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DBSers Digging In Against State Taxes

6/08/2003 8:00 PM Eastern

Direct-broadcast satellite providers are digging in against new tax bills pending in three states and contemplated in California.

The Satellite Broadcasting and Communications Association, in concert with DirecTV Inc. and EchoStar Communications Corp., has funded an anti-tax Web site (www.stopsatellitetax.com). Visitors can log on and announce their opposition, and the site will target the missive automatically to the proper elected official, based on districting information.

DBS advocates are trying to fight off proposals in Nevada, Ohio and Connecticut this legislative session.

Nevada lawmakers have already allowed a satellite-specific bill, SB492, to die, according to the SBCA. But a 5% DBS tax is still under consideration in other revenue-enhancement measures.

Ohio legislators are still trying to balance the state budget, and the reconciliation bill, HB95, once included a tax on both satellite and cable. Only satellite, which would be subject to a 5% sales tax, remains in the measure.

Connecticut may take the biggest bite out of DBS customers' pockets. A 5% tax is contemplated on top of the 6% that satellite households already pay on service and equipment purchases. The latter tax may also increase to 6.5%, according to an association official.

"We want to focus on facts," said SBCA president Andy Wright. "It's unfair to tax DBS and not cable. Satellite is a national service that doesn't impact infrastructure."

Cable lobbyists argue that heavy taxes are already assessed on their services, including franchise fees, utility, sales, property and possessory-interest taxes.

Wright counters that franchise fees are not taxes, but fees for the use of public rights-of-way. It's a cost of doing business, just like DBS providers must pay the price to build and launch satellites, he noted.

At a recent hearing in Ohio, DBS lobbyists argued that sales taxes are illegal under state and federal law, suggesting lawsuits are in the offing if the state approves a tax.

Ed Kozelek, executive vice president of the Ohio Cable Telecommunications Association scoffed at claims that a tax is unconstitutional and discriminatory. The arguments represent the DBS industry's "last-ditch efforts to maintain their current advantage over the cable industry."

The legal threat shows how crucial the existing tax advantage is to that industry, he added.

But the most interesting battle is shaping up in California, where no bill has been officially introduced as yet. But all of the state's tax policy is under review by a nine-person commission appointed by Gov. Gray Davis and both chambers of the state legislature. The California Commission on Tax Policy in the New Economy began work two years ago, looking at reform of sales, property, income and telecommunications taxes.

It worked in relative obscurity until last month, when satellite interests found out about a one-page opinion that stated the cable industry's arguments for a satellite tax, written for the committee by one of its own members.

That's when the satellite industry started crying "foul" over the fact that the committee is headed by Bill Rosendahl, a Los Angeles regional vice president for Adelphia Communications Corp.

The committee had held 11 meetings this year alone before the memo was leaked and the satellite contingent began its "scurrilous, attacking strategy," said Rosendahl. The job of the committee is to come up with nine to 12 taxing strategies, a process that is consensus driven.

Rosendahl has been active in promoting political discourse for years, moderating and taping panel discussions on national, state and local elections and issues. He's been involved in more than 2,700 hours of political broadcasts shown on Adelphia local-access channels, public-television stations and the California Channel.

"I was told I was selected because I am a fair broker and moderator," Rosendahl said.

The satellite industry had been invited to participate in committee hearings, he added, but never responded until the internal memo was leaked.

"I'm not aware the satellite industry was ever invited before the controversy arose," Wright countered.

A California Cable Telecommunications Association-backed bill that would levy an 8% sales tax on satellite service was introduced last session, but never made it out of committee. The DBS companies want to keep it from arising again this year, as the state wrestles with a billion-dollar deficit.

"I'm shocked cable is out there trying to turn this to their advantage," Wright said. In 23 states that have enacted telecommunications taxes, 21 also lumped cable into the taxable pool, he added.

"We should be cooperating" in anti-tax efforts, Wright said.

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