Court Strikes Down Calif. PPV Tax

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A California state attempt to attach a tax to pay-per-view
boxing events was recently shot down by a United States District Court judge on
constitutional grounds.

U.S. District Judge William Shubb, in Sacramento, Calif.,
ruled that the California "Boxing Act" violated the First and 14th
Amendments to the U.S. Constitution by imposing a 5 percent gross-receipts tax on PPV
telecasts of boxing, wrestling and martial-arts events, according to U.S. Satellite
Broadcasting, which sued to overturn the act.

The act, which would have benefited the state's athletic
commission, would not have included PPV buys from cable operators, but it would have
affected direct-broadcast satellite dish owners, the California Cable Television
Association said.

Several other states, however, have implemented taxes on
PPV ring events that affect both cable- and DBS-distributed events.

"We believe that Judge Shubb's significant decision
should cause other states to pause and carefully consider the consequences of attempting
to impose taxation upon any category of television programming based solely upon
content," USSB president and CEO Stanley E. Hubbard said in a prepared statement.

"The alarming trend among some states to impose new
taxes on small groups without political muscle -- in this case, distributors and
enthusiasts of televised ring sports -- became increasingly disturbing to us,"
Hubbard added. "This boxing tax clearly violated the First Amendment, and as one of
the largest distributors of pay-per-view boxing, we decided to stand up for what is
right."

According to the decision, the court declared that
"television broadcasts constitute speech," and that the state of California's
"selective application of the [tax] to boxing telecasts and boxing telecasts alone
constitutes exactly the kind of judgment about [speech] content which the First Amendment
does not allow California to make."

The court further found that the state had "failed to
bring forward any evidence suggesting that the Boxing Act tax is necessary to advance a
compelling interest and narrowly tailored to achieve that goal."

Representatives from the California State Athletic
Commission could not be reached for comment at press time.

Despite the ruling, Dennis Mangers, senior vice president
of the CCTA, wouldn't rule out another attempt by the state to tax PPV events.

"Every year, the state athletic association tries to
institute a tax, and every year, we've been able to defeat the measure," he said.
"I never assume, however, that we're safe from anything, but it certainly is a good
decision for all of us."

While California will not institute a PPV tax, a number of
other states -- including Oklahoma, Florida, Georgia and Missouri -- still have taxes on
the books targeting PPV boxing, wrestling and other ring events.

Several industry sources, however, indicated that most of
those taxes, if not all of them, are in the process of being challenged or will be
challenged in the near future.

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