DBS Appeals Decision
The Franklin County Court of Appeals recently ruled that the state sales tax on DBS service, but not on cable service, is constitutional and not a violation of the U. S. Constitution's Commerce Clause. The Appellate Court, in a 3-0 decision, reversed a lower court's decision finding the tax, originally enacted in 2003, unconstitutional as it discriminated unfairly against DBS.
The Appellate Court ruled that DBS failed to show that "Ohio's sales tax provisions discriminate against the interstate market for pay television, whether delivered by cable or satellite. At best, the plaintiffs have persuasively, but ultimately to no end, established that they are more burdened by Ohio's tax provision than comparable interstate cable providers. Discrimination between different forms of interstate commerce is not discrimination against interstate commerce (emphasis in original)."
Since the Court had already found that Ohio's sales tax did not violate the Commerce Clause as both providers are engaged in interstate commerce, the court did not need to look at the question of whether the amount and burden of cable franchise fees, which are not applicable to satellite service, essentially equalizes taxation on the two video providers.
As a result of this decision, the State Tax Commissioner will not be forced to refund well over $100 million dollars in collected taxes. The DBS plaintiffs may seek review of the Appellate decision in the Ohio Supreme Court, which they have not done as of this writing. Stay tuned.
ASSOCIATED PRESS
An Ohio appeals court has ruled unanimously that applying state sales tax to satellite TV but not cable is constitutional.
In its opinion, the 10th District Court of Appeals voted 3-0 Friday to overturn a ruling in Franklin County Court of Common Pleas that had sided with satellite-TV providers EchoStar Satellite Corp. and DirecTV Inc. The companies argued that their right to equal protection under the law was violated by the tax, which was part of then-Gov. Bob Taft's penny sales-tax increase in 2003.
The appeals court ruled that both types of television providers are engaged in interstate commerce, where such different taxation is allowed.
From Gongwer News:
OHIO APPEALS COURT UPHOLDS STATE SALES TAX ON SATELLITE TELEVISION SERVICES
The General Assembly's application of the state sales tax to satellite television services - but not to cable TV - has been upheld as constitutional in the 10th Ohio District Court of Appeals.
A 3-0 opinion from the appellate court reversed a ruling from a Franklin County common pleas judge, who last year found the tax scheme was discriminatory in its effect.
The trial judge held that the tax impermissibly burdened satellite providers by increasing the net costs to television consumers for satellite service in comparison to cable service.
In a decision released Thursday, the appellate panel said the trial court erred in granting summary judgment in favor of DIRECTV Inc. and EchoStar Satellite Corp. in their lawsuit against the State Tax Commissioner.
Appellate Judge Lawrence Grey said the satellite firms had not demonstrated that Ohio's sales tax provisions discriminate against the interstate market for pay TV.
"At best, the plaintiffs have persuasively, but ultimately to no end, established that they are more burdened by Ohio's tax provision than comparable interstate cable providers," Judge Grey said.
"Discrimination between different forms of interstate commerce is not discrimination against interstate commerce," he said.
As of mid-2008, the state had collected an estimated $140 million from the satellite TV sales tax that it would have been forced to refund in the event it lost the court case.
Judge Grey, retired from the 4th District and sitting by assignment, said the sales tax on satellite television and not on cable providers did not violate the Commerce Clause.
"Supreme Court precedent ... demonstrates that the dormant Commerce Clause should not be conceived to protect particular technological or commercial models, but to protect interstate commerce and interstate access to the markets of a given state," he said.
The court said that because it found the tax did not run afoul of the Commerce Clause, it did not examine the question of whether cable TV - by providing additional services such as internet access and telephone - presents enough alternate benefits to warrant differential taxation.
"Nor do we examine the question of whether the amount and burden of franchise fees, which are paid by cable television providers and not by satellite television providers, essentially equalizes taxation on the two means of delivering pay television to Ohio consumers," Judge Grey said.
Concurring in the opinion were Appellate Judges Judith French and Peggy Bryant.