Ohio Governor Bob Taft signed into law earlier today. The sales tax was not imposed on local cable television services, even though satellite television companies compete with incumbent cable operators in the same market. The lawsuit was filed in the Court of Common Pleas, Franklin County, Ohio.
The suit seeks a declaratory judgment holding that the satellite-only tax is unconstitutional and requests a permanent injunction against enforcement of the tax on approximately 700,000 satellite TV customers in Ohio.
“With this action, DISH Network and DIRECTV are vigorously defending the rights of the satellite television customers in Ohio who have selected a competitive and affordable alternative to cable television in the free marketplace,” said Michael McDonnell, senior vice president and chief financial officer at EchoStar. “We will aggressively and proactively challenge any state that pursues a discriminatory and unfair tax policy that disenfranchises consumers, and our customers, while benefiting local cable operators.”
The satellite-only sales tax was sponsored by local cable television operators that have exploited the budget crisis in Ohio in their attempt to gain an unfair and unconstitutional competitive advantage against faster-growing satellite television services.
“The satellite-only tax flies in the face of both the Ohio and U.S. constitutions,” said Michael W. Palkovic, senior vice president and chief financial officer at DIRECTV. “Applying a discriminatory tax on satellite providers that provide virtually the same product to the same customers gives a direct commercial advantage to local cable services that access and place a burden on the state’s public infrastructure, while discriminating against out-of-state satellite television services that do not use the public infrastructure nor put demands on the state for the delivery of their services. This discrimination violates the Commerce Clause of the U.S. Constitution.”
Tom Zaino, Tax Commissioner for the State of Ohio, addressing a joint conference of the Ohio Senate and House of Representatives earlier this month, stated that a legal challenge of the satellite-only tax by the satellite TV companies has a “significant chance of success.”
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