
approximately 80 cable operators with systems throughout the State (cable
petitioners), brought this class action in the Arkansas Chancery Court to
challenge the extension of the sales tax to cable television services.
Cable petitioners contended that their expressive activities are protected
by the First Amendment and are comparable to those of newspapers,
magazines, and scrambled satellite broadcast television.  They argued that
Arkansas' sales taxation of cable services, and exemption or exclusion from
the tax of newspapers, magazines, and satellite broadcast services,
violated their constitutional rights under the First Amendment and under
the Equal Protection Clause of the Fourteenth Amendment.
    The Chancery Court granted cable petitioners' motion for a preliminary
injunction, requiring Arkansas to place in escrow the challenged sales
taxes and to keep records identifying collections of the taxes.  Both sides
introduced extensive testimony and documentary evidence at the hearing on
this motion and at the subsequent trial.  Following the trial, the Chancery
Court concluded that cable television's necessary use of public
rights-of-way distinguishes it for constitutional purposes from other
media.  It therefore upheld the constitutionality of Act 188, dissolved its
preliminary injunction, and ordered all funds collected in escrow
released.
    In 1989, shortly after the Chancery Court issued its decision, Arkansas
adopted Act 769, which extended the sales tax to "all other distribution of
television, video or radio services with or without the use of wires
provided to subscribers or paying customers or users."  1989 Ark. Gen.
Acts, No. 769, MDRV 1.  On appeal to the Arkansas Supreme Court, cable
petitioners again challenged the State's sales tax on the ground that,
notwithstanding Act 769, it continued unconstitutionally to discriminate
against cable television.  The Supreme Court rejected the claim that the
tax was invalid after the passage of Act 769, holding that the Constitution
does not prohibit the differential taxation of different media.  Medlock v.
Pledger, 301 Ark. 483, 487, 785 S. W. 2d 202, 204 (1990).  The Court
believed, however, that the First Amendment prohibits discriminatory
taxation among members of the same medium.  On the record before it, the
court found that cable television services and satellite broadcast services
to home dish-antennae owners were "substantially the same."  Ibid.  The
State Supreme Court rejected the Chancery Court's conclusion that cable
television's use of public rights-of-way justified its differential sales
tax treatment, explaining that cable operators already paid franchise fees
for that right.  Id., at 485, 785 S. W. 2d, at 203.  It therefore held that
Arkansas' sales tax was unconstitutional under the First Amendment for the
period during which cable television but not satellite broadcast services
were subject to the tax.  Id., at 487; 785 S. W. 2d, at 204.
    Both cable petitioners and the Arkansas Commissioner of Revenues
petitioned this Court for certiorari.  We consolidated these petitions and
granted certiorari, 498 U. S. --- (1990), in order to resolve the question,
left open in Arkansas Writers' Project, Inc. v. Ragland, 481 U. S. 221, 233
(1987), whether the First Amendment prevents a State from imposing its
sales tax on only selected segments of the media.

II
    Cable television provides to its subscribers news, information, and
entertainment.  It is engaged in "speech" under the First Amendment, and
is, in much of its operation, part of the "press."  See Los Angeles v.
Preferred Communications, Inc., 476 U. S. 488, 494 (1986).  That it is
taxed differently from other media does not by itself, however, raise First
Amendment concerns.  Our cases have held that a tax that discriminates
among speakers is constitutionally suspect only in certain circumstances.
    In Grosjean v. American Press Co., 297 U. S. 233 (1936), the Court
considered a First Amendment challenge to a Louisiana law that singled out
publications with weekly circulations above 20,000 for a 2% tax on gross
receipts from advertising.  The tax fell exclusively on 13 newspapers.
Four other daily newspapers and 120 weekly newspapers with weekly
circulations of less than 20,000 were not taxed.  The Court discussed at
length the pre-First Amendment English and American tradition of taxes
imposed exclusively on the press.  This invidious form of censorship was
intended to curtail the circulation of newspapers and thereby prevent the
people from acquiring knowledge of government activities.  Id., at 246-251.
The Court held that the tax at issue in Grosjean was of this type, and was
therefore unconstitutional.  Id., at 250.
    In Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460
U. S. 575 (1983), we noted that it was unclear whether the result in
Grosjean depended on our perception in that case that the State had imposed
the tax with the intent to penalize a selected group of newspapers or
whether the structure of the tax was sufficient to invalidate it.  See 460
U. S., at 580 (citing cases and commentary).  Minneapolis Star resolved any
doubts about whether direct evidence of improper censorial motive is
required in order to invalidate a differential tax on First Amendment
grounds: "Illicit legislative intent is not the sine qua non of a violation
of the First Amendment."  Id., at 592.
    At issue in Minneapolis Star was a Minnesota special use tax on the
cost of paper and ink consumed in the production of publications.  The tax
exempted the first $100,000 worth of paper and ink consumed annually.
Eleven publishers, producing only 14 of the State's 388 paid circulation
newspapers, incurred liability under the tax in its first year of
operation.  The Minneapolis Star and Tribune Company (Star Tribune) was
responsible for roughly two-thirds of the total revenue raised by the tax.
The following year, 13 publishers, producing only 16 of the State's 374
paid circulation papers, paid the tax.  Again, the Star Tribune bore
roughly two-thirds of the tax's burden.  We found no evidence of
impermissible legislative motive in the case apart from the structure of
the tax itself.
    We nevertheless held the Minnesota tax unconstitutional for two
reasons.  First, the tax singled out the press for special treatment.  We
noted that the general applicability of any burdensome tax law helps to
ensure that it will be met with widespread opposition.  When such a law
applies only to a single constituency, however, it is insulated from this
political constraint.  See id., at 585.  Given "the basic assumption of our
political system that the press will often serve as an important restraint
on government," we feared that the threat of exclusive taxation of the
press could operate "as effectively as a censor to check critical comment."
Id., at 585.  "Differential taxation of the press, then, places such a
burden on the interests protected by the First Amendment," that it is
presumptively unconstitutional.  Ibid.
    Beyond singling out the press, the Minnesota tax targeted a small group
of newspapers -- those so large that they remained subject to the tax
despite its exemption for the first $100,000 of ink and paper consumed
annually.  The tax thus resembled a penalty for certain newspapers.  Once
again, the scheme appeared to have such potential for abuse that we
concluded that it violated the First Amendment: "[W]hen the exemption
selects such a narrowly defined group to bear the full burden of the tax,
the tax begins to resemble more a penalty for a few of the largest
newspapers than an attempt to favor struggling smaller enterprises."  Id.,
at 592.
    Arkansas Writers' Project, Inc. v. Ragland, 481 U. S. 221 (1987),
reaffirmed the rule that selective taxation of the press through the narrow
targeting of individual members offends the First Amendment.  In that case,
Arkansas Writers' Project sought a refund of state taxes it had paid on
sales of the Arkansas Times, a general interest magazine, under Arkansas'
Gross Receipts Act of 1941.  Exempt from the sales tax were receipts from
sales of religious, professional, trade and sports magazines.  See id., at
224-226.  We held that Arkansas' magazine exemption, which meant that only
"a few Arkansas magazines pay any sales tax," operated in much the same way
as did the $100,000 exemption in Minneapolis Star and therefore suffered
from the same type of discrimination identified in that case.  Id., at 229.
Moreover, the basis on which the tax differentiated among magazines
depended entirely on their content.  Ibid.
    These cases demonstrate that differential taxation of First Amendment
speakers is constitutionally suspect when it threatens to suppress the
expression of particular ideas or viewpoints.  Absent a compelling
justification, the government may not exercise its taxing power to single
out the press.  See Grosjean, 297 U. S., at 244-249; Minneapolis Star, 460
U. S., at 585.  The press plays a unique role as a check on government
abuse, and a tax limited to the press raises concerns about censorship of
critical information and opinion.  A tax is also suspect if it targets a
small group of speakers.  See Minneapolis Star, supra, at 575; Arkansas
Writers', 481 U. S., at 229.  Again, the fear is censorship of particular
ideas or viewpoints.  Finally, for reasons that are obvious, a tax will
trigger heightened scrutiny under the First Amendment if it discriminates
on the basis of the content of taxpayer speech.  See id., at 229-231.
    The Arkansas tax at issue here presents none of these types of
discrimination.  The Arkansas sales tax is a tax of general applicability.
It applies to receipts from the sale of all tangible personal property and
a broad range of services, unless within a group of specific exemptions.
Among the services on which the tax is imposed are natural gas,
electricity, water, ice, and steam utility services; telephone,
telecommunications, and telegraph service; the furnishing of rooms by
hotels, apartment hotels, lodging houses, and tourist camps; alteration,
addition, cleaning, refinishing, replacement, and repair services; printing
of all kinds; tickets for admission to places of amusement or athletic,
entertainment, or recreational events; and fees for the privilege of having
access to or use of amusement, entertainment, athletic, or recreational
facilities.  See Ark. Code Ann. MDRV 26-52-301 (Supp. 1989).  The tax does
not single out the press and does not therefore threaten to hinder the
press as a watchdog of government activity.  Cf. Minneapolis Star, supra,
at 585.  We have said repeatedly that a State may impose on the press a
generally applicable tax.  See Swaggart Ministries v. Board of Equalization
of California, 493 U. S. ---, --- (1990); Arkansas Writers', supra, at 229;
Minneapolis Star, supra, at 586, and n. 9.
    Furthermore, there is no indication in this case that Arkansas has
targeted cable television in a purposeful attempt to interfere with its
First Amendment activities.  Nor is the tax one that is structured so as to
raise suspicion that it was intended to do so.  Unlike the taxes involved
in Grosjean and Minneapolis Star, the Arkansas tax has not selected a
narrow group to bear fully the burden of the tax.
    The tax is also structurally dissimilar to the tax involved in Arkansas
Writers'.  In that case, only "a few" Arkansas magazines paid the State's
sales tax.  See Arkansas Writers', 481 U. S., at 229, and n. 4.  Arkansas
Writers' Project maintained before the Court that the Arkansas Times was
the only Arkansas publication that paid sales tax.  The Commissioner
contended that two additional periodicals also paid the tax.  We responded
that, "[w]hether there are three Arkansas magazines paying tax or only one,
the burden of the tax clearly falls on a limited group of publishers."
Id., at 229, n. 4.  In contrast, Act 188 extended Arkansas' sales tax
uniformly to the approximately 100 cable systems then operating in the
State.  See App. to Pet. for Cert. in No. 90-38, p. 12a.  While none of the
seven scrambled satellite broadcast services then available in Arkansas,
Tr. 12 (Aug. 19, 1987), was taxed until Act 769 became effective, Arkansas'
extension of its sales tax to cable television hardly resembles a "penalty
for a few."  See Minneapolis Star, supra, at 592; Arkansas Writers', supra,
at 229, and n. 4.
    The danger from a tax scheme that targets a small number of speakers is
the danger of censorship; a tax on a small number of speakers runs the risk
of affecting only a limited range of views.  The risk is similar to that
from content-based regulation: it will distort the market for ideas.  "The
constitutional right of free expression is . . . intended to remove
governmental restraints from the arena of public discussion, putting the
decision as to what views shall be voiced largely into the hands of each of
us . . . in the belief that no other approach would comport with the
premise of individual dignity and choice upon which our political system
rests."  Cohen v. California, 403 U. S. 15, 24 (1971).  There is no
comparable danger from a tax on the services provided by a large number of
cable operators offering a wide variety of programming throughout the
State.  That the Arkansas Supreme Court found cable and satellite
television to be the same medium does not change this conclusion.  Even if
we accept this finding, the fact remains that the tax affected
approximately 100 suppliers of cable television services.  This is not a
tax structure that resembles a penalty for particular speakers or
particular ideas.
    Finally, Arkansas' sales tax is not content based.  There is nothing in
the language of the statute that refers to the content of mass media
communications.  Moreover, the record establishes that cable television
offers subscribers a variety of programming that presents a mixture of
news, infor mation, and entertainment.  It contains no evidence, nor is it
contended, that this material differs systematically in its message from
that communicated by satellite broadcast programming, newspapers, or
magazines.
    Because the Arkansas sales tax presents none of the First Amendment
difficulties that have led us to strike down differential taxation in the
past, cable petitioners can prevail only if the Arkansas tax scheme
presents "an additional basis" for concluding that the State has violated
petitioners First Amendment rights.  See Arkansas Writers', supra, at 233.
Petitioners argue that such a basis exists here: Arkansas' tax
discriminates among media and, if the Arkansas Su preme Court's conclusion
regarding cable and satellite television is accepted, discriminated for a
time within a medium.  Petitioners argue that such intermedia and
intramedia discrimination, even in the absence of any evidence of intent to
suppress speech or of any effect on the expression of particular ideas,
violates the First Amendment.  Our cases do not support such a rule.
    Regan v. Taxation with Representation of Washington, 461 U. S. 540
(1983), stands for the proposition that a tax scheme that discriminates
among speakers does not implicate the First Amendment unless it
discriminates on the basis of ideas.  In that case, we considered
provisions of the Internal Revenue Code that discriminated between
contributions to lobbying organizations.  One section of the Code conferred
tax-exempt status on certain nonprofit organizations that did not engage in
lobbying activities.  Contributions to those organizations were deductible.
Another section of the Code conferred tax-exempt status on certain other
nonprofit organizations that did lobby, but contributions to them were not
deductible.  Taxpayers contributing to veterans' organizations were,
however, permitted to deduct their contributions regardless of those
organizations' lobbying activities.
    The tax distinction between these lobbying organizations did not
trigger heightened scrutiny under the First Amendment.  Id., at 546-551.
We explained that a legislature is not required to subsidize First
Amendment rights through a tax exemption or tax deduction. {3}  Id., at
546.  For this proposition, we relied on Cammarano v. United States, 358 U.
S. 498 (1959).  In Cammarano, the Court considered an Internal Revenue
regulation that denied a tax deduction for money spent by businesses on
publicity programs directed at pending state legislation.  The Court held
that the regulation did not violate the First Amendment because it did not
discriminate on the basis of who was spending the money on publicity or
what the person or business was advocating.  The regulation was therefore
"plainly not `aimed at the suppression of dangerous ideas.' "  Id., at 513,
quoting Speiser v. Randall, 357 U. S. 513, 519 (1958).
    Regan, while similar to Cammarano, presented the additional fact that
Congress had chosen to exempt from taxes contributions to veterans'
organizations, while not exempting other contributions.  This did not
change the analysis.  Inherent in the power to tax is the power to
discriminate in taxation.  "Legislatures have especially broad latitude in
creating classifications and distinctions in tax statutes."  Regan, supra,
at 547.  See also Madden v. Kentucky, 309 U. S. 83, 87-88 (1940); New York
Rapid Transit Corp. v. New York City, 303 U. S. 573, 578 (1938); Magoun v.
Illinois Trust & Savings Bank, 170 U. S. 283, 294 (1898).
    Cammarano established that the government need not exempt speech from a
generally applicable tax.  Regan established that a tax scheme does not
become suspect simply because it exempts only some speech.  Regan
reiterated in the First Amendment context the strong presumption in favor
of duly enacted taxation schemes.  In so doing, the Court quoted the rule
announced more than 40 years earlier in Madden, an equal protection case:

"The broad discretion as to classification possessed by a legislature in
the field of taxation has long been recognized. . . .  [T]he passage of
time has only served to underscore the wisdom of that recognition of the
large area of discretion which is needed by a legislature in formulating
sound tax policies.  Traditionally classification has been a device for
fitting tax programs to local needs and usages in order to achieve an
equitable distribution of the tax burden.  It has, because of this, been
pointed out that in taxation, even more than in other fields, leg islatures
possess the greatest freedom in classification.  Since the members of a
legislature necessarily enjoy a familiarity with local conditions which
this Court cannot have, the presumption of constitutionality can be
overcome only by the most explicit demonstration that a classification is a
hostile and oppressive discrimination against particular persons and
classes."  Madden, supra, at 87-88 (footnotes omitted), quoted in Regan,
461 U. S., at 547-548.


    On the record in Regan, there appeared no such "hostile and oppressive
discrimination."  We explained that "[t]he case would be different if
Congress were to discriminate invidiously in its subsidies in such a way as
to aim at the suppression of dangerous ideas."  Id., at 548 (internal
quotations omitted).  But that was not the case.  The exemption for
contributions to veterans' organizations applied without reference to the
content of the speech involved; it was not intended to suppress any ideas;
and there was no demonstration that it had that effect.  Ibid.  Under these
circumstances, the selection of the veterans' organizations for a tax
preference was "obviously a matter of policy and discretion."  Id., at 549
(internal quotations omitted).
    That a differential burden on speakers is insufficient by itself to
raise First Amendment concerns is evident as well from Mabee v. White
Plains Publishing Co., 327 U. S. 178 (1946), and Oklahoma Press Publishing
Co. v. Walling, 327 U. S. 186 (1946).  Those cases do not involve taxation,
but they do involve government action that places differential burdens on
members of the press.  The Fair Labor Standards Act of 1938, 52 Stat. 1060,
as amended, 29 U. S. C. MDRV 201 et. seq., applies generally to newspapers
as to other businesses, but it exempts from its requirements certain small
papers.  MDRV 213(a)(8).  Publishers of larger daily newspapers argued that
the differential burden thereby placed on them violates the First
Amendment.  The Court upheld the exemption because there was no indication
that the government had singled out the press for special treatment,
Walling, supra, at 194, or that the exemption was a " `deliberate and
calculated device' " to penalize a certain group of newspapers, Mabee,
supra, at 184, quoting Grosjean, 297 U. S., at 250.
    Taken together, Regan, Mabee, and Oklahoma Press establish that
differential taxation of speakers, even members of the press, does not
implicate the First Amendment unless the tax is directed at, or presents
the danger of suppressing, particular ideas.  That was the case in
Grosjean, Minneapolis Star, and Arkansas Writers', but it is not the case
here.  The Arkansas Legislature has chosen simply to exclude or exempt
certain media from a generally applicable tax.  Nothing about that choice
has ever suggested an in terest in censoring the expressive activities of
cable tele vision.  Nor does anything in this record indicate that
Arkansas' broad-based, content-neutral sales tax is likely to stifle the
free exchange of ideas.  We conclude that the State's extension of its
generally applicable sales tax to cable television services alone, or to
cable and satellite services, while exempting the print media, does not
violate the First Amendment.
    Before the Arkansas Chancery Court, cable petitioners contended that
the State's tax distinction between cable and other media violated the
Equal Protection Clause of the Fourteenth Amendment as well as the First
Amendment.  App. to Pet. for Cert. in No. 90-38, p. 21a.  The Chancery
Court rejected both claims, and cable petitioners challenged these holdings
before the Arkansas Supreme Court.  That Court did not reach the equal
protection question as to the State's temporary tax distinction between
cable and satellite services because it disallowed that distinction on
First Amendment grounds.  We leave it to the Arkansas Supreme Court to
address this question on remand.
    For the foregoing reasons, the judgment of the Arkansas Supreme Court
is affirmed in part and reversed in part, and the cases are remanded for
further proceedings not inconsistent with this opinion.

It is so ordered.


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1
    Cable systems receive television, radio, or other signals through
antennae located at their so-called "headends."  Information gathered in
this way, as well as any other material that the system operator wishes to
transmit, is then conducted through cables strung over utility poles and
through underground conduits to subscribers.  See generally D. Brenner, M.
Price, & M. Meyerson, Cable Television and Other Nonbroadcast Video: Law
and Policy MDRV 1.03 (1989).

2
    Satellite television broadcast services transmit over-the-air
"scrambled" signals directly to the satellite dishes of subscribers, who
must pay for the right to view the signals.  See generally A. Easton & S.
Easton, The Complete Sourcebook of Home Satellite TV 57-66 (1988).

3
    Certain amici in support of cable petitioners argue that Regan is
distinguishable from this case because the petitioners in Regan were
complaining that their contributions to lobbying organizations should be
tax deductible, while cable petitioners complain that sales of their
services should be tax exempt.  This is a distinction without a difference.
As we explained in Regan, "[b]oth tax exemptions and tax deductibility are
a form of subsidy that is administered through the tax system."  Regan, 461
U. S., at 544.