FAQ

Currently, advertising and newspaper circulation are exempt from the state sales tax. It is always of concern that Iowa politicians may be tempted to eliminate some of the exemptions to the sales tax. They could claim that they passed no “new taxes” since the sales tax is not a new tax. Instead, they could argue they just made the tax “fairer” by subjecting more products and services to the tax.

A sales tax on advertising is a bad idea for Iowa

Broadening the sales tax to include advertising services would be a mistake. It would have a huge negative affect on the Iowa economy.

A sales tax on advertising would slow economic growth – Advertising is the most economically efficient means of marketing a product or service. From drug stores to supermarkets and auto dealers, advertising is the cornerstone of their marketing efforts. Expanding the sales tax to advertising would result in higher advertising costs. When the cost of advertising goes up, there is less advertising, which leads to less consumer demand. Lower consumer demand reduces revenue, creates fewer jobs, slows the economy and reduces its usefulness as a revenue source.

Advertising expenditures have a huge impact on the Iowa economy – Recent studies by Global Insight show that a tax on advertising reduces local employment and personal income by substantial amounts (study summary attached). According to the research, advertising is an economic force that helps generate $57.6 billion in total economic activity in Iowa. Sales of products and services generated by advertising help support 251,209 Iowa jobs.

A sales tax on advertising would hurt Iowa companies competitively -- Advertising dollars that are currently spent in Iowa would be shifted to media agencies outside the state. Iowa advertising firms would be at a competitive disadvantage when trying to secure national or regional advertising.

A sales tax on advertising has been tried unsuccessfully in other states -- Since 1987, when the state of Florida repealed its advertising sales tax, 40 states have considered and rejected such a tax. Florida’s experience is instructive. During the state’s six-month experiment, its department of revenue processed 12 million magazine advertising transactions alone, the administrative cost of which exceeded the tax collections. After an outcry from advertising firms, the media, and the tourism industry when advertising fell by 12 percent, the tax was repealed in a special session. The political fallout was extensive.

Other states have learned that defining what “advertising” to tax is impossible -- State government and businesses would need an army of accountants and lawyers to administer the tax. Some of their questions: does taxable advertising include business cards? Sales calls? Telephone calls? Websites? Logos on clothing? Storefront signs? Sports arenas? Racecars? Ads for tax-exempt merchandise? Convention booths? What about advertising prepared in Iowa but run only in other states? What about advertising messages sent via email or via text messages over mobile phones?

A tax on advertising creates a new layer of hidden taxes --This is multiple-taxation. Advertising is not an end product, such as a bar of soap, which is already subject to the state sales tax. Since a large portion of any tax on a business is generally passed on to the consumer, families would end up paying a “double sales tax” for most products and services.

CNA never goes into a sales presentation with any pre-conceived notion of which newspapers should be included in the final proposal to the advertiser. Rather, the CNA Account Executive learns everything he/she can about that advertiser, its target market, its demographic market, its budget, its goals, etc. and makes a recommendation based on that information. The advertiser always determines the markets. For example, it we are making a presentation to an advertising agency representing an auto dealer association group in a given DMA (designated market area), we will initially propose every newspaper in the DMA or every newspaper market that has a dealer (of the given manufacturer-Ford, Chevy, etc.) in the DMA. The agency will determine the final markets in which it will advertise, not CNA. It will generally make that determination based on its target market and its budget. It is CNA's hope that by moving dollars from broadcast to print, it can begin to make progress toward adding additional markets and securing more advertising for all Iowa newspapers.

CNA is almost always selling to advertising agencies. When sales budget targets are developed, the Sales & Marketing Director begins by determining the two-year sales history for all accounts and identifying those representing 80 percent of all CNA sales during that period. Each of these accounts is then consulted to determine its anticipated budget for the coming year. Some accounts are able to provide a lot of helpful information, others very little. The staff then identifies those accounts planning to substantially increase, reduce or eliminate their newspaper advertising budgets in the upcoming year. The resultant change in dollar volume is then either added or subtracted from the projected sales for the current year. Other factors considered include: newspaper rate increases (estimated based on a survey of newspapers); increased staff experience and the potential for new business.

According to INA Legal Hotline attorney Joe Quinn, it depends on how the insert flyers will be used. There is no sales tax on insert flyers to be inserted in newspapers or shoppers. But sales tax would apply on insert flyers that will be distributed by direct mail or handed out in stores. The only exception would be if a newspaper acts as a wholesaler, printing insert flyers for an ad agency on behalf of a client who plans to distribute them via direct mail or in stores. In that case, the sales tax would be charged to the client by the ad agency, not the newspaper serving as the wholesaler.

According to INA Legal Hotline attorney Joe Quinn, absent a contract or compensation for the creative work done on the ad, ownership is with the paper.

Each newspaper should adopt a policy statement. The statement should be approved by the highest-ranking officer (usually the publisher) of the newspaper. A copy of the statement along with a cover letter explaining the newspaper's commitment to adherence of the Fair Housing Act should be distributed to the newspaper's employees. A sample policy statement follows: FAIR HOUSING LAWS: "The Federal Fair Housing Act prohibits discrimination in the sale, rental, leasing and financing of housing, as well as discriminatory advertising, on the basis of RACE, SEX, COLOR, RELIGION, NATIONAL ORIGIN, MENTAL or PHYSICAL HANDICAP, or FAMILIAL STATUS. (Our local jurisdictions also have specific applicable regulations.)

"These laws cover any potential or actual sale, lease, rental, eviction, price, terms, privileges or any service in relation to the sale of or use of housing. They not only prohibit advertisements which clearly restrict access to housing based on the protected categories, but also prohibit advertisements which indicate a preference for or against a person based on a protected category. In particular circumstances, use of colloquialisms, symbols or directions to real estate for sale or tent may indicate a discriminatory preference.

"It is the intent and goal of this newspaper to have each advertiser who wishes to place a covered advertisement in the newspaper comply with the Fair Housing laws. Any advertisement which is perceived to contain language contrary to these laws will be rejected or changed to remove the offending reference. There may be situations where it is not clear whether particular language is objectionable. Such advertisements should be referred to a supervisor for consideration and determination. Under certain circumstances, advertisers may claim that because of the nature of the housing being advertised, they are not subject to the Fair Housing laws. Such claims are irrelevant for purposes of considering advertisements for publication in this newspaper. Every housing advertisement published in this newspaper is subject to the Fair Housing laws."

Anyone who makes, prints or publishes advertisements (or causes them to be made, printed or published) needs to be concerned about housing discrimination. This definition includes all advertising and media, i.e. broadcast, brochures, billboards, direct mail, flyers, newspapers, poster, shoppers, etc. This provision extends to prohibit the use of discriminatory words, phrases, photographs, illustrations, symbols or forms. The Department of Housing and Urban Development, which investigates complaints, takes the position that newspapers face civil suits if they publish advertisements that encourage discrimination (or even indicate a preference) relative to protected classes.

You might wonder if the Fair Housing Act and regulations hinders free speech as espoused in the First Amendment of the U.S. Constitution. The answer is NO. There is a distinction between free public speech and commercial speech. Advertisements are commercial speech and, thus, are subject to regulation. Newspapers are not in the practice of accepting advertisements for anything illegal, such as prostitution, stolen property or illegal drugs. Because discrimination is against the law, newspapers cannot accept ads that discriminate.

In order for newspapers to comply with all of the Fair Housing Act and regulations, publishers of housing advertisements should do the following: 
- provide a printed copy of their nondiscrimination policy to each employee and officer; 
- post copies of the policy in conspicuous locations in their businesses; 
- make copies available in their businesses; 
- include a Fair Housing notice at the beginning of the real estate advertising section; 
- avoid referring to the kinds of people who might live in or buy a particular dwelling in advertisements.

The Fair Housing Act of 1968 begins: "It is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States." All subsequent provisions of the Act and its administrative rules are based on the premise that obtaining fair housing must be a choice free of practices or influences that would limit such choice because of race, color, religion, sex, national origin, handicap or familial status. "Blockbusting" and "steering" are two discriminatory practices that are specifically mentioned in the Act. Blockbusting includes engaging in conduct which conveys the impression that a neighborhood is about to undergo certain changes and, thus, panic owners into selling their properties. Steering involves guiding an individual seeking housing toward or away from particular property for discriminatory reasons. Suits can be brought against the persons who wrote and placed the ad, as well as against the persons who accepted the ad, the owner and management company of the property advertised, plus the newspaper management, publisher and owner. The Fair Housing Act covers all "dwelling units" or single units of residence for a family of one or more persons. The definition includes condominiums, cooperative and mobile homes. A dwelling unit can be all or part of any building or structure that is occupied or intended as a residence by a person or family. The only legal discriminatory housing transaction is one between private parties when there is no use of advertising, a real estate broker, an appraiser, or commercial financing. Use of any of these causes the Fair Housing Act provisions to be applicable. It is permissible to discriminate by sex for a roommate when living areas are shared.

• • • • Complaints may be filed by the following:

1. Individuals who believe they have been discriminated against;
2. HUD and other local, state and federal agencies;
3. Fair Housing organizations.

Anyone who can show that they have been "injured" by a discriminatory housing practice can file civil charges. The Act has expanded the number of protected classes as well as strengthened provisions for relief for claimants and penalties against defendants. Injured parties have up to a year to file a claim with the Department of Housing and Urban Development (HUD). An aggrieved person is anyone who claims to have been injured by a discriminatory housing practice or who believes that such an injury is likely to occur. Injured parties include individuals for whom housing was made unavailable because of discrimination; however, fair housing organizations can also sue, charging interference with their efforts to promote equal housing opportunity. Suits are sometimes brought by “testers,” persons hired to check for discrimination by pretending to be bona fide renters or buyers. Fines, damages and attorney fees may be awarded as the result of a successful conclusion of a complaint. Fines may begin at $10,000 and increase to as much as $50,000. Fines may be assessed against corporations, individuals and owners.

Describe the PROPERTY, not the seller, or the neighbors, or the landlord, or “appropriate buyers and tenants.” Seemingly harmless words can get newspapers into trouble.

It is important that words used in discriminatory contexts are avoided. Examples are: restricted, exclusive, private, integrated, traditional, board approval required. Some of these words, especially together or in certain local contexts, are used as “code” to create an atmosphere of discrimination. Beware of code words that carry hidden or subtle discriminatory meanings. When a word causes doubt, do without.

Furthermore, avoid symbols or logos that imply or suggest a preference based on one of the protected classes. Examples: crosses, the Star of David. By expressing a preference for one class of person, other classes are discriminated against. Such use might suggest to “outsiders” that they are not welcome in such a place. The use of human models in advertising is scrutinized in the same way that words are, because it is possible to indicate a preference for certain types of individuals by using certain kinds of models. The exclusive use of one kind of model can be interpreted as indicating a “non-preference” for persons in a protected class who do not look like the model. It does not matter whether the models are real individuals appearing in photographs or drawings in artists’ illustrations. When models are used in any series of housing advertisements, provide fair representation, over time, of the different kinds of people found in your market areas.

The common sense approach to Fair Housing advertising is to use language or artwork or photography that is inclusive, not exclusive. There are exemptions under the Fair Housing Act: 
- Reasonable restrictions on the maximum number of occupants in a dwelling unit may be made. 
- Under certain circumstances, religious organizations and private clubs may limit the sale, rental or occupancy of housing owned or operated for other than commercial purposes. 
- The Act does not apply to an owner of dwelling containing living quarters for no more than four families (if the owner lives in one of the units), not to an owner of single-family dwellings (if the owner has no more than three). Yet it does apply if these same owners use a real estate broker and/or if they use discriminatory advertising.

For further reference of “Not acceptable,” “Caution,” or “Acceptable” words most frequently used in housing advertising see the list of words in the Fair Housing Guide listed below. Not acceptable: able-bodied, adult living, adult community, adults only, African, agile, alcoholics (no), Asian, bachelor, bachelor pad, blacks (no), blind (no), board approval required, Catholic, Caucasian, Chicano, Chinese, children (no), church(es) near, colored, couple, couples only, crippled (no), deaf (no), drinkers (no), employed (must be) , empty nesters, any ethnic references, exclusive, executive, handicapped (not for), healthy only, Hispanic, impaired (no), Indian, Irish, integrated, Jewish, landlord (description of), Latino, married, mature couple, mature individual, mature person(s), membership approval req., Mexican-American, must comply w/park rules, no play area, # of children, Oriental, Puerto Rican, retarted (no), singles only, Soc. Sec. Ins (no), tenant (description of), white only, mentally handicapped (no), Mormon Temple, nationality, non-drinkers, older person(s), one child, physically fit, quiet tenants, seasonal worker (no), single person, stable, unemployed (no), mentally ill (no), Mosque, newlyweds, non-smokers, one person, Polish, responsible, shrine, smokers (no), synagogue / near temple, white. Caution: active, close to country clubs / near desirable neighborhood, domestic’s quarters, female(s) only, female roommate, fisherman’s retreat, gays (no), gender references, gentleman’s farm, grandma’s house, golden agers only, handyman’s dream, lesbians (no), male(s) only, male roommate, man (men) only, mature, mother-in-law apartment, nanny’s room, near, no student(s), # of persons, prestigious, private, quality neighborhood, restricted, retired, retirees, Section 8 (no), secure, senior(s), senior citizen(s), senior housing, single woman/man, sophisticated, straight only, two people, walking distance of / within, woman (women) only. Acceptable: bus/MAX (near), credit check required, den, drinking (no), drugs (no), drug users (no), Equal Housing Opportunity, family (great for), family room, fixer-upper, near golf course, hobby farm, luxury townhouse, neighborhood name, nice, # of bedrooms, # of sleeping areas, nursery, nursing home, play area, privacy, private driveway, private entrance, private property, private setting, public transport (near), quality construction, quiet, school district, school name, secluded, security provided, senior discount, (no) smoking, # of square feet, townhouse, traditional style, tranquil setting, verifiable income, with view, view of.

According to INA Legal Hotline attorney Joe Quinn of the Nyemaster Law Firm, it is not illegal to let employees know they must be tobacco free as a condition of employment. Hence, the ad copy is legal.

Yes, the unauthorized use of the words "Super Bowl" or the Super Bowl logo could lead to prosecution. Both the words and the logo are trademarks. While they can be used in editorial copy, you must pay licensing fees to use them in conjunction with any advertising promotion. The NFL is very aggressive in tracking down violations, and employs "spotters" to look for unauthorized uses of the words or logo. Even a seemingly innocuous reference to a Super Bowl sale is in violation if proper fees are not paid. A merchant selling products that have already been licensed by the NFL can promote the sale of these items in advertising, provided the appropriate wording is used. For instance, the Super Bowl beer sponsor can be described as the "official beer sponsor" but not as the "official beer."

The Iowa Code is not perfectly clear on this matter. It states, "any person, firm, company, etc. who offers for sale, exposes for sale, sells at retail or uses or explodes fireworks...commits a misdemeanor." We would advise not running the ads. If you decide to run them, at the very least you should insist on including the language “void where prohibited.” But to be safe, just avoid the ads altogether.

1. If the sponsor is an individual (or individuals), the attribution must provide the full name and complete mailing address of each person who is responsible for or is paying for the ad. The name(s) shall be preceded by the Phrase "Paid for by.”
   
2. If the sponsor is an organization, the full name and complete mailing address of the organization responsible for the ad must be shown, again preceded by the phrase "Paid for by." In addition, the name of at least one officer of the organization must be shown.
3. If the sponsor is a registered political committee (one which has filed a Statement of Organization with either a County Auditor or the Iowa Ethics and Campaign Disclosure Board), only the name of the committee must be shown, again preceded by the words "Paid for by." In the case of a newspaper ad bearing many names or signatures of supporters where including addresses would be difficult and expensive, the addresses may be placed on file with the Board or County Auditor and this fact noted in the ad. If a sponsor is donating labor or materials rather than paying for the advertising, the disclaimer statement should begin "Labor (or materials) donated by." In instances of joint sponsorship, both a "donated by" and a "Paid for by" may be necessary.

Yes. However, these rules exist:

A lawyer shall not communicate with the public using statements that are false, deceptive, unfair or unverifiable. Advertising permitted under these rules shall not rely on emotional appeal or contain any statement or claim relating to the quality of the lawyer’s legal services. In all communications the lawyer may use restrained subjective characterizations of rates or fees such as “reasonable,” “moderate,” and “very reasonable,” but shall avoid all unrestrained subjective characterizations of rates or fees, such as, but not limited to, “cut-rate,” “lowest,” “giveaway,” “below-cost,” “discount,” and “special.”

Lawyer advertising may be communicated to the public in newspapers, periodicals, trade journals, “shoppers,” and other similar advertising media. Listings in the classified section shall be under the general heading “Lawyers” or “Attorneys,” except that a lawyer who (qualifies by rule to be) listed in classifications or headings identifying those fields or areas of practice. Information permitted by these rules, articulated only by a single nondramatic voice, not that of the lawyer, and with no other background sound, may be communicated by radio or television, or other electronic or telephonic media. In the case of television, no visual display shall be allowed except that allowed in print as articulated by the announcer. The INA Legal Hotline advises members to let the attorney determine the content of the ads. That way, if there’s ever a problem, it will be the attorney’s.

According to INA Legal Hotline Attorney Joe Quinn, in this particular case, the appearance of an employee is a valid requirement for employment. Therefore, it would not be illegal to use the word “attractive” in the ad.

The words “Final Four” and “March Madness” are among the National Collegiate Athletic Association’s list of registered trademarks. The unauthorized use of these and other words registered by the NCAA could lead to legal action.

In conjunction with its championships, the NCAA has developed licensing and marketing programs that make use of its trademarks and championships marks. Such programs are carefully controlled and aggressively protected to be consistent with the purposes and objectives of the NCAA. Any direct or indirect usage of the NCAA’s championships, tickets or marks/logos (including references to the name of the NCAA championship) requires prior written consent of the NCAA and its corporate marketing staff.

Federal regulations support the NCAA’s efforts to prohibit the unauthorized use of the NCAA’s name and trademarks, or any use of NCAA championship tickets in sweepstakes, promotions or contests or any other unfair attempt to associate with or exploit the goodwill of the NCAA championship event.

A merchant selling products that have already been licensed by the NCAA to official corporate partners or merchandise licensees can promote the sale of these items in advertising, provided the appropriate wording is used, and the advertising is submitted by the NCAA corporate partner to the NCAA corporate marketing staff for approval.

The U.S. Code says the U.S. flag should never be used for any advertising purposes in any manner whatsoever.”

A New York Court of Appeals case said that this federal law is "not intended to prescribe behavior, but it is an extension of prevalent customs, and thus the provisions are not to be accorded the full weight of statutory prohibition.”

So, you may run into trouble if you use a flag to sell merchandise or services. But if you are showing the flag as an illustration to sell a flag kit or flag poles, you’re probably all right.

The NNA’s handbook "Federal Laws Affecting Newspapers” has this to say on the subject: "While the language of a federal statute would indicate that the flag may not be used in any ads whatsoever, at least one court has held that the provisions are not to be accorded the full weight of a statutory enforce this prohibition.”

INA Legal Hotline attorney Joe Quinn advises that this phrase be removed from the ad. The general rule of thumb for housing and employment ads, according to Joe, is to advertise the property or the job, not the person it is "perfect” for.

According to the INA’s Legal Hotline attorneys, at one time, the FDA had written regulations on this topic. However, a subsequent U.S. Supreme Court decision ruled that the FDA did not have the authority to impose such rules, so they became moot.

After a large group of states sued a group of tobacco companies about promotion aimed at young people, all sides agreed to a master settlement agreement. That agreement limits what a cigarette manufacturer may do in advertising but does not affect a merchant selling cigarettes since the merchant was not a party in the lawsuit.

So, there would be nothing prohibiting a merchant from running such an ad. The attorney recommends that the Surgeon’s General warning be included in the ad. While there is no guidance in the master settlement agreement regarding the minimum type size of the warning, the words "SURGEON GENERAL’S WARNING” should be in all caps.

According to the INA Legal Hotline Attorneys, there is no law against individuals selling firearms unless they are licensed dealers.

According to the INA Legal Hotline Attorney Joe Quinn, the Ford dealer’s ads are likely in violation of the copyright and/or trademark law. They most likely do not have a license or permission to use these trademarks. While they could list in regular script the various makes they service, they cannot use the trademarks or logos.

According to INA Legal Hotline attorney Joe Quinn, using Ladies Night or free drinks or admission to ladies is in violation of the Iowa Civil Rights Statute. The newspaper running such an ad would have no legal responsibility but may wish to advise the advertiser to check with their attorney before placing such an ad. In any case, newspapers are cautioned to not give advertisers any legal advice on this or any other matter.

Iowa’s Alcohol Beverage Control Act (Iowa Code Chapter 123) only empowers the Alcohol Beverages Division of the Department of Commerce to set wholesale prices and not retail prices. Therefore, it does not prohibit a bar from advertising and offering free drinks. The bar owner, however, should contact the Department of Revenue and Finance as it is likely the bar will have to pay a sales tax on the drinks that are given away. Also, if a cover charge is required the drinks are technically not free and that creates a false advertising issue. The Alcohol Beverages division spokesman responding to this question encouraged a bar owner to contact his or her attorney for guidance before initiating a "free drinks” promotion. Questions regarding Iowa’s alcoholic beverage laws can be directed to the Alcohol Beverages Division at 515-281-7432.