DirecTV Inc. and EchoStar Communications Corp. have joined forces in filing a
lawsuit challenging a Tennessee sales tax on satellite-TV customers.
The lawsuit -- filed in the Chancery Court of Davidson County against the
Tennessee commissioner of revenue -- claimed that the 8.25% sales tax on monthly
subscription fees is unconstitutional because it is not equally imposed on
Local cable-company subscribers receive an exemption on the first $15 of the
tax charged against their fees. That is a violation of the commerce clause of
the U.S. Constitution prohibiting state taxes that discriminate against
The action follows suits filed in June challenging similar taxes in Ohio and
North Carolina. In the latter case, the two direct-broadcast satellite providers
are demanding a refund to customers totaling some $30 million
"Imposing a significantly higher sales tax on satellite-TV companies than
imposed on our cable-operator competitors is discriminatory, unconstitutional
and otherwise unlawful," said Michael W. Palkovic, DirecTV’s senior vice
president and chief financial officer, in a release.
"By tying the DBS companies' hands in their efforts to compete, these taxes
can only help to perpetuate the high and ever-increasing cable prices consumers
are experiencing throughout the nation," he added.