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RE: Opposition to Taxing Advertising & 74 New Goods and Services

Hand Delivered - March 5, 2010

Dear House and Senate Appropriations Committee Members:

e Mid-Atlantic Community Papers Association is deeply concerned by the Governors proposed broad expansionsto the Sales and Use Tax. We empathise with the dire predicament our Commonwealth faces, and we do not envy your

onumental challenge to craft a fair and balanced budget.

Please know this: ur publishers operate on the front lines of the economy, providing the glue that bonds neigh-bors and the merchants on Main Street. We share a singular perspective on the condition of truly local commerce.Our collective enterprise serves the unique and most critical function of communicating between Mom and Pop busi-nesses and their customers.

We admit candidly that if we were in your shoes we might be tempted to gaze longingly at spreadsheets circulatingthat promise a windfall buffet of new revenue. Should the mood suddenly swing in favor that commerce-killing op-tion, we urge you to consider ree Critical Tests for fixing any new bulls eyes:

1. Is it a simple sale at retail or a complex range of commerce-driving services?

2. Is it a luxury or a necessity -- a want or a need?

3. Would anynew burdens of collection be minimal or disproportionately onerous?

ur member publishers would be forced to spend hundreds of thousands of dollars -- money they do not have-- on new software before even attempting to collect the first pennyfor our Commonwealth. en double thatwith costs of programming, training, administration and compliance, and even new computers -- all incurred beforeeven attempting to collect the first penny of sales tax.

Community papers cannot simply press a button on a cash register and try to begin passing 4-6% on to our strug-gling customers, automatically collecting fees on diminished volume. In community publishing, the advertising trans-action is actually a discrete set of simultaneous processes linked to billing. We rely on industry-specific, proprietaryand usually customized software, which is available from only a select group of specialized vendors. e license, theprogramming, the training and the hardware upgrades alone will cost fortunes we just do not have.

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e new burdens of sales tax collection will be disproportionately onerous on the community paper publishing

industry. But that is only the beginning of the cascading disasters and counter-intended outcomes on Main Street,PA. Publishers from every corner of the state provide a granular view of the stark realities they and their advertisersstruggle with today without a 4-6% penalty:

An Historic Number of Small Business Doors have Shuttered -- Reality in Downtown, PA 4-6% is Roughly Double the Last Average Rate Increase -- For Many, No Increase for Years A 4-6% Ad Tax Cant Be Passed Along -- Much r Most Will Be Offset by Diminished Advertising A 4-6% Ad Tax Simply Cannot Be Swallowed Without Additional Job & Healthcare Losses

Details from the MACPA Member Ad Tax & Local Economic Survey:

QUESTION: When was last time you raised (or decreased) rates? What Percent?

- in 2009 I decreased rates 25% on the rate card.

- Retail ROP rates were held across the board for 2009- Last time was May of 07 at 3%

- no change for a few years- August 2008 - 3%- 2008, 4%- 1/1/09 5% (Only raise in 3 years)- not raised rates in nearly 4 years. If anything we have had to find ways of providing more value for no ad-

ditional cost. A rate hike of 4-6% would be unacceptable to advertisers of all levels from local to national. We wouldore than likely have to eat the increase to sustain volume.- July 2008, 4 to 5%- Last year: What %? just 3- We have been fortunate to be able to keep our same rate for the past 3 years by keeping a low overhead and

constantly looking for ways to cut costs.- havent raised the price for 3 years. Classified also is only raised every two years.- 2008, -3% Note: thats decrease!

- We have not raised our rates in 5 years. We have been hit hard with the current economic times. We

deal with small local businesses that are struggling.

QUESTION: Across the board, what portion of a 4-6% hike could you pass along?

- 0!- Probably half that at best- None- Would have to try to pass all of it on. Couldnt absorb it- We would just eat the whole amount- Very little- rate hike of 4-6% would be unacceptable to advertisers of all levels from local to national. We

would more than likely have to eat the increase to sustain volume.

- typically we get 50% of a rate increase- A sales tax on advertising is another tax on the already-struggling businesses in our area. Sales taxes

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re on the consumer. But our consumers are businesses.- We couldnt pass much more than 1% along. If we passed an additional 3% along we would most likely see

$10,000.00 less in revenues.

QUESTION: Or, how much of a 4-6% Ad Tax would be met with decreased ad size and/or volume?

- Most of it- Many will have to reduce size, cut zone coverage- Would no doubt lose volume, and theyll lose business too- It would reduce ad size by as much as 10%- THIS WILL RESULT IN LOST INCHES AS SMALLER MOM & POPS LOOK FOR WAYS TO KEEP

HEIR EXPENSES FROM SKYROCKETING. THAT WILL TRANSLATE TO FEWER SALES AT RETAIL- 25% at bare minimum- ats diffi cult to put a number to. But Im certain larger ads would be reduced in size, some advertisers

would advertise every other week rather than every week.- is would result in many advertisers either cutting back on size or volume of ads. Lose-lose

QUESTION: Bottom line net loss in dollars if Ad Tax enacted?

- 60%- $30,000- too hard to determine, well into six figures

- Net loss of probably $1,000 to $1,200 per week- Loss could be well over $100,000- $1,680 per week

QUESTION: On Front End Software -- You would need to tag classifieds, display and inserts as both taxable &ax exempt, bill & collect accordingly, and send reports and a check to the state on a regular basis. Can your cur-

rent software do this?

- NO!

- Our current software would not be able to handle all you have listed- NOPE!- no it cannot- Our ad order entry system is antiquated. Having said that, even newer models would need to be modified

to accommodate for change in process. It would take time and money. Dollars we dont have at this time. Given leanoperation we dont have the resources to manually manage the new billing challenges the sales tax would provide.

- No, will need new system, new servers, probably new workstations- Current software will work, with some serious tweaking -- I hope- No, our IT staff says well need another system.

- Definitely not. For what we paid, this is unbelievable

QUESTION: Rough estimate of cost to upgrade, program & train on a new front end system?

- $50,000 minimum

- Dont really know, it would involve program and that is expensive!- based on recent rfp, roughly $40-80k to upgrade and flow

- $25k in software costs...minimum $20k in training- several thousand dollars, if we can patch, tens of thousands more likely- the cost to get another program would be at least $50K- At least $20,000 for bare bones function

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QUESTION: Ballpark cost for additional accounting relating to sales tax collection?

- $30,000- is would simply be an accounting nightmare-period.

- Additional expense $5,000 per year.

- at least another $20k- A few thousand dollars.- extra hour a day for our offi ce workers $150 week, someone to collect figures and file taxes $150 week....

And heaven help us if we lose an employee and must retrain someone. As a small business ourselves, just thinkingabout the extra bookwork, etc. is a nightmare! ats the problem with being a small business. We try to do everythingourselves and can only do so much

- $300 per week

QUESTION: How many local advertisers have closed their doors in last 12 months?

- Hard to put a number on closings but more importantly, the remaining businesses are spending 15-20% less

on advertising- About 15- We know of about 5 local advertisers who are oob- not very many! we have been lucky- 15% and thats conservative

- Over two dozen, with many more to come I fear.- too many to count- Too Many, and another huge batch are faced with the dilemma of the cost of an ad OR paying health-

care OR Wal-mart

- 116

- a f---ing ton- WAY WAY TOO MANY

- 4 that affected us- About one in 15 local businesses

- Our local business scene has drastically changed. e amount of stores that are vacant is staggering. I donthave a number

- of my top 10!

..........................................................

e consensus of first-hand publisher accounts conclude that home town economies are teetering on an historicbrink. Attempts to place an additional 4-6% hurdle between any new product or business and their cash-strappedclients will be met with counterproductive reductions in consumption, and steep new margins that can neither be

passed along nor absorbed. Any new sales tax will ultimately trigger incalculable job loss. For these compellingreasons, we ask that you please reject any proposals to Tax Advertising.

Respectfully,

Jim HaighGovernment Relations Consultant,Mid-Atlantic Community Papers Association427 Ridge Street, Emmaus, PA 18049(o) 610.965.4032 (f ) 610.965.5629 (c) 610.504.2010

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