Assembly Votes to Cut Sales Tax for Printers to Attract New Payrolls

SACRAMENTO —  The state Assembly on Tuesday put out the welcome mat for Harry V. Quadracci and his proposed $150-million printing plant, which legislators hope to attract to Pacoima or another California location.

By a 67-1 margin, the Assembly approved without debate and sent to the Senate a measure by Sen. Alan Robbins (D-Van Nuys) that would exempt Quadracci’s Quad/Graphics and other printers from paying the 6% sales and use tax on catalogues and advertising brochures sent through the mail.

Under current law, department stores and other businesses that have brochures printed and mailed in California are subject to the tax. But if they have the ads printed elsewhere and then mailed to California, the transaction is not subject to the state tax.

The legislation by Robbins, whose district includes Pacoima, would exempt from the tax catalogues, letters, circulars and brochures containing printed sales messages.

In presenting the bill on the Assembly floor, Assemblyman Tom McClintock (R-Thousand Oaks) said the tax “has been easily circumvented by locating new catalogue printing plants just across the border in Arizona and Nevada.”

Vetoed by Deukmejian

McClintock proposed similar legislation last year but it was vetoed by Gov. George Deukmejian. Supporters, including the state Commerce Department, say they are optimistic that the governor will sign it this year.

But Donna Lipper, a spokeswoman for the governor, said Deukmejian’s staff is reviewing Robbins’ proposal and “it’s premature to say that the governor will sign the bill.”

The Department of Commerce, the printing industry and some printing unions are lobbying for the governor to sign the measure.

“The sales tax was never intended to take jobs away from Californians and send those jobs to other states,” said Richard M. Allen, legislative coordinator for the Department of Commerce.

The California Printing Industry Assn., a trade group, said two large printing firms--R. R. Donnelly & Sons and Meredith Burda--picked other states over California in the past two years, in part because of the tax.

The association maintains that several large printing facilities have closed in the face of stiff competition from printers in neighboring states.

Flattered by Approach

Quadracci, president and founder of Wisconsin-based Quad/Graphics, said in an interview that he is flattered by the state’s attempt to court his company. But Quadracci said he is unwilling to disclose whether the tax waiver would tip the balance in favor of California. He plans to make a final decision after Labor Day.

Quadracci acknowledged that Pacoima would be a “premium” location for his plant, which would eventually employ 1,200 workers, because it is close to major freeways.

Should the bill become law, Quadracci said, “it certainly would make the state more competitive to the neighboring states but it wouldn’t in and of itself guarantee that we would come into the state.”

The plant would be the fifth for the 14-year-old company, which publishes regional editions of Time and Newsweek magazines in addition to advertising circulars.

David Miller, governmental affairs director for the printers association, said Quad/Graphics would like to locate in California, with Pacoima being the leading site contender, followed by Ontario and a downtown location that was the home of a printing plant that went out of business earlier this year.

Miller said the Pacoima location would be inside the 6.7-square-mile Pacoima enterprise zone, which the state established effective Sept. 25. Enterprise zones are economically depressed areas where businesses are granted tax breaks and other incentives to hire the unemployed.

“The state is going to benefit from this,” Miller said of the legislation. “It’s a way to stop companies from locating outside of California.”

But Dave Brainin, lobbyist for the California Tax Reform Assn., criticized the proposal as “a special-interest bill designed to provide a sales-tax exemption just for one industry.”

“It seems that when you provide something for one industry, then every other industry comes in and asks for the same thing and you proliferate the exemptions,” Brainin said.

This is the second straight year the printing industry has attempted to win a tax break from the Legislature.

In rejecting the measure last year, Deukmejian said he shared McClintock’s concern that the state printing industry “is at a competitive disadvantage because many California retailers are currently avoiding the sales tax by contracting out of state for their printed advertising materials.”

“However, I cannot justify resolving the disadvantage by offering an exemption for materials printed in California.”

Suggests Taxing All

The governor suggested taxing all catalogues regardless of where they are printed.

Commerce’s Allen said the suggestion proved unwieldy and his department persuaded the governor to consider signing another tax-break bill by McClintock. That measure won Assembly passage but stalled in the Senate Appropriations Committee earlier this year.

Robbins then reintroduced the tax-break provisions as an amendment to an unrelated measure already in the Assembly. Supporters anticipate final passage on the Senate floor before the 1986 legislative session ends this weekend.