Whether non-fiction books are entitled to the same sales tax exemption as fiction books is a dispute that has been simmering for years, resulting in a federal civil rights lawsuit filed Tuesday, May 7, by the American Civil Liberties Union (ACLU) on behalf of the Association of Rhode Island Authors (ARIA) and three of its members, local authors Steven Porter, Paul Caranci, and Lucie Contente, as plaintiffs. According to the court complaint, “ARIA’s membership consists of upwards of three hundred Rhode Island writers of both fiction and nonfiction works.”
The root of the dispute is RI General Laws §44-18-30B(b)(1) that exempts from sales tax the works of “writers, composers, and artists residing in and conducting a business within the state of Rhode Island. For the purposes of this section, a ‘work’ means an original and creative work, whether written, composed, or executed for ‘one-of-a-kind, limited production’ that falls into one of the following categories” including “a book or other writing.” The RI Department of Revenue, Division of Taxation, issued regulation 280-RICR-20-70-11, most recently revised in March 2018, that restates the statutory criteria and provides for how to file for an exemption certificate for each qualifying work. The law charges the state Division of Taxation, in collaboration with the RI State Council on the Arts (RISCA), to implement these provisions, and for this reason the named defendants in the lawsuit, ARIA v. Savage, are Neena S. Savage in her capacity as tax administrator and Randall Rosenbaum in his capacity as executive director of RISCA.
Strangely, the state tax authorities prior to the lawsuit do not seem to have ever put in writing their interpretation of the statute and regulation at issue, and even seem to have studiously avoided every opportunity to do so. The plaintiffs allege in their complaint that “The Defendants have determined that nonfiction books are not ‘works’ pursuant to [the statute] and, therefore, Rhode Island authors of original works of nonfiction cannot obtain the Author Exemption for nonfiction works.” The plaintiffs also allege in their complaint that “…the RISCA Executive Director informed ARIA and its members at ARIA meetings and/or ARIA workshops that nonfiction books will not receive the Author Exemption… but that fiction books will receive the Author Exemption…” Representatives on behalf of both the Division of Taxation and RISCA repeatedly verbally confirmed the policy distinguishing between fiction and non-fiction books, according to the complaint.
Rosenbaum, when contacted by Motif, said that he had not yet seen the complaint and declined further comment. Savage did not return several telephone messages by the time this article was written.
Paul E. Grimaldi, chief of information and public relations for the Department of Revenue (DoR), issued a statement that appears to deny the central factual allegation underlying the lawsuit that the state does distinguish between fiction and non-fiction for purposes of sales tax exemption: “In response to an inquiry by the American Civil Liberties Union in the fall of 2018 regarding the tax treatment of non-fiction works, the Tax Administrator, in consultation with the Rhode Island State Council on the Arts, has previously determined that the sale of a book by its author may qualify for a tax exemption whether the book is a work of fiction or non-fiction” (emphasis added). Asked directly by Motif whether his statement was “denying the central factual claim that the department deems fiction qualifying for exemption but non-fiction not qualifying for exemption,” Grimaldi replied, “The statement stands on its own.” Grimaldi’s statement also said, “Concerning the statement today by the American Civil Liberties Union, the Department of Revenue is not in receipt of a notice of suit, and in any case, would not comment on pending litigation.”
Grimaldi’s statement appears to reference a November 15, 2018, letter signed by Savage and Rosenbaum, sent to Steve Brown, executive director of the RI ACLU, in response to Brown’s letter of October 2, 2018, in which Brown argues, “As for the statute itself, it clearly exempts ‘a book or other writing’… There is no ambiguity in that. To the extent that Division officials are deciding that non-fiction writing is not ‘original and creative,’ there is no justification in the statute’s language for such a reading. lt is also a judgment wholly unsupported by any meaningful understanding of the writing process, whatever the genre, and places the Division in the dubious role of making wholly subjective, and ultimately arbitrary, determinations about works of art.” Brown cites examples of “…whole fields of writing that don’t fit neatly into either category. The Division of Taxation has no business deciding whether ‘non-fiction novels’ like Norman Mailer’s The Executioner’s Song or Truman Capote’s In Cold Blood are entitled to a sales tax exemption for the author based on a person’s determination as to whether they are novels or works of non-fiction… Why is a dull and wholly derivative piece of fiction automatically deemed ‘original and creative’ where Charles Darwin’s revolutionary evolutionary theory in On the Origins of Species would never be?” The reply letter from Savage and Rosenbaum to Brown simply promises to follow the law, offering to re-evaluate any denial brought to their attention, but never admits or denies the practice of distinguishing between fiction and non-fiction.
According to the complaint, plaintiff Contente filed for author exemption certificates for three of her books, two non-fiction (Gluten and Gluten Free Cooking in Perfect Harmony and Gluten and Gluten Free Cooking in Perfect Harmony Take 2) and one fiction (Bella from the Farm), receiving no response for the former and approval for the latter. ARIA President Steven Porter said, “There was no official denial letter. She filled out the form listing her three books (two non-fiction cookbooks and one children’s fiction). When her exemption letter arrived in the mail, it only listed the children’s book. She was not given any explanation. She even contacted Taxation and asked for a copy of the application she filed. They refused.” Brown confirmed to Motif that the state never provided any determination whatsoever in response to Contente’s exemption application for the non-fiction work, resulting in what he construed to be de facto denial.
Plaintiff Porter, according to the complaint, received approvals for two works of fiction (Confessions of the Meek and the Valiant and Manisses), but did not apply for an exemption for a work of non-fiction (Scared to Death… Do it Anyway) because he had been told verbally it would be denied per policy. Plaintiff Caranci, according to the complaint, for the same reason did not file for an exemption for any of his nine books of non-fiction (including, for example, The Hanging and Redemption of John Gordon: The True Story of Rhode Island’s Last Execution).
The complaint drafted by ACLU co-operating attorney Lynette Labinger is careful to allege the existence of the state tax policy distinguishing between fiction and non-fiction “on information and belief,” a legal formula that allows a plaintiff to compel a statement from a defendant either admitting or denying something the plaintiff is not yet in a position to prove. “Labinger’s assertions are because we have been told verbally, on many occasions, that non-fiction does not qualify. They never put it in writing. I can’t find anyone who has a true objection to this anywhere. RISCA is as non-committal as DoR. You’d think they’d be on our side. I’ve always felt there was more to this issue that I just don’t know about,” Porter said.
The filing of the lawsuit will force the state to go on record formally answering the complaint, either admitting or denying the alleged policy; Brown confirmed to Motif that, to the best of his knowledge, the state never prior to the lawsuit put in writing whether there is actually a policy distinguishing fiction and non-fiction. “We look forward to the discovery in the lawsuit,” Brown said, but he emphasized that plaintiff authors “will indicate numerous times that state officials have verbally made that distinction to them” consistent with actual pattern and practice of refusing to decide applications for exemption certificates for non-fiction as Contente experienced. We asked Brown why the state would enforce a policy that they do not admit exists; “That’s a good question,” he replied.
The Finance Committee of the RI House of Representatives scheduled a hearing on H.5158, a legislative fix for this, on Wednesday, May 8. Both Porter on behalf of ARIA and Brown on behalf of the ACLU said they plan to be there to testify. (Note: The video record of that hearing was made available by Capitol TV.) A similar bill last year never made it out of committee. “We testified last year in support of the bill and will do the same this year. Whether it will make a difference that there’s now a lawsuit challenging what’s happening, I don’t know. We’ll find out,” Brown said. “Taxation has been unwilling to discuss their interpretation of this law. We believe that either a legislative fix or lawsuit are our only options,” Porter said. Asked whether the timing of the suit was intended as a message before that hearing, Porter answered, “Yes, but the suit would have been filed soon anyway.”
One of most visible activities of the non-profit ARIA is to organize opportunities for its members to sell their books. The largest of these is their annual RI Author Expo at Rhodes on the Pawtuxet in Cranston, next scheduled for Saturday, December 7, 2019, 10am-4:30pm. According to ARIA President Steven Porter, 135 author vendors and 15 other exhibitors expect to offer books for sale and meet about 1,400 attendees at the event, which is free to prospective readers. Authors also participate in panels and forums aimed at both experienced and aspiring writers. (Disclosure: Motif is a media sponsor of the event.) Authors selling their books directly to the public at such events would be precisely the circumstances where sales tax exemption would apply, although Porter noted “these same authors participate in similar smaller events and book signings throughout the year all over the state.”
Asked why he thought the state allowed the dispute to drag out for years and get as far as a federal civil rights lawsuit, Porter answered, “Bureaucracy. We’ve yet to encounter anyone with a strong objection. In fact, almost everyone agrees with our position. But finding someone with the political will to get this fixed has been maddening.”