What is a Confiscatory Business License Tax? How Does it Affect Your Billboard Lease?

Similar to any business endeavor, governments impose taxes on billboard operators. While the tax is normal, some taxes can be confiscatory and designed to regulate business instead of raising revenue.

There are over 400,000 billboards spread throughout the country. While each billboard uniquely markets a particular product or service, all billboards are subject to federal, state, and local tax laws, as deemed by their locations.

Taxes on Billboard Advertising

There are two main types of taxes for billboard advertising. Our Billboard lawyers explain the difference:

Property Tax: Billboards are found on both public and private property. Not only do they appear as freestanding advertising structures, but they are also found affixed to the sides of buildings and other clearly visible structures. The owner of the land that the billboard is on is responsible for paying the applicable property taxes, as assessed by the city, county and state. The property owner is also responsible for reporting the net income from ground rent on his annual federal taxes.

Business License Tax: Many local governments impose taxes on businesses that operate in their jurisdiction. These taxes are usually based on gross revenue, without deduction for expenses. Typically, these are a relatively small percentage of the gross revenue, maybe half of one percent.

Confiscatory Business License Tax

Sometimes a local government will impose taxes designated as “business license” taxes, but based on criteria other than revenue. For example, taxes based on the size of a billboard might produce a tax that exceeds the revenue paid by advertisers. These are confiscatory taxes, designed to eliminate the billboard rather than to raise revenue.

About 20 years ago, a local city imposed just such a tax upon our billboard operators. We were able to persuade the city and its attorneys that it is unconstitutional to tax a first-amendment business, such as billboards, by a different standard than other businesses. The city reduced its business license tax to a reasonable number. (As a side note, several years later, the same city engaged us to write a new billboard ordinance.)

Current Status

This is an issue that continues to arise across the country. In Maryland, a court-approved a business license tax on billboards. In Ohio, the court rejected one. The Supreme Court may address the issue, or it may leave the decision to each individual state.

Contact Our Billboard Lawyers

Our legal team has extensive experience since 1985 handling transactions and litigation concerning billboards and other forms of outdoor and out-of-home advertising. Our billboard lawyers have dealt with commercial development, sign plans, permits and entitlements, billboard leases, billboard easements, lease renewals, eminent domain, the California Outdoor Advertising Act, state and local regulations, and disputes over the ownership, control, and removal of sign structures.

We have the knowledge, understanding, and experience to help you earn a good return on your investment. Whether you are a landowner or a billboard operator, we understand the tax regulations. We know how to listen to your concerns and how to address them. We have been working in the industry for decades and we can guide you through your options. Hit Reply to schedule a Get Acquainted Call. Let’s find out if we are a good fit for one another.