Update: On September 16, 2021, the Supreme Court of Ohio handed down a merit decision in this case.  Read the analysis here.

“Can you tell me how the content is controlled by this tax?”

Chief Justice O’Connor, to counsel for Lamar

Who is the city targeting? Just stable billboards?

Justice Fischer, to counsel for the City

On June 16, 2021, the Supreme Court of Ohio heard oral argument in Lamar Advantage GP Company, LLC, d.b.a. Lamar Advertising of Cincinnati, OH and Norton Outdoor Advertising, Inc. v. City of Cincinnati, Ohio and Nicole Lee, Treasurer of the City of Cincinnati, Ohio and Art Dahlberg, Director of the Department of Buildings and Inspects for the City of Cincinnati, Ohio and Reginald Zeno, Finance Director for the City of Cincinnati, Ohio, 2020-0931. At issue in this case is the constitutionality of an excise tax imposed exclusively on billboards. Justice Brunner recused herself from the case, and Judge Anita Laster Mays of the Eighth District sat for her.

Case Background

In June 2018, Cincinnati City Council passed an ordinance which created an excise tax on billboards. This tax (“Tax”) required the owner or operator of a billboard to pay the greater of (1) seven percent of the gross receipts generated by any sign, or (2) an annual minimum tax calculated based upon the type, location, and square footage of the sign. Additionally, the Tax contained a provision (“Gag Provision”) that prohibited a billboard operator from informing an advertiser that the advertiser would absorb the cost of the tax.

After the Tax was passed, Lamar Advantage GP Company (“Lamar”) and Norton Outdoor Advertising, Inc. (“Norton”) filed suit, challenging the constitutionality of the Tax and the Gag Provision. The trial court found the Tax and the Gag Provision unconstitutional as violating the First Amendment and enjoined further collection of the Tax. The City of Cincinnati (“City”) appealed.

The Appeal

In a unanimous decision, the First District reversed the trial court’s finding that the Tax was unconstitutional, but affirmed the trial court’s decision that the Gag Provision was unconstitutional.

Acknowledging that billboards are a means of speech entitled to First Amendment protections, the appellate court reasoned that the Tax was content neutral, did not threaten to suppress the expression of certain viewpoints, and did not single out a particular group of billboard operators to bear the burden of the tax. The fact that there are only a small group of billboard operators has been determined by market forces.  Further, the First District noted that differential taxation of the media is permitted if justified by special characteristics. Billboard operators have special characteristics in that they are not traditional press mediums and seldom publish their own content. Because the Tax did not suppress expression of particular ideas or viewpoints, the First District held that the Tax was constitutional.

Regarding the Gag Provision, the First District held that the provision restricted commercial speech. Applying intermediate scrutiny, the appellate court found that the provision was broader than necessary to achieve the City’s goal, and therefore, the court held the Gag Provision was unconstitutional.

Read the oral argument preview of the case here.

Key Statutes and Precedent

CMC 313-3 (ordinance creating an excise tax on billboards.)

CMC 313-7 (limiting communications between billboard operators and their customers, specifically prohibiting the billboard operators from indicating that their customers will absorb the cost of the tax.) (repealed)

*Grosjean v. Am. Press Co., Inc., 297 U.S. 233 (1936) (holding that a tax on the sale of advertising on newspapers that applied to only 13 of the 124 publishers in the state violated the First Amendment.)

*Lovell v. City of Griffin, 303 U.S. 444 (1938) (invalidating ordinance that required municipal government permission to distribute literature and stating the historic connotation of the press “comprehends every sort of publication which affords a vehicle of information and opinion.”)   

*Metromedia, Inc. v. City of San Diego, 453 U.S. 490 (1981) (holding that billboards are a means to communicate a wide array of messages and are therefore entitled to First Amendment protections.)

*Norton Outdoor Advertising, Inc. v. Village of Arlington Hts., 69 Ohio St.2d 539 (1982) (invalidating ordinance restricting billboard advertising to the “product or business conducted on the premises.” The complete ban on non-commercial speech and the limitation on commercial speech were both found unconstitutional.) 

*Minneapolis Star and Tribune Co. v. Minnesota Commr. of Revenue, 400 U.S. 575 (1983) (holding that a use tax on paper and ink products consumed in publication that applied to only 14 of 388 newspapers violated the First Amendment because the tax singled out a small group of newspapers within the press for differential treatment and was not justified by some “special characteristic” of the press.)

Arkansas Writers’ Project, Inc. v. Ragland, 481 U.S. 221 (1987) (holding that a tax’s differential treatment among magazines that depended upon the magazine’s content violated the First Amendment because the tax could not overcome strict scrutiny review.)

*Leathers v. Medlock, 499 U.S. 439 (1991) (holding that a generally applicable sales tax, which exempted certain media segments, did not violate the First Amendment because the tax applied generally and did not single out the press, or a group within the press, for special treatment.)

BellSouth Telecommunications, Inc. v. Farris, 542 F.3d 499 (6th Cir. 2008) (holding a Kentucky gag provision could not survive intermediate scrutiny and reasoning the provision allowed legislators to duck responsibility for a new tax by keeping voters in the dark about its economic impact.)

Clear Channel Outdoor, Inc. v. Dir., Dept. of Fin. of Baltimore City, 472 Md. 444 ( 2021) (holding an excise tax applicable only to billboard operators was constitutional because the tax did not discriminate based on content, did not single out the press, and did not target a small group of speakers.) 

*Cited by counsel at argument

*Lamar and Norton’s Propositions of Law Accepted for Review

*Lamar and Norton filed separate briefs but their propositions of law accepted for review are the same.

Proposition of Law No. 1

Constitutionally mandated heightened First Amendment scrutiny applies to a discriminatory excise tax only on billboards that does not apply to businesses generally but instead singles out only the press or targets a small group of speakers.

Proposition of Law No. 2

Section 313-7(b), the Tax’s Gag Provision, prohibits political speech and is an unconstitutional infringement of noncommercial speech.

At Oral Argument

Arguing Counsel

R. Guy Taft, Strauss Troy Co., L.P.A., Cincinnati, for Appellant Lamar Advantage GP Company, LLC

Michael A. Galasso, Robbins, Kelley, Patterson & Tucker LPA, Cincinnati, for Appellant Norton Outdoor Advertising, Inc.

Marion E. Haynes III, Assistant City Solicitor, Cincinnati, for Appellee City of Cincinnati, et al.

Lamar and Norton’s Argument

Lamar and Norton shared argument time. Their arguments are consolidated.

The Court of Appeals lost its way when it held that the First Amendment was not even implicated in this case and when it overturned the trial judge’s decision that this targeted tax violated the First Amendment. The U.S. Supreme Court set forth the underpinnings for the governing law in this area in Minneapolis Star. The First Amendment was drafted specifically to prohibit a government from having the power to impose a tax targeted only on the press.  The Minneapolis Star Court specifically ruled –and this is what the court of appeals missed-that the mere power in the government to impose a targeted, as opposed to a general, tax only on the press inherently censors speech. The Court went further saying if a government passes a targeted tax only on the press there is a presumption that the government intended to control the content. The power to issue a crippling targeted tax only against the media will intimidate or place the speakers in fear that if they say something to offend or criticize the government, they will then be subjected to crippling taxes. The ability to target only media, here only the billboards, inherently controls speech and censors content. Minneapolis Star was a tax only on the ink and paper used to produce newspapers.  It was totally content neutral and yet the Court held that the mere power to pass a targeted tax only on the press inherently censored speech. A tax that targets only the media or only a small group within the media violates the First Amendment unless strict scrutiny can be met.

It is of no consequence that a particular medium is disseminating the speech of someone else.  There is still full First Amendment protection as the publisher of someone else’s speech. And billboards have always been a traditional venerable medium for the presentation of political, social, and other non-commercial ideas with full First Amendment protections. Here, the City claims it is just taxing the wooden structures of the billboards. But those structures are the means and instruments exclusively used for the production of speech.

This tax is not just on economic transactions and other economic activity.  The city calculated the tax based upon the minimum square footage.  While it is true that billboards are a business, they are a speech business.  The amicus brief points this out very well. The Cincinnati Enquirer newspaper doesn’t have a lot of its own content either. It contains much syndicated content. Under the First District holding there is no reason that the billboard tax could not be selectively applied to newspapers, because they are also engaged in the speech business. This court has held in Norton Outdoor Advertising that billboards are pure speech, that they are not just commercial speech and that they are afforded full First Amendment protections. Billboards can’t be relegated to a lower class of First Amendment protection. There’s a similar holding from Metromedia from the U.S. Supreme Court that recognizes that while billboards may be subject to noncommunicative regulation, they are nonetheless afforded First Amendment protection. The press includes every sort of publication which affords a vehicle of information and opinions.

In order to uphold a selective tax only on billboards, this court would have to reverse itself on Norton Outdoor Advertising, would have to distinguish Metromedia, and would have to ignore Grosjean and Minneapolis Star.

Finally, despite the repeal of the gag provision, that issue is not moot, and a claim for damages remains to be decided below.

City’s Argument

There are sound reasons why the court should affirm the constitutionality of the city’s tax on business privileges authorizing rental billboards. First, billboard operators are not engaged in speech and do not function as the press when they rent out their billboards. Second, the city’s tax regulates billboard operators’ economic activity, not their speech.  Finally, the city’s tax is not like those taxes that were invalidated in the United States Supreme Court’s press tax cases.

When billboard operators wield their business privileges they are not functioning as speakers or members of the press. Their business purpose is not to engage in protected expressive activity. They are not generating or selling content, serving as a government watchdog or otherwise expressing themselves. In their own words, from trial, they sell product from their inventory to their customers. Billboard operators are simply selling space.  There is no message or expression associated with it. That is different from cable TV operators, for example. They tend to aggregate channels and make different offerings of content to customers.

The U.S. Supreme Court has held that each medium of speech must be regulated according to its own unique aspects. In the case of billboards there’s long been a dichotomy that was first recognized in the Metromedia case between the noncommunicative and the communicative aspects of billboards. There may be regulations that apply to the noncommunicative aspects that could have some impact on the communicative side but certainly not direct and certainly not here. These are economic regulations. Furthermore, the city has long possessed the police power to regulate billboards.

As to the issue of mobile billboards, the city’s current regulations do not tax these. Mobile billboards are a unique issue within the law of billboards that is not before the court and has not been developed. The billboards that are taxed here are billboards that are planted in the ground, but primarily those which hold a business license from the city under Chapter 895 of the city’s Municipal Code. It is the economic transaction that gives rise to tax liability. It is because the signs are placed into commerce that they trigger tax liability. The focus is on the sale of space. These billboard operators by their own word operate akin to a rental company.  These are essentially rental properties.

There is an exemption for signs under 36 square feet, but it doesn’t apply to any particular billboard operator. The amount of the tax is established by the size of the billboard, not by the message conveyed on the billboard, and it applies across the board. It’s up to the billboard operator to determine the extent to which they use their privilege. It is the underlying economic transaction that gives rise to the tax liability. It has nothing to do with the identity of the speaker or the messages they are seeking to convey. 

The city’s cap and replace policy doesn’t necessarily trigger tax liability. It simply creates a limited number of entities which hold these business privileges in the city, but again, the extent to which they put those business privileges to work is largely up to the billboard operator and the privilege holder. The city’s tax is broad based and applies to all operators equally and to each sign depending on its size and placement, and nothing else. This is in contradistinction to the taxes that were at issue in the press tax cases. In those cases, there were taxes that were designed to narrowly target a small group of taxpayers to the exclusion of all other taxpayers.

The tax in Minneapolis Star was a suspiciously designed tax that didn’t have parallels in the state, whereas excise taxes are common throughout Ohio and within the city of Cincinnati. Under Ohio law excise taxes cannot be raised to crippling levels. The Ohio Constitution forbids it. The Minneapolis Star tax was designed in a way that the U.S. Supreme Court said it resembled a penalty on the largest actors. That is not the case here. This is an evenly applied tax that applies to effectively to all within the industry.

What Was On Their Minds

What Billboard Companies Do

Don’t billboard companies sell space that expresses a message, asked Justice DeWine? Sometimes the messages are their own messages, sometimes they are other people’s. They are certainly expressing a message, and that’s what the First Amendment protects. Cities have wide discretion to regulate things like the size and location of billboards, but here when you are talking about a rule that forbids the government from singling out a particular part of the press for differential treatment, you are talking about the communicative aspects of billboards.

The U.S. Supreme Court’s Press Tax Cases

In Minneapolis Star, one issue was that the tax targeted the press, and the other issue was that the tax targeted a small number of the newspaper industry, noted Justice DeWine. Is the rule that anytime it is either one of those things or does it have to be a small number of market participants?  What’s the determinative factor? Is the standard strict scrutiny? Why isn’t there even a much stronger ability in a city like this for council to use the tax power to control or influence the communicative aspects of billboards operators than there were in the press tax cases? It seems even greater here, he added.

Targeted Tax/Control of Speech

Why does a targeted tax censor content, asked Justice Stewart?  How does it censor content?

How is the content controlled by this tax, asked Chief Justice O’Connor? Isn’t the tax in place and it has nothing to do with the content of the billboards?

Is the issue here that there are only a few billboard companies or that it targets one part of the press, asked Justice DeWine? What about cable TV stations?  Could the state put a tax just on cable TV stations? Don’t the billboard operators sell advertising? If someone rents a billboard for a campaign criticizing city council, isn’t it foreseeable that city council might decide that the billboard companies should pay a higher tax? Isn’t that exactly what the Minneapolis Star case was about? Those kinds of dangers? How is the tax not targeted when it singles out just two speakers who dominate the Cincinnati market?

In this case the speech is from a third party so how is this affecting the billboards, unlike the press cases where the speech actually comes from the press asked Judge Laster Mays?

The Reach of the City’s Excise Tax

If I have one of those trucks that carry big billboards that light up and I’m at a summer festival is that taxed by the excise tax, asked Justice Fischer? Some billboards are taxed, and some aren’t? By whether they are mobile or not? Who is the city targeting? Just stable billboards? They’re being singled out? If a citizen of Cincinnati owns a billboard, and puts it up, there is no tax, right? But if the same citizen owns Citizen LLC and has to pay its own LLC for business purposes to put up the same sign it’s taxed? Assume that a PAC buys some billboards and I want to advertise on them. Does that PAC have to pay this excise tax?

If a business had their own billboard on the side of their building or in their parking lot, are they covered here, asked Chief Justice O’Connor? What happens if they are advertising for somebody else? Is it the sale of the space that is key?

There is also the size restriction, noted Justice Kennedy. If your billboard is smaller than x you are not taxed but if your billboard is bigger than y, you are. Is that right?

Because of the cap and replace program are the billboard operators boxed in and unable to avoid the tax, asked Judge Laster Mays?

Is Cincinnati the only municipality in Ohio that levies this tax, asked Chief Justice O’Connor?

The Repealed Gag Order

How is there any standing to appeal the gag order, asked Justice DeWine, adding that the billboard companies were not aggrieved by the judgment which was in their favor, and the law had already been repealed. Is there any precedent that allows party to appeal a judgment that is in its favor?  

How it Looks from the Bleachers

To Professor Emerita Bettman

Because I was a paid consultant to the City’s lawyers in this case, I’m not going to predict the outcome. I will leave that to my student contributor Max Londberg.

To Student Contributor Max Londberg

Justice Fischer seemed to signal his discomfort with the excise tax singling out only certain types of billboards. Justice Kennedy seemed similarly skeptical with a pointed question to that effect. Justice DeWine also indicated his preference for the billboard operators’ argument. He first asked a softball question about the Minneapolis Star rule, the answer to which favored the billboards as the case provides independent grounds for deeming a tax unconstitutional, including if it targets a small group within the media. Justice DeWine later returned to this point with Marion Haynes, the city’s lawyer, asking how the excise tax doesn’t affect just such a small group—the two billboard operators that dominate the market in Cincinnati. He also raised concerns that City Council could wield the tax to influence messaging on billboards, either by raising or lowering the tax liability. Chief Justice O’Connor’s opinion was more difficult to gauge. She stated the tax has nothing to do with billboard content, and Justice Stewart asked for further explanation as to how the tax censors content. Judge Laster Mays asked a question that elicited a strong response from Lamar’s counsel: that full First Amendment protection extends to publishers who disseminate the speech of others.

I predict the Court holds the tax unconstitutional. Guy Taft, representing Lamar, analogized the invalidated tax on ink and paper in Minneapolis Star to the wooden billboard structures that bear messages, calling both instruments for producing speech. Taft closed by stating that freedom of the press is not confined to newspapers, and even though the tax at issue here involves billboards, it could be selectively applied to newspapers and serve as a starting point for the erosion of free speech protections. I predict the Gag Provision will be deemed a moot issue as the appellate court has already held it unconstitutional, despite the billboard operators’ argument that a damages claim still exists.