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For Dish Network in Florida, Satellite & Cable Tax Can Differ

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Dish Network, LLC (also active as DirectTV and EchoStar Satellite LLC) (“Dish”), a premier U.S. satellite provider, has sued Florida seeking a declaration that the state’s Communications Services Tax (“CST”) is unconstitutional insofar as it levies a higher rate of tax on Dish’s service than applies to cable companies selling identical programming (DirecTV, Inc. and EchoStar Satellite, LLC, n/k/a Dish Network, LLC, v. State of Florida, Department of Revenue and The Florida Cable Telecommunications Association, Case No. 05-CA-1037; Circuit Court of the Second Judicial Circuit in and for Leon County, Florida, General Civil Division). Dish claimed that the difference in rates, embodied in Fla. Stat. § 202.12(1)(b), offended both the Commerce and Equal Protection Clauses of the U.S. Constitution, rendering the state law “facially unconstitutional.” Judgment in Dish’s favor could have loosed up to $40 million in tax refunds annually.

Leon County Circuit Court Judge Terry Lewis reviewed the parties’ cross-motions for summary judgment and issued an informally-styled, almost conversational Letter Ruling entitled simply, “Summary Final Judgment for Defendants.” First, he examined Dish’s assertion that, viewed in isolation, Florida’s CST violates the Federal Constitution by attaching unequal tax rates to essentially similar products; then, he evaluated the DoR’s reply, which holds that Florida’s larger telecommunications taxation regime, viewed from a slightly higher (that is, more inclusive) altitude, manifests a design that easily passes this scrutiny.

The Judge begins by citing a legal presumption: That statutes properly enacted are constitutional – “that those who bring a facial challenge to the statute bear the heavy burden of demonstrating that no set of circumstances exist under which the statute would be valid.” The Court’s reasoning then proceeds on several fronts: “[T]he legislature had a rational basis to classify Satellite Service and Cable Service differently,” he observes, “because they are different. They are organized differently, have different modes of operation, use different technologies in providing their services, and they provide different services.” Judge Lewis then lightly fleshes out each of these talking points.

However, even more decisive in resolving the Equal Protection claim is Lewis’s recognition that the CST does not operate in a vacuum (as Dish would have it), but functions in concert with other taxes. The state-level CST is levied at a higher percentage of satellite service revenues (10.8% versus cable’s 6.8%), partly because Florida’s local-level CST doesn’t apply to them at all, but does attach to cable receipts because of one of those above-identified differences: satellite doesn’t touch local rights-of-way, whereas cable does. The net effect of calculating both sets of taxes in combination has “created a roughly level playing field for the two industries,” notes the Judge.

The allegation that Florida’s CST infringes the Commerce Clause by impermissibly discriminating between intrastate and interstate businesses, favoring one over the other, prompts Judge Lewis’s observation that the CST “applies regardless of the location of a Satellite Service or Cable Service provider or the point of origin of Satellite Service or Cable Service,” and that the tax scheme as presently in effect “does not reward in-state companies or punish out-of-state companies,” as well as his side observation that, these days, “the undisputed facts show that both the satellite companies and the major cable companies are interstate,” anyway. Accordingly, “Final Judgment is hereby entered ... determining that Florida’s Communications Services Tax is facially constitutional and that it does not violate the Commerce Clause or Equal Protection Clause.”

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About the Author: Marc Palmer Kram is a Senior Tax Analyst at Wolters Kluwer Tax & Accounting US, where he performs quality control and troubleshooting on the vast taxability database supporting its best-in-class CCH tax-compliance software, and then sometimes writes about what he finds. Learn more about him by visiting his author bio page. Learn more about Wolters Kluwer at and

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