DBS Ops Sue Over Sales Tax

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Making good on their threat, DirecTV Inc. and EchoStar Communications Corp. have sued Ohio over a satellite sales tax included in the state's budget package, signed June 26 by Gov. Bob Taft.

The direct-broadcast satellite companies argued that the 6% sales tax in the omnibus budget reconciliation bill is unconstitutional because it will not be applied to cable TV providers.

A cable sales tax was included in an early version of the budget, but it was removed when operators argued they already bear a substantial tax burden.

Local operators contribute to the state's economy with in-kind services such as institutional networks and public affairs programs, the cable industry argued.

This might be the first of other lawsuits challenging a state's tax policy this year.

North Carolina approved a tax on DBS service in 2001 that also isn't levied equally on cable systems, according to DirecTV spokesman Bob Marsocci. The first step in challenging that 5% tax, Marsocci said, is to submit a refund request with the state.

If North Carolina does not comply with that request by the statutory 90-day deadline, that state will also be sued, he said.

Twenty-two states levy some kind of local tax on DBS services, according to DirecTV.

Another 19 states have taxes that are applied equally to cable and DBS.

The Ohio lawsuit was filed June 26 in the Court of Common Pleas in Franklin County, Ohio. It seeks a permanent injunction against the implementation of the tax on the approximately 700,000 DBS customers in the state, according to the companies.

The satellite-only levies will afford cable "a direct commercial advantage" and unfairly tax companies that do not use public rights-of-way, according to the DBS companies. The tax violates both the state and federal constitutions, they said.

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