Ohio Sat TV Tax Becomes Law

[Gregg Lengling]

As expected, Ohio Gov. Bob Taft signed into law the state's budget bill, which includes a new tax on satellite TV services.

And DirecTV and EchoStar made good on their promise to fight the 6-percent satellite TV levy.

Thursday afternoon, hours after Taft signed the measure into law, the companies filed a lawsuit challenging the tax in the Court of Common Pleas in 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.

"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 CFO 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 companies said the satellite-only sales tax was pushed by local cable TV operators, which used the budget crisis in Ohio to get the measure before lawmakers and the governor.

"The satellite-only tax flies in the face of both the Ohio and U.S. constitutions," Said Michael Palkovic, senior vice president and CFO at DirecTV. "Applying a discriminatory tax on satellite providers that provide virtually the same product to the same customer 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."

Satellite Broadcasting and Communications Association President Andy Wright said with the new tax, Taft and state lawmakers "have unfairly and unconstitutionally created a competitive disadvantage in Ohio's multichannel video market." He added that SBCA will support DirecTV and EchoStar in challenging the tax in court, "and will continue to oppose unfair and anticompetitive taxes on satellite television subscribers."

While signing the bill, Taft never specifically mentioned the satellite TV tax.

"I am pleased that the legislature took a number of initial steps to reform Ohio's tax code," Taft said. "The budget I signed today includes municipal income tax reform, reform of telecommunications taxes, broadens the base of the sales tax to include more services, and aligns Ohio with states that are participating in the streamlined sales tax project."