Ohio's highest court ruled 5-2 against satellite companies that complained a sales tax is unfair because it doesn't also apply to cable TV. The court affirmed a lower court's decision that the tax does not amount to unconstitutional discrimination because it's based on the different nature of the companies' business activities.
Top Ohio Court OKs State’s Satellite TV Tax
COLUMBUS, Ohio (AP) — The Ohio Supreme Court has upheld a state sales tax for satellite TV providers that cable competitors don’t have to pay, rejecting arguments from the satellite industry that the tax is unfair and unconstitutional.
In the 5-2 decision released Monday, the state’s highest court ruled that the 2003 tax does not violate the U.S. Constitution’s Commerce Clause because the tax is based on differences between the nature of the businesses and does not favor in-state interests at the expense of out-of-state interests.
Satellite companies had argued that subjecting them and not their cable rivals to the tax violates their rights to interstate commerce, because their companies operate between states while cable companies operate within them.
But writing for the majority, Justice Terrence O’Donnell wrote that the justices concluded that Ohio lawmakers “imposed a sales tax that makes no distinction between local and interstate commerce, but rather distinguishes based on the mode of distributing television programming.”
Ohio has collected about $44 million a year since imposing the 5.5 percent sales tax on satellite TV as part of a budget-balancing tax package in 2003. The Legislature chose not to apply the tax to cable operators, which pay local franchise fees that range from 2 percent to 5 percent.
The lawsuit that reached the state Supreme Court was brought by DirecTV Inc. and EchoStar Satellite Corp., and the decision affirms an earlier ruling from a state appeals court. The satellite industry has challenged similar tax discrepancies in several other states, and attorneys said earlier that an Ohio high court ruling either way would likely be appealed to the U.S. Supreme Court.
Ohio had drawn support in the case from 15 other states, the National Conference of State Legislatures and the National Governors Association, among others.
Messages for comment were not immediately returned Monday by the Ohio Department of Taxation or by New York attorney E. Joshua Rosenkranz, who represented DirecTV and EchoStar when the case was argued before the Ohio Supreme Court in October.
In a dissenting opinion joined by Justice Paul Pfeifer, outgoing Chief Justice Eric Brown said flatly that the sales tax was indeed unconstitutional.
“It treats sellers of the same service differently. That’s discrimination,” Brown wrote.