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| Author: | Prodigy [ Sun Oct 17, 2010 10:26 am ] |
| Post subject: | Tax unfair, satellite-TV companies tell justices |
Tax unfair, satellite-TV companies tell justices Wednesday, October 13, 2010 11:43 PM By James Nash The Columbus Dispatch Satellite-television companies asked the Ohio Supreme Court today to exempt them from the state sales tax, saying it discriminates against them because their cable competitors don't have to pay it. DIRECTV and Echostar want the state to lift its 5 1/2 percent sales tax on satellite television, which would save the average customer about $80 a year but cost the state $53.9 million a year in lost tax revenue. The companies say the tax code was rigged to favor cable companies because they have much larger Ohio-based work forces and billions of dollars' worth of cable lines, distribution facilities and other equipment in the state. The tax code "puts a thumb in the scales of competition for the enterprises that benefit the local economy," E. Joshua Rosenkranz, attorney for the satellite companies, told the justices. "This is a case about local protectionism." Lawmakers extended the state sales tax - but not any local sales taxes - to the satellite television industry in 2003. The state's lawyer, Lawrence D. Pratt, noted that cable companies already pay franchise fees that approximate the sales tax. Pratt said applying the sales tax to satellite companies but not cable providers does not violate the Commerce Clause of the U.S. Constitution because the distinction does not treat in-state companies differently from out-of-state ones. "There is no Ohio cable broadcasting service that is competing with an Indiana satellite broadcasting service," Pratt said. "We don't believe there's discrimination here." The state's position is supported by the cable-television industry as well as 15 other states that filed a friend-of-the-court brief. Attorney John A. Swain, representing the cable industry in Ohio, argued that it's OK to apply a different tax to satellite and cable companies because they're not the same. He noted that satellite is a one-way service and cable is two-way, with interactive programming. "Legislatures draw distinctions among businesses constantly," Swain said. Rosenkranz said the distinction is meaningless. "These are absolutely the same products with respect to the person sitting in the living room," the DIRECTV lawyer said. DIRECTV claims 18.6 million customers nationally but won't reveal Ohio numbers. Echostar's Dish Network is the company's only major rival, with 14.3 million customers nationally. Robert G. Mercer, a spokesman for DIRECTV, said Ohio is among a small number of states that apply their sales taxes to satellite television. "These kinds of taxes penalize our customers, especially the folks in rural areas who rely on satellite for their TV programming," Mercer said. State Tax Department spokesman John Kohlstrand countered that challenges to sales taxes in other states, such as Kentucky and North Carolina, have fallen flat. "One thing that gives us comfort at the tax department is that when these kinds of cases are argued in other states, (satellite companies) don't get very far," Kohlstrand said. If DIRECTV and Echostar win, the state may have to refund taxes collected on satellite television over the past seven years. Rosenkranz said the companies wouldn't seek tax refunds, but state tax officials said customers still could press claims. |
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