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DirecTV, Dish Fight Mass. Satellite-TV Tax

1/26/2010 04:33:19 PM Eastern
Boston - DirecTV and Dish Network jointly filed a lawsuit against the Massachusetts Tuesday for discriminating against 270,000 families that receive satellite-TV services by imposing a 5 percent tax on those services.

The pay-TV providers complained that the state does not impose the same taxes on other pay-TV services that provide the same or similar programming over wired pipelines.

The satellite-TV companies said the state does not impose a 5 percent tax on 1.9 million families that receive their pay TV from cable companies.

"If the 270,000 pay-TV subscribers in Massachusetts who purchase programming from a satellite-TV provider are anything like the typical consumer, this 5 percent difference could be enough to persuade them to switch to a cable-TV provider for their pay-TV service," the suit states. "The difference in tax treatment also means that Massachusetts, in the midst of an unprecedented economic crisis, is giving up more than $80 million in tax revenues per year by failing to impose a level sales tax on all pay-TV subscribers."

According to the complaint, the cable and satellite-TV companies have the same basic business model when it comes to distributing pay-TV programming to subscribers with one exception â€” how the two types of businesses transmit their programming signals to subscribers.

The suit calls the state's discrimination against satellite distribution vs. wired cable services "a textbook case of parochial protectionism," that resulted from the local cable TV industry urging the Massachusetts legislature to impose a tax on only one category of pay-TV service as a "reward" for contributing to the state economy, and to penalize like services that do not.

The suit charges the practice "discriminates against interstate commerce in violation of the Commerce Clause of the United States Constitution."

The satellite companies said the discriminatory sales tax also violates the Equal Protection Clauses of the U.S. Constitution and the Massachusetts Constitution because it serves no legitimate public purpose and there is no rational basis for the discrimination between satellite TV and cable.

"The satellite-only sales tax serves only the parochial economic interests of cable companies and local government entities, and deprives the public of sales tax revenues. There is no rational basis for imposing a 5 percent on satellite subscribers, but not cable subscribers, when the latter imposes far greater demands on the state for services, infrastructure, easements and environmental impact," the suit states.
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