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
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
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.