DBS Ops Add Ky., Fla. to Tax Suits

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DirecTV Inc. and EchoStar Communications Corp. have targeted two more states -- Kentucky and Florida -- for legal challenges on the taxes applied to direct-broadcast satellite customers.

That brings the lawsuit roster to five. The DBS providers had already filed suits in Ohio, Tennessee and North Carolina.

The Kentucky suit, filed in U.S. District Court for the Eastern District of Kentucky, challenged a change in tax policy approved just this year by the legislature. A cable-industry-backed bill eliminated traditional franchise fees and replaced them with a 3% excise tax on all video providers, plus a 2.4% gross receipts tax.

The Florida suit challenged an older tax policy. In 2001, the state went to a uniform-telecommunications-tax policy, replacing local fees and assessments with a single fee to the state. The bill was revenue-neutral, meaning operators would still pay amounts equal to the 9.18% state sales tax, plus franchise fees of 1%-5%, but the bill saved cable operators in accounting fees and helped the competitive field by drawing in DBS providers and their customers.

In both of the latest suits, the DBS companies argued that the state taxes are unfair because cable operators get an offset on the state levy for local fees they pay. That's an offset DBS companies can't qualify for because they don't impact local rights-of-way and, therefore, don't pay fees those fees.

The state taxes violate the interstate-commerce clause of the U.S. Constitution, the suits alleged.

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