Sales Tax Slice: Do Sales Tax Exemptions for the American Flag Raise First Amendment Issues?


 

U.S. Flag

The multifaceted role of flags and their worth as both physical objects and value statements has played out in various ways in the public arena. For example, you are probably aware of the current dispute between President Trump and NFL players regarding proper treatment of the flag and the right to protest inequality. But beyond political statements, does a flag’s dual nature pose complexities for sales and use tax law? Over a quarter of states have endeavored to enshrine reverence for the flag in their sales and use tax law via exemptions, but is this permissible under the U.S. Constitution? 

I’ve counted 14 states that exempt sales of the flag from sales and use tax. These are California, Connecticut, Florida, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia West Virginia, and Wisconsin. Some of these states also exempt sales of state and POW/MIA flags. Some limit their exemptions to sales of the flag by veterans’ organizations or state agencies.   

As well-meaning as these exemptions may be, it is possible that they run afoul of the First Amendment. In Arkansas Writer’s Project, Inc. v. Ragland, 481 U.S. 221 (1987), the U.S. Supreme Court ruled that an Arkansas statute exempting from sales and use tax religious, professional, trade, and sports magazines violated the First Amendment’s Press Clause by favoring certain publications over others based on their content. It may be a stretch to view the flag as a publication invoking Press Clause concerns, but what about the Speech Clause? Content discrimination is presumptively unconstitutional under both the Press Clause and the Speech Clause.     

The Supreme Court ruled in Texas v. Johnson, 491 U.S. 397 (1989), and again in United States v. Eichman, 496 U.S. 310 (1990), that flag burning is expressive conduct protected by the Speech Clause of the First Amendment. But does a flag held in retail inventory have any meaning or is the flag only imbued with meaning by the conduct that one takes toward it? A flag set ablaze is likely to take on a very different meaning from one held aloft. 

If the sale of a flag is itself an act of speech, laws favoring the sale of certain flags over the sale of others are presumptively unconstitutional under the Speech Clause. If not, it would seem that sales tax exemptions for sales of the flag don’t violate the First Amendment. 

Do sales tax exemptions for the American flag violate the First Amendment? Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn.

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