Ohio Supreme Court: State Sales Tax OK For Satellite, But Not Cable

Giving an odd boost to cable providers, the Ohio Supreme Court ruled the state could slap a sales tax on satellite TV services even though cable companies don’t need to tack the tax on to their packages.

The Columbus Dispatch reports the satellite sales tax hauls in $59 million a year for the state. Had the court ruled that the tax was unjust, DirecTV and Dish Network subscribers would have saved $80 a year.

The justice who wrote the majority decision wrote the law “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.”

Got all that? The Chief Justice offered a dissent that makes a bit more sense, writing Ohio “treats sellers of same service differently. That’s discrimination.”

Top court affirms Ohio’s tax on satellite TV [The Columbus Dispatch]

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  1. eirrom says:

    The ruling seems idiotic. Our justice system at its finest.

    • bar_foo says:

      Could be. Or it could be the law that’s idiotic and should be changed. Sales taxes are outdated in a service economy: goods and services should be taxed equally.

    • Necoras says:

      Cable companies have to pay a licenses fee of some sort to the state. Satellite companies don’t. The sales tax was the state’s attempt to get a similar revenue stream from the satellite companies. It’s a bit convoluted, but the intent was to level the playing field, not destabilize it.

  2. c!tizen says:

    Me thinks some Ohio supreme court justices have cable, free cable.

  3. jason in boston says:

    Do the Courts have lobbyists? This seems like a payoff.

    • Class Act says:

      The decision notes that both the satellite companies and the cable companies had lobbyists in the legislature which wrote the law. Apparently, the cable companies had better lobbyists.

      “As a result, the cable and satellite television industries retained lobbyists to protect their interests, and ultimately the legislature amended the bill to enact a sales tax on “satellite broadcasting service” alone.”

    • PsiCop says:

      Most people would think Supreme Court justices are somehow above reproach and not subject to corruption. But as a resident of Corrupticut (er, Connecticut), which over the last 10 years has seen corrupt state treasurers, mayors, legislators, and even governors and their chiefs of staff all allocute to illegal activities, I do not for one moment believe that Justices cannot be bought. They can be. Without doubt. And this case does stink of bribery.

  4. Ocyrus says:

    Let’s see… cable companies have infrastructure that makes use of public space and satellite companies have no ground presence in Ohio other than the dishes on each individual home.
    I’m leaning towards thinking that those judges were bribed in some fashion.

  5. Megalomania says:

    I would ask what the rationale for the difference is; if the cable companies are not taxed because they are required to upgrade and maintain the publicly owned infrastructure, then it seems like a wash.

    • Battlehork says:

      Cable subscribers already pay separate taxes on that service.

      • Necoras says:

        Licence fees, but yes. There are similar charges on the cable companies, they just aren’t termed taxes. This was intended to level out the industry a bit.

    • skylar.sutton says:

      IANAL but what I got from TFA is that satellite companies do not operate as local businesses, so much as they operate as large corporations. Cable companies exploit some sort of loophole where they run as “local franchises” instead of large corporations. I guess “local businesses” are exempt from whatever tax this is.

      I’m from Ohio and can vouch for the fact that all cable companies around here are “local” (ex: “NEOTWC” is “North East Ohio Time Warner Cable”… instead of just “Time Warner, Inc.”)… either way the ruling still seems unfair.

      • Linoth says:

        Not sure about Ohio, but I know in New York, Time Warner has been reincorporating, with “Ma Warner” absorbing the local branches back into the corporation, while they keep their local names to keep from confusing customers.

  6. convem24 says:

    It sounds like from the information that I read on the case the initial briefs were not complete and basically a technicality did the satellite groups in. I think most of the telcom/cable rules need a major overhaul so there is fairness in taxation and pricining but I guess I can keep hoping.

  7. Class Act says:

    The decision is not idiotic at all. The Ohio legislature decided to charge sales tax on satellite services, not cable services . The Court merely said that doing so is not unconstitutional. It’s not the Courts’ job to make the laws, but to interpret them.

    The decision is available here: http://www.dispatch.com/wwwexportcontent/sites/dispatch/local_news/stories/2010/12/27/satellite-decision.pdf

    • frank64 says:

      Good point.

    • hegemonyhog says:

      It’s amazing how completely and utterly irrelevant that statement is here.

    • vastrightwing says:

      I suppose the state can tax anything they darn well please. I mean the constitution doesn’t explicitly mention not being able to tax. They could tax our air and use the excuse that the money will be used to ensure plenty of clean air for the future. They already tax your water and its distribution, so why not tax the sales of entertainment? I believe the reason this went to court is because the industry being taxed doesn’t like it and is using the “fairness” argument against it. I think taxes are not fair at all, but this is not the subject.

      Of course, businesses are not taxable entities: they don’t exist (they are only abstract ideas of people). Only people are taxed. When a “business” is taxed, it merely passes the overhead to the consumer (ie people).

  8. Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

    Cable companies are pushing hard for these taxes, just as they pushed HOAs and local governments to ban satellitie dises a few years ago. (NOTE: The FCC now prohibits such restrictions on dishes under 1 meter and any terrestial (OTA) TV antennas: http://www.fcc.gov/mb/facts/otard.html)

    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 ting 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…”

  9. YouDidWhatNow? says:

    One more reason why lobbying should be outlawed. Along with political parties. If you did those two things, people in positions of power might actually start doing the right thing…

    • Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

      Term Limits.
      For all.
      Even judges.

      The founding fathers never intended for people to make a career in elected office.

      • EarlNowak says:

        Term limits for judges combined with an abolishment of judicial elections.

        (I know some people think appointed judges seem undemocratic, but I don’t think judges should be beholden to campaign donors/supporters. Judges should be fair and impartial, and not have to campaign on their “record” either. Combine with strict term limits and I think appointed judges are a great idea.)

  10. vastrightwing says:

    I wish we could stop framing the tax argument as it’s OK to tax denizens as long as the tax is “fair”. Put another way, it’s OK to cable/satellite as long as they are treated equally. How about local governments provide some kind of value and make revenue off of that. They do this in some places by providing water/sewer and even electricity. OK, so why not provide cable service? It seems that people are addicted to entertainment and have this entitlement attitude towards it. Therefore, wouldn’t it be in the public’s interest to have the town provide said service? I’ll go further and argue that towns could make money providing cable, internet and telephone. There! The technology is mature, there are plenty of local people capable of installing the infrastructure; there is no reason this wouldn’t work… except one: the cable industry would fight this idea make sure it never saw the light of day. But other than that!

    • psm321 says:

      Because then the cable/satellite/internet companies sue the town for unfair competition

    • alulim says:

      Some actually Do. Kutztown, PA has thier own cable tv/internet service. It operates at small profit (money back to the borough) and costs about 20% LESS. It’s now, however, virtually impossible to start in a new town. You can thank verizon and comcast for the all the new regulations, laws, and fees if it’s attempted.

  11. stevied says:

    Cable providers pay a franchisee fee based upon projected sales/use/customers in most Cities/States. Basically the consumer is already paying a tax (built into the price).

    Satellite providers don’t pay the franchisee fee, thus sales tax is applicable.

    Yes, State tax laws are totally farked up.

    • Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

      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?

  12. Madaline_7 says:

    I don’t care. DishNetwork is still 1000x better than Time Warner. (Yes, I live in Ohio.)

  13. mattoreo21 says:

    The truth is cable company’s have to pay franchise fees to every city they serve (sat does not pay these fees) also there are tariffs charged to the cable companies that sat does not pay either so in the end cable pays more taxes and fees in Ohio than the sales tax the sat companys pay. See http://saveaccess.org/node/1645 or http://www.legislature.state.oh.us/bills.cfm?ID=127_SB_117_I