Top court affirms Ohio's tax on satellite TV


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From the Columbus Dispatch:
The picture looks the same on the flat-screen in your living room, but the Ohio Supreme Court says it's OK for the state to tax a satellite television provider but not the cable company offering the same service.
In a 5-2 decision certain to leave nonlawyers scratching their heads, the Supreme Court ruled that the state is not discriminating against satellite-television providers by assessing a 5.5 percent sales tax even though cable operators don't pay it.
Had the court ruled the tax was unfair and discriminatory, as DIRECTV and Echostar argued in a lawsuit, satellite customers would have saved roughly $80 a year. However, it would have cost the state $59 million in lost revenue, tax officials said.
Justice Terrence O'Donnell, who wrote the majority decision, said the sales tax on satellite providers approved by the General Assembly in 2003 "does not violate the Commerce Clause of the U.S. Constitution, because the tax is based on the nature of those businesses, not the nature of their activities, and it does not favor in-state interests at the expense of out-of-state interests."
An attorney representing the satellite companies, E. Joshua Rosenkranz, said in oral arguments in the case in October that the law is a case of "local protectionism" because it's rigged in favor of cable providers will local operations and workforces.
Ohio tax code, Rosenkranz charged at the time, "puts a thumb in the scales of competition for the enterprises that benefit the local economy."
Cable companies respond that they pay franchise taxes assessed by local jurisdictions, while satellite providers do not.
Outgoing Chief Justice Eric Brown, the only Democrat on the court, offered a sharp dissent to the majority ruling, saying the tax is blatantly unconstitutional because it "treats sellers of same service differently. That's discrimination."
The satellite providers won a partial victory in Franklin County Common Pleas Court, but the 10th District Court of Appeals reversed the decision. That set up the appeal to the Ohio Supreme Court.
Cable companies have been, and will continue, pushing hard for these taxes, just as they pushed HOAs and local governments to ban satellite dishes a few years ago. (NOTE: The FCC now prohibits such restrictions on dishes under 1 meter and any terrestial (OTA) TV antennas:

I have to agree with the chief Justices dissent. And worse yet, this decision sets a precident that others states can, and will, follow.
It's all about the money. Even the courts are now in it for the money.

"We've taxed every thing we can think of. There's only one thing left to tax."
"You don't mean...?"
"Yes. We'll have to tax... You know, "THINGY"..."
"Tax Thingy??"
"YES. Of course, we'll exempt ourselves..."

Question: how long before we get slapped with an "Antenna Tax" for OTA antennas?
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but the Ohio Supreme Court says it's OK for the state to tax a satellite television provider but not the cable company offering the same service.
Cable operators do collect and pay a tax. Local municipalities are allowed to collect up to a 5% franchise fee from cable operators, according to section 622 of the cable act. Satellite operators are exempt from this fee. This is where the whole push from cable operators is coming to enact a sales tax on satellite service.

However I think they've gone a bit too far. The franchise fee for cable is only applicable to the basic service tier, since the local franchising authority only has jurisdiction over basic service. It gets tricky because satellite operators have no basic service tier like cable operators do. Their lowest tier is usually equivalent to the cable operators' "expanded basic" or "standard" tiers.


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If I build a product or service that is cheaper / better/ or avoids built in pitfalls of another competing business model, then the government should step in and tax my more efficient business to level the playing field, right?

The government has run out of things to tax, right?
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I wouldnt say so, pogi. Why aren't cable operators allowed to negotiate with private land owners to run cable? This is how John walson did it in the early days. He put amps in peoples basements in exchange for a discount on their cable service. The only reason the cable operators pay this bogus franchise fee is because it's a source of revenue for the govt and allows them to act as a gatekeeper. Adding the sat tax on top of them wouldn't be fair in that case.


One question that needs to be asked is why did Ohio feel it appropriate to do this. One answer is that satellite services are not compelled to support public interest through the provision of local access channels and free or heavily-discounted service to the community, itself. These (and other) "taxes" levied on cable companies are the root-cause of the problem, here. The more government interferes in the industry, the more it has to interfere further to achieve equity between suppliers.