The State of Minnesota has passed a bill rescinding a 6.5% sales tax for creative services that go into commercialmaking, effective July 1.
The ruling is a result of a massive effort from the Association of Independent Commercial Producers (AICP), the American Association of Advertising Agencies (4A’s), the Advertising Federation of Minnesota, the Minnesota Film Board, City of Minneapolis Office of Film Video and Recording, City of St. Paul Film Liaison Office, and Upper Minnesota Film Office, as well as individuals from ad agencies, the post community and equipment rental houses.
Specifically, the bill calls for a tax exemption on "the gross receipts from the sale of and storage, use, or other consumption of tangible personal property which is primarily used or consumed in the preproduction, production or postproduction of any television commercial and any such commercial, regardless of the medium in which it is transferred."
Production hubs such as New York, California, Florida, Texas, Toronto and Vancouver, B.C. have already alleviated such taxes. AICP Minnesota chapter president Kirk Hokanson, president of Minneapolis-based Voodoo Films, explained that this puts Minnesota on a more level playing field and "marks the elimination of an incentive to produce spots out of town."
"As a community we need to eliminate obstacles in our path, the sales tax was a huge one," he commented.
Hokanson also believes the ruling will have a large impact on duplication. "For years, duplication and mastering were typically sent out of town because of the tax," he explained, noting that since the sales tax ruling, two out-of-town duplication facilities began exploring the opening of Minnesota-based operations. He declined to name the referenced companies.
A Pledge
AICP/Minnesota board member Heidi Habben, who is director of marketing at Minneapolis-based Crash & Sue’s, said that one of the major pieces in getting this bill passed was a recent pledge from 17 Minneapolis advertising agencies.
The agencies pledged that if the State enacted the sales tax exemption, they would: "(1) Bid Minnesota production companies on more projects with the goal of a 10% increase in commercials produced and shot in Minnesota; (2) direct more duplication and dubbing work to Minnesota editorial facilities; (3) encourage out-of-town production companies that are bidding on projects to shoot those projects in Minnesota; and (4) help further the development of the postproduction community by postproducing a significantly larger percentage of commercials in Minnesota."
The agencies that made the pledge are: BBDO; Bozell Kamstra; Campbell Mithun Esty; Carmichael Lynch; Clarity Coverdale Fury; Colle & McVoy; HMS Partners; Hunt Adkins; Rapp Collins Communications; Kruskopf Olson; Martin/Williams; Nemer Fieger & Associates; Olson & Company; Peterson Milla Hooks; Foley Sackett; Initio; and Periscope.
"The legislature wanted something concrete," explained Kathy DiToro, senior VP/director of broadcast production at Minneapolis-based agency Campbell Mithun Esty. "We believe this is realistic."
"This is a great film community but commercial work was going elsewhere," she explained. "We would ultimately go with the best talent. But there are a lot of good directors and talent in town."
"We are thrilled. Our office is full of flowers, faxes and [we’ve received] phone calls," said Minnesota Film Board director Randy Adamsick. "Our goal is a 10% increase. … 10% represents $50 million in production and postproduction billing that stays in Minnesota." In addition to the agency pledge, Adamsick believes the other key contributor to the enactment of the bill was support from Gov. Jesse Ventura and his administration
"It was a huge collaboration of people from all segments of this industry that worked tirelessly," said Hokanson. He noted especially the efforts of Habben, Adamsick, and Janet Zahn, former director of the Minneapolis Office of Film, Video and Recording. (Zahn recently joined Juntunen Media Group, Minneapolis, as an account executive.)
Habben reported that the Minnesota Department of Revenue intends to meet with the production community-likely in mid-June-to help members understand and interpret the bill. A celebration of the ruling is scheduled on June 7. Gov. Ventura is expected to attend.
